Newsprint probe held up by language barrier

Date: 11/04/1996

By Tim Jones

THE European Commission's investigation into an alleged cartel by paper manufacturers is turning into a marathon, with no prospect of a decision being reached for months.

In April last year, 40 manufacturers of newsprint - paper for newspapers and magazines - were raided after complaints from publishers about an inexplicable surge in prices in 1993-94.

The Commission's initial inquiries found that prices had increased by 20&percent; during that short period.

This, the publishers said, had added significantly to their costs and had to be passed on to the consumer, since newsprint alone accounts for a third of the retail price of a newspaper or magazine.

Although the most vociferous complaints came from France, where publishers have to buy their paper through a centralised cooperative system, the delays in the inquiry have been caused by the involvement of Nordic companies. Seven Nordic producers supply 75&percent; of the three main grades of newsprint used in Europe.

“The Commission is having to go through mountains of papers seized in Finnish and Swedish and this is what is taking so long,” said a source. “We thought we would have at least a tentative decision by December but, really, nobody knows when it will come.”

This is proving frustrating for the companies involved - including Norway's Norske Skog and Sweden's Stora and SCA - who have argued ever since the raids that prices rose for normal market reasons rather than as a result of any collusion.

“The direction of prices has been haphazard over the past few years, which does not reflect a cartel,” said an industry official. “There are perfectly simple market explanations.”

In the early Nineties, reductions in price and production volumes drove manufacturers into serious losses as demand grew three times more slowly than it had in the previous decade.

In early 1994, the price of pulp rose in the wake of a surge in demand for linerboard - a type of paper used to make boxes - for export to Latin America and Asia.

Meanwhile, developed countries emerged from the early Nineties slow growth period, taking paper-makers by surprise and forcing them to produce flat out to meet demand. Prices were squeezed higher.

In September last year, North American newsprint manufacturers introduced their sixth consecutive price increase since March 1994, raising average prices by 40&percent; in 1995 - even more than the 25&percent; increase in Europe in 1995.

Since then, paper prices have started to dip. By the time the Commission announces its findings, the problem could well be over.