
PAGE 18 EC COMPETITION POLICY NEWSLETTER Vol. 1, N° 2, Summer 1994
THE COMMISSION CONDEMNS A CARTEL OF EUROPEAN CARTONBOARD PRODUCERS AND
IMPOSES SUBSTANTIAL FINES
Acting on a proposal from Mr Van Miert, the Member of the
Commission responsible for Competition policy, the
Commission has imposed fines totalling some 132,15 mio
Ecus on 19 companies (or groups) which over a long period
operated a fixing cartel covering the whole European
cartonboard sector.
The producers of cartonboard - which include several major
international forest products and paper companies as well as
small independent mills - had set up a clandestine cartel to
fix prices and regulate the market under the cover of an
ostensibly legitimate trade association called the PG (Product
Group)Paperboard. Although it emerged during the case that
the cartonboard producers had been attempting - with mixed
success - to bring "order" to the market since the 1970's, it
was from 1986 that they succeeding in bringing in a scheme
which guaranteed that their regular "price initiative" went
through in full across Western Europe.
This massive cartel was uncovered as a result of
unannounced inspections carried out simultaneously in April
1991 by Commission officials at sixteen locations in the EC.
The cartel was a flagrant violation of Article 85 of the EC
Treaty which prohibits agreements and concerted practices
which may affect trade between Member States and which
have as their object or effect to prevent restrict or distort
competition in the Common market. The present case
follows closely on the Commission's decision in February
this year to impose fines of over 100 million ECU on 14
steel producers for price fixing and market sharing. The
present case reveals once again a disturbing level of
sophisticated cartel activity in a major industrial sector.
Mr Van Miert said that the same attitude would be taken
towards any other industry where such blatant antitrust
violations were uncovered. "It is amazing, an very
disturbing, that after more than ten years of active pursuit of
secret cartels and heavy fines, the CommisSion is still
discovering classic market sharings and price fixing cartels
in major industries. This case underlines the fact that only an
enforcement body like the Commission with European-wide
powers of investigation can uncover and sanction such huge
and covert cartels. Despite the elaborate steps taken by the
firms to cover up their unlawful activities, the Commission
inspectors were able once again to discover the detailed
evidence which enabled the Commission to condemn a
serious breach of competition rules".
THE CARTONBOARD SECTOR
Cartonboard is a stiff card-like product used in a variety of
applications but mainly for producing folding boxes for
packaging food and non-food consumer goods and for
graphics purposes. It can be produced from virgin wood
fibres or from recycled waste material.
- The main producers of virgin fibre cartonboard (known as
GC grades) are the Scandinavian integrated forest product
groups - STORA (S), MODO (S) and the FINNBOARD
companies (SF) - whose interests range from forestry
through woodpulp to paper and board. Although
headquartered in Sweden and Finland they now also own
much of EC internal production.
- The principal producers of recycled board (know as "GD"
grades) are SARRIO (Italy) and MAYR-MELNHOF, an
Austrian group which has expanded across Western
Europe and now accounts for 20 % of all European
cartonboard production.
The EC market is worth up to 2.500 million ECU each year.
Annual consumption of cartonboard (all grades) in the EC is
over 3 million tonnes (GC grades = 35 % of consumption;
GD 55 % and a third category SBS or "Solid bleaches
sulphate" the remainder).
Imports from EFTA countries (mainly Finland, Sweden,
Austria) take one third of the EC market. The main
customers for cartonboard are the "converters" (producers of
folding cartons) and the printing industry.
THE MARKET
In the four years from 1987 to 1990 cartonboard
consumption in Western Europe increased by almost 20 %.
During that period, prices were regularly increased (usually
twice each year) by all producers in a series of "price
initiatives" across Western Europe. On each occasion list
prices in each Member State were increased by 6-10 %. At
times prices increases were forced through against
determined customer resistance and despite a fall in the price
of pulp.
This series of price initiatives brought list prices in the EC
up by an average of 26 % in real terms. Net prices (i.e.
after all rebates) increased by 20 % over the period in real
terms. GC prices increased by more than GD. As an
example : for one major producer the net price of GC grades
went up from DM 1.500/t in Germany in March 1988 to DM
2.000/t in mid 1991 (+ 33 %); its GD grades went from DM
1.200/t to DM 1.450/t in the same period (+ 21 %).
THE PROCEDURE
The regular and uniform price increases applies by the whole
cartonboard industry across Europe provoked constant
complaints from customers to the producers but it was only
in late 1980 that the Commission was appraised of the
matter by British and French carton users' Trade
Associations.
Simultaneous and unannounced investigations were carried
out by over 40 inspectors from DG IV and the Member
States in April 1991. Although the British complainant had
in fact publicly announced its complaint in the trade press
and efforts had obviously made to clean up any traces of the
cartel, the Commission's officials discovered a series of
highly secret and incriminating documents (mainly private
notes of cartel meetings and the "blueprint" for a scheme to
control production and bring up the price).
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