Norske Skog Accused of Cartel Activities

(First published in Norwegian 24 Mar 2006)

By Erik Hagen
Norwatch

Norske Skog is one of the big suppliers of paper to the Indian market. According to Gireesh Kumar Sanghi, an Indian Member of Parliament, Norske Skog’s sale in India may be illegal.

“Norske Skog is part of a cartel that contributes to a serious exploitation of developing countries”, Sanghi told Norwatch on the phone. He was referring to the fact that the company’s agent in India, Anika International, is utilized by four other big paper companies: Abitibi Consolidated Inc., UPM Kymmene, Catalyst Paper Corporation, and Norske Skog Pan Asia. He believes this creates monopoly conditions in the Indian market.

“It is absurd to claim that we have contributed to cartel and monopoly activities”, Hanne Aaberg, communications director in Norske Skog, told Norwatch. She recounted that India is a market experiencing immense growth and that the price increase in the country has not been disproportionately great.

Raises the Prices
M.P. Sanghi, who is also the publisher of one of Andra Pradesh’s leading newspapers, nevertheless claimed the opposite.

“Every third month the cartel raises the price by $50 to $70. In half a year the price of paper has increased from $400 to $750 per ton. This makes it extremely difficult for us to run a newspaper”, Sanghi said. He explained that it is difficult for Indian newspapers to increase the sales price and that the Indian newspaper industry is suffering heavily as a result of the claimed price fixing.

Norwatch has had access to a copy of the letter Sanghi sent to Norske Skog’s executive director, Lars W Groholt, on 27 January 2006.

“May I request you to take immediate steps for taking necessary steps to rectify the present status, which is a serious offence under the Indian Law”, the politician wrote to Groholt.

“I may also point out here that the appointment of sole selling agent or having single channel of distribution by 5 companies affects and restricts the competition”, Sanghi claimed in the letter and emphasises that activities that distort competition are in conflict with Indian legislation.

Denies the Allegations
Information Director Aaberg told Norwatch that the facts that form the basis of Sanghi’s serious accusations are completely erroneous. She claimed that the price increase that has occurred in India is the result of natural market fluctuations.

“In India prices increased by 11.7% last year, whereas the corresponding price increase in the USA was 12.9%, and these markets are closely connected”, Aaberg told Norwatch.

“Remember too that there is an extreme growth situation in India. Last year alone the growth in the demand for paper increased by all of 21%”, Aaberg said. She explained that Norske Skog’s reference price for newspaper paper in India is $670 per ton, whereas it is $655 in the USA.

She claimed that the accusations of monopoly conditions were primarily aimed at the agent in India and not at Norske Skog, which only has 4.9% of the market in the country. She said that it is common for sales agents to represent several companies simultaneously and that the agents thus can guarantee an even paper supply to the customers in the importing country.

Competition Authority Informed
Norwatch has also read a letter sent by Sanghi to Prime Minister Jens Stoltenberg in January. In the letter Sanghi made an appeal that the Norwegian authorities intervene in the case.

Birgit Løyland, head of the Norwegian Competition Authority’s Department of Intermediate Goods and Energy, confirmed that they have received a copy of the appeal from the Ministry of Government Administration and Reform.

“Since the activities of Norske Skog in this case have occurred outside Norway’s borders, it is beyond the mandate of the Competition Authority to initiate an investigation of the conditions”, Løyland told Norwatch.

Norske Skog has been highly criticised in Norway lately, on the occasion of the closure of a Norwegian paper production plant. In this connection the company claimed that the price of paper on the international market is decreasing. The Norwegian daily newspaper Nationen was critical of Norske Skog’s answer to the accusations from India.

“Norske Skog has paid constantly less for Norwegian paper lumber for 15 years and claimed that the paper prices in the world have been low”, the newspaper wrote.