Russia accuses Mondi of paper-price fixing

Russia accuses Mondi of paper-price fixing

Apr 5, 2016

Russia’s Federal Antimonopoly Service (FAS) has opened a case against a subsidiary of Mondi for violating what it says are “elements of the antimonopoly laws”.

FAS says it “suspects” Mondi Syktyvkar, which it describes as Russia’s largest paper producer, of failing to comply with aspects of federal law; in particular “monopolistically fixing the high price for offset paper”.

Mondi has said that it had not received “any FAS notification to this effect” and had no further details of the probe.

“Mondi is committed to complying with all applicable antimonopoly laws and believes it has not violated any such laws.”

Lora Rossler, group head of communications at Mondi, said that the group’s offset uncoated fine paper sales in Russia comprised about 10% of its Europe and international uncoated fine paper sales, or “less than 2%” of group sales.

Mondi’s share slipped 2.2% to close at R277.95 on the JSE.
“A recently observed increase of prices for offset paper has elements of violating the antimonopoly law,” Nelli Galimkhanova, head of the FAS department for industry control, said in a statement on the authority’s Web site on Friday.

“Upon considering all case circumstances and the arguments given by the respondent, the FAS commission shall make a decision,” she says.

FAS says it found last year the costs of offset paper rose about 50% for Russian consumers, but this did not match the change in the costs of production and sale of such paper.

It had earlier initiated inspections of Russia’s largest cellulose and paper industry makers.

Offset paper refers to paper used for printing books and magazines and not to single office-style paper for photocopying.

FAS also says it was continuing to “watch the situation” in Russian cellulose-and-paper markets, and that it monitored costs on a quarterly basis.

Justin Jordan, equity analyst at Jefferies International in London, says Russian authorities had not contacted Mondi formally.

“What happens from here? Likely nothing, in Jefferies’s view. Worst case scenario, a modest fine,” he says.

Jordan says that Mondi had increased offset reel paper prices by 25% in Russian currency terms last year, due to domestic Russian cost inflation.

However, he says that market sentiment was the “real issue here”, following an earlier European Union investigation into possible price-fixing in industrial sack markets.

Mondi last month said it had not been affected by unannounced inspections at several companies in the European kraft paper and industrial bags sector.

By Mark Allix for www.bdlive.co.za