Paper board and tube probe

The European Commission has started a detailed investigation into the planned joint venture between US packaging company Sonoco Products and Finnish fibre-based materials firm Ahlstrom.

The Commission has concerns that the joint venture, which would combine both companies European core board and paper core businesses, could reduce competition in the markets for high-end paper mill cores (tubes for winding magazine paper) and for low-end cores (less sophisticated tubes for winding paper, film or textile).

Core board is a paper/board material made from recycled material. Paper cores are tubes produced from core board by winding processes, normally used as the base around which various products (paper, film, adhesive tape, fabric and yarn) are wound.

EC investigators have identified potential competition concerns in the field of high-end paper mill cores (tubes for winding magazine paper) given the joint venture’s high market shares in the European Economic Area and in Northern Europe, in particular. The venture would also hold very high market shares in the low-end segment of cores (less sophisticated tubes for winding paper, film or textile) in the Scandinavian region.

At this stage of its inquiry, the Commission has doubts that the market would remain sufficiently competitive given the limited number of competitors. And although the two companies have offered to remove the competition concerns raised by the Commission, at present, the Commission hasn’t been able to determine whether the undertakings would fully restore effective competition. However, neither has it ruled out that the proposed undertakings could constitute the basis of a possible solution in the future.

In May, Sonoco purchased CorrFlex Graphics, one of the US’ largest point-of-purchase display companies, for $250 million in cash. The company, now to be known as Sonoco CorrFlex, is expected to generate sales of approximately $200 million in 2004.