COMMISSION DECISION of 13 July 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/C/33.833 - Cartonboard) (Only the Dutch, English, French, German, Italian and Spanish texts are authentic) (94/601/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (1), as last amended by the Act of Accession of Spain and Portugal,

Having regard to the Commission decision of 21 December 1992 to open a proceeding on its own initiative,

Having given the parties concerned the opportunity to make known their views on the objections raised by the Commission, pursuant to Article 19 (1) of Regulation No 17 and Commission Regulation No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Council Regulation No 17 (2),

After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

PART I THE FACTS

A. SUMMARY OF THE INFRINGEMENT (1) This Decision imposing fines for an infringement of Article 85 arises out of investigations carried out by the Commission in April 1991. Acting under Article 14 (3) of Regulation No 17, Commission officials visited the premises of a series of producers of cartonboard or their subsidiaries and selling agents in the Community. By means of the said investigations and subsequent enquiries under Article 11 of Regulation No 17, the Commission discovered documentary evidence showing that an infringement of Article 85 had been committed by the following undertakings:

- Buchmann GmbH,

- Cascades SA,

- Enso-Gutzeit Oy,

- Europa Carton AG,

- Finnboard - the Finnish Board Mills Association,

- Fiskeby Board AB,

- Gruber & Weber GmbH & Co KG,

- Kartonfabriek 'De Eendracht' NV (trading as 'BPB de Eendracht'),

- NV Koninklijke KNP BT NV (formerly Koninklijke Nederlandse Papierfabrieken NV),

- Laakmann Karton GmbH & Co KG,

- Mayr-Melnhof Kartongesellschaft mbH,

- Mo Och Domsjoe AB (MoDo),

- Papeteries de Lancey SA,

- Rena Kartonfabrik AS,

- Sarrió SpA,

- SCA Holding Ltd (formerly Reed Paper & Board (UK) Ltd),

- Stora Kopparbergs Bergslags AB,

- Enso Española SA (formerly Tampella Española SA),

- Moritz J. Weig GmbH & Co KG.

(2) The infringement consists of participating from about mid-1986 until at least April 1991 (in most cases) in an agreement and concerted practice by which the producers supplying cartonboard in the Community in concert and complicity and contrary to

Article 85:

- met regularly in a series of secret and institutionalized meetings to discuss and agree a common industry plan to restrict competition,

- agreed regular price increases for each grade of the product in each national currency,

- planned and implemented simultaneous and uniform price increases throughout the Community,

- reached an understanding on maintaining the market shares of the major producers at constant levels (subject to modification from time to time),

- took concerted measures to control the supply of the product in the Community in order to ensure the implementation of the said concerted price rises,

- exchanged commercial information (on deliveries, prices, plant standstills, order backlogs, machine utilization rates, etc.) in support of the above restrictions.

B. THE CARTONBOARD INDUSTRY 1. The product

(3) Cartonboard (also known as 'paperboard') is a stiff material produced from wood fibres and used primarily for the manufacture of folding cartons for packaging food and non-food consumer goods. It is also used to produce card for graphic purposes.

Cartonboard is produced by a number of methods which involve the dispersal of fibres in water at a 1 % concentration and the subsequent casting into sheets by draining the water and drying the resulting fibre deposit.

A large variety of product qualities has been developed to meet the differing requirements of end users. The quality of the material depends to a considerable extent on the choice of fibre used and its treatment during the production process. Cartonboard is usually manufactured and sold as sheets combining layers of material made from different types of pulp. It is commonly coated or laminated on its white side with various materials to enhance its appearance or make it suitable for particular applications. The basic distinction is between cartonboard produced from primary wood fibres and cartonboard made from recycled wastepaper.

(4) The main qualities of cartonboard produced in western Europe are:

- folding boxboard (FFB) manufactured with a top layer of whiteliner made from bleached chemical pulp, a middle layer of mechanical or semi-mechanical pulp, and frequently a thin bottom layer of bleached chemical pulp. FBB is usually used for the packaging of food, cosmetics, cigarettes, pharmaceuticals, etc.,

- white-lined chipboard (WLC), also known in continental western Europe as Duplex, or Triplex, and based on secondary or recycled fibres. This product is produced with bleached chemical pulp on the topside and backlayers of wastepaper and is normally used for packaging of non-food products,

- solid bleached sulphate board (SBS), a multi-layered product made from bleached chemical pulp and white throughout. It is mainly used as a premium grade for the packaging of food, cosmetics, pharmaceuticals and cigarettes.

Certain other board products (e.g. 'greyboard' which is made entirely from wastepaper) may also be produced on cartonboard machines but they do not fall within the definition of 'cartonboard' as used by the producers themselves and are not the subject of the present proceedings.

The standard product designation and abbreviations used in Germany are commonly employed in the cartonboard industry throughout western Europe.

- The coated and uncoated FBB grades are designated 'GC' and 'UC' respectively.

- Coated and uncoated 'duplex' grades of WLC are designated 'GD' and 'UD' while 'triplex' grades are known as 'GT' and 'UT'.

- Coated and uncoated SBS grades are designed 'GZ' and 'UZ' respectively.

Inside these categories there are further subdivisions: for instance, GC1 is distinguished from GC2 by virtue of the different backing layer used, GD1 from GD2 by their different specific volume, etc. For convenience, the whole of the virgin fibre sector is often referred to as the 'GC grades', and all recycled qualities as 'GD grades'. This usage will be adopted where appropriate in this Decision.

2. Market size and value

(5) As a result of inter alia overlapping product definitions, estimates of the size of the cartonboard market differ.

For the purposes of this procedure, the Commission has followed the classification used for the purposes of their own statistical exchange system (see recital 61) by the producers involved in the present proceedings.

Total production of cartonboard by Western European producers in 1990 (the last full year during which the infringement is known to have continued) amounted to almost 4,2 million tonnes, of which about one-sixth was exported to overseas markets.

Some 2 400 000 tonnes were produced in the Community, 70 % of which consisted of GD grades. The output of the Nordic countries was 1 300 000 tonnes (almost all GC and SBS) while in Austria some 340 000 tonnes of GD grades were manufactured.

West European (EC and EFTA) consumption of cartonboard (all grades) in 1990 was some 3,5 million tonnes. Of this total, GC grades accounted for 1,3 million tonnes (37 % by tonnage), GD grades 1,9 million tonnes (54 %) and SBS 0,3 million (9 %).

Cartonboard consumption in the Community in 1990 was some 3 090 000 tonnes, of which 1 150 000 tonnes were GC and 1 700 000 tonnes GD grades. France, Germany, Italy and the United Kingdom accounted for over 80 % of Community consumption.

Imports from EFTA countries, principally Sweden and Finland, took 30 % of the Community market.

Details of production, sales and consumption for 1990 are shown in Table 1.

The Community market for cartonboard was worth approximately ECU 2 500 million in 1990.

(6) The west European market for cartonboard over the past 30 years was characterized by strong growth. The annualized rate of growth in Europe for cartonboard was normally greater than that for industrial production in general: during the 1980s, for example, cartonboard growth in western Europe averaged 3 % annually compared with only 1,5 % growth in industrial production.

In the four-year period from 1987 to 1990 cartonboard consumption increased by 18,6 %. In 1991 however there was a downturn and demand fell by 2,2 %.

During the second half of the 1980s, demand for GC (virgin fibre) grades increased at almost three times the rate for GD (recycled) grades.

The trend to GC grades was reversed during 1990 with GD sales in the Community increasing by some 11 % over 1989, while GC sales fell by 1 %.

The significant switch back to GD in 1990 was attributed to several factors: greater public awareness of environmental concerns; an increase in the price differential between GC and GD grades in late 1989 when GC prices were increased but GD prices were not; and improvement in the appearance of some GD grades so as to make the product appear more like the GC grades.

3. The producers

(7) The Community market for cartonboard is supplied to a considerable extent by European producers of GC grades located outside the Community and particularly in Sweden and Finland.

The GC sector is dominated by several large Nordic forest product groups, which following recent industry restructuring and acquisitions now in fact have a substantial part of their cartonboard production capacity located inside the Community. The largest European producer of GC grades is the Swedish Stora group, with annual production of some 450 000 tonnes. Two-thirds of Stora's GC production comes from its Kopparfors factories in Sweden and the remainder from the former Feldmuehle operation which Stora acquired in 1990 (Feldmuehle also produced GD grades). Another important Swedish producer, the MoDo group, produces 200 000 tonnes of GC grade cartonboard, virtually all of this in its United Kingdom mill located at Workington in Cumbria; MoDo's production in Sweden consists almost entirely of SBS. The four (in 1991) Finnish GC board producers - Metsae-Serla, Kyro, Tampella and United Paper Mills - together account for almost 500 000 tonnes (all produced in Finland) and market the product in the Community and other export markets exclusively through their commonly-owned sales organization Finnboard (3).

(8) In the GD area, two major producers, Mayr-Melnhof (M-M) and Sarrió, now account for half the west European production capacity. M-M is based in Vienna but also owns or controls cartonboard mills in Germany, Switzerland (66 % holding), the Netherlands and (since 1991) the United Kingdom. In 1990, the M-M group already had over 600 000 tonnes of production capacity in GD and 90 000 tonnes in GC. A new GD machine (160 000 t/year) was added in Germany (and an existing machine reportedly close) in 1991. M-M acquired another German producer in late 1992 so that its total capacity is now over 850 000 tonnes. Sarrió (part of the Italian Saffa group) is the second largest European producer of recycled grades with plants in Italy totalling 400 000 tonnes GD (as well as 26 000 tonnes GC) capacity. It also has two mills in Spain (Sarrió, Prat). Other important GD producers in the Community include Stora (the former Feldmuehle operation), Cascades, Weig and Buchmann. Europa Carton is not only a cartonboard producer but also the largest converter in Germany. Fiskeby of Sweden is the only Nordic producer of recycled board.

(9) Some groups, including principally Stora, M-M and Cascades are important producers of both GC and GD grades.

The two important European producers of SBS (GZ, UZ) are MoDo (via Iggesunds Bruk in Sweden) with a production of around 225 000 tonnes in 1990 and Enso-Gutzeit of Finland with 125 000 tonnes.

According to one study (based on capacity) (4), the Stora group had some 14 % of total west European capacity in 1990, followed by M-M (13 %), the Finnboard mills (11 %), MoDo/Iggesund (10 %), Sarió/Saffa (8 %), Cascades (7 %), Enso-Gutzeit (3 %) and Weig (2 %). 10 producers thus accounted for 70 % of cartonboard capacity (all grades).

For 1991, after further acquisitions and capacity increases, another study (based this time on total output) (5) put M-M in first place with 19,3 %, followed by Stora (14,2 %), Finnboard (12,4 %) and Sarió/Saffa (10 %).

4. The customers

(10) The main customers for cartonboard in the Community are the producers of folding cartons ('converters'), who account for approximately 60 % of cartonboard consumption. A few cartonboard producers have a downstream converter activity integrated in the undertaking.

The converters purchase cartonboard in sheets and produce folding boxes (cartons) to the specifications of their customers who are mainly manufacturers of food and non-food consumer goods.

End users of folding boxes in western Europe are divided about 54:46 between food and non-food categories. There are about 1 500 converters in the major Community countries. The 10 largest produce about one-quarter of the total output, a reflection of the somewhat fragmented nature of the market on the customer side although it should be said that in recent years there has been a tendency towards greater concentration.

Other important customers for cartonboard include the printing industry which uses the product for graphic purposes.

5. Cartonboard industry restructuring

(11) In the last decade the cartonboard industry has undergone substantial structural change. In 1980 the vast majority of European cartonboard production came from independent 'one-product' companies which were involved only in the cartonboard industry. By contrast in 1990 only half the available capacity was accounted for by specialist board companies, the rest being owned by large paper industry conglomerats with diversified interests.

- In 1990 Stora, Sweden's largest forest products group and the owner of Kopparfors, one of the major carton producers, acquired the German paper group Feldmuehle-Nobel. Feldmuehle had already acquired 50 % of the leading French cartonboard producer Papeteries Beghin-Corbehem in 1988 and the remaining 50 % in 1989. The total combined turnover of the new Stora/Feldmuehle group is in the region of ECU 6 500 million. The former 'Kopparfors' and 'Feldmuehle' cartonboard operations have now been integrated to form the Billerud Division of Stora.

- M-M, originally a medium-sized producer located in Austria, is now the largest west European producer of GD grades, having acquired first FS-Karton in Germany in 1984 and late KNP-Vouwkarton in the Netherlands and a controlling interest in Deisswil in Switzerland. In October 1991 M-M acquired the Colthrop Board Mill, the only United Kingdom producer of GD grades and formerly part of the Reedpack group. It also took over the German producer Laakmann in late 1992.

- AB Iggesunds Bruk, one of the major European producers of SBS, acquired Thames Board Mill ('TBM'), a major GC grade producer located in Workington, United Kingdom, as of 1 January 1988, and at the end of that same year was itself fully integrated into the MoDo paper group which had until then owned just under 50 % of its equity. (A 'new MoDo' group was formed from three formerly independent groups, MoDo, Iggesund and Holmen.)

- The Cascades group of Canada acquired two French cartonboard mills in 1985 to 1986 (Blendeques and La Rochette) and later Duffel, the only Belgian producer (now closed down) and Djupafors (Sweden) in 1989.

- Reedpack Ltd, formed in 1988 in a management buy-out of the manufacturing interests of Reed International plc (which included Reed paper & Board (UK) Ltd ('Reed P & B') owner of the Colthrop Board Mill), was itself acquired in July 1990 by SCA, a major Swedish forest industry group. SCA retained most of the former Reedpack operations including Reed P & B but sold the Colthrop Mill to another management buy-out (the Field Packaging group) in May 1991. Field in turn sold the Colthrop Mill to M-M in October 1991.

- Saffa, the leading Italian producer, merged its cartonboard division with the Spanish producer Sarrió in 1990 (and changed the name of the cartonboard division to Sarrió) and acquired another Spanish producer, Prat Carton, in 1991.

- Aussedat-Rey, one of the leading French paper groups and owner of Papeteries de Lancey, was itself acquired by International Paper, the world's largest pulp and paper company, in June 1989.

- Enso Gutzeit, the second largest Finnish forest products group and a major producer of SBS grade cartonboard acquired the sawn products, paper and board interests of Tampella Oy, another Finnish industrial corporation producing GC grades and one of the members of Finnboard in early 1993.

- Fiskeby AB, the only Skandinavian producer of GD grades, was acquired by the US corporation Manville Forst Products on 1 June 1990.

- KNP (Koninklijke Nederlandse Papierfabrieken), a large Dutch paper manufacturer, acquired the German packaging producer Herzberger Papierfabrik Osthushenrich GmbH (including Badische Kartonfabrik) with effect from 31 December 1986. Subsequently KNP sold its cartonboard operation in the Netherlands, KNP Vouwkarton, to M-M, the sale taking effect on 1 Janury 1990.

- KNP itself merged with two other Dutch paper companies in early 1993 to form Koninklijke KNP BT NV.

- Europa Carton AG, itself owned by Stone Container Corporation of the United States, included in its activities the manufacture of cartonboard as well as the production of folding boxes. On 17 February 1993 Europa Carton AG agreed with the major French converter FCP to merge their boxmaking activities in a jointly owned holding company. As part of the operation Europa Carton AG placed its boxmaking activity including its cartonboard factory in a new company Europa Carton Faltschachtel GmbH which is owned by the joint venture.

6. Trade between Member States

(12) Although the majority of the cartonboard imported into the major Community markets comes from Nordic countries, there is a considerable trade in cartonboard between the Member States themselves. In 1990, out of 2 400 000 tonnes of cartonboard produced in the common market 620 000 tonnes (25 %) was traded in the form of direct sales from one Member State to another by the cartonboard manufacturers. There is also a substantial inter-State trade in cartonboard by merchants and as the larger converters have become more integrated on a pan-European basis they have tended to look for group supplies to wherever the most favourable terms can be obtained. Imports into the Community from the Nordic EFTA countries (Sweden, Norway, Finland) were 770 000 tonnes, consisting almost entirely of GC and SBS. A substantial tonnage (135 000 tonnes) of GD material was imported into the Community from Austria.

At the level of the main finished product (folding boxes), 11 % of west European output is shipped across national borders.

7. Capacity utilization

(13) Cartonboard production is a highly automated and capital intensive process. In order to be viable, a large new cartonboard mill would need to have a capacity of 150 000 to 200 000 tonnes and would cost around ECU 250 million to build. This was in fact the case of the new M-M/FS-Karton mill which came on stream in Germany at about the end of 1990.

The cartonboard producers consider that the ideal method of operation is to run their machines at full capacity 24 hours a day and 350 to 355 days per year. To operate economically, large machines require long production runs with the minimum of product changes. Each production run is tailored to suit the requirements of the individual customer or of several customers grouped together. Virtually all the cartonboard manufactured in western Europe is produced for specific orders; it is not generally practicable to manufacture for stock. The number of days or weeks of orders in hand (order backlog) is thus a good indicator of the strength of demand. In the event that the order backlog falls below two to three weeks, the larger producers will generally consider it advisable to halt production temporarily ('take downtime') in order to improve the production programme and ensure the maintenance of product quality. Smaller mills have somewhat more flexibility.

(14) For several years up to 1983 the operating rates of the machines in western Europe were considered unsatisfactory by the producers (1980: 83 %; 1981: 85 %; 1982: 84 %; 1983: 91 %).

In 1984 demand again improved and capacities were judged 'well-utilized' at a 96 % occupacity. Demand fell slightly in 1985 resulting in a slightly lower utilization rate.

1986 was considered a reasonably good year by the cartonboard industry with a 2 % increase in consumption and lower costs for raw materials and energy.

(15) Between 1983 and 1986 substantial capacity increases resulting from machine rebuilds and de-bottlenecking were made by the Finnish producers (the Finnboard mills in GC grades and Enso-Gutzeit in SBS) which added some 150 000 tonnes to the west European production capacity. However the substantial increase in demand for cartonboard during the 1980s balanced out the increase in capacity.

During 1987 a new methodology was adopted by the producers for calculating capacity utilization and it became apparent that there was in reality no overcapacity in the cartonboard industry.

For the next three or four years the cartonboard industry was running at, or close to, full capacity, although during 1990 it became increasingly necessary for the larger producers to take downtime.

8. Costs, prices and profitability

(16) The principal raw material cost element in the production of cartonboard is the price of wood pulp (for GC grades) and waste paper (for GD).

The woodpulp for GC grades is usually purchased from Scandinavian or North American sources and typically accounts for some 30 % of the cost of the cartonboard. (In the case of some major GC producers, their cartonboard mills are located next to their woodpulp plants and are to a large extent supplied by internal transfer.) The vast majority of pulp production in fact goes to make paper, and only an estimated 5 % of total pulp consumed is for GC cartonboard.

The price paid for pulp by cartonboard producers is therefore said to be determined largely by the state of the paper industry in general rather than by the condition of the market for GC cartonboard. In the case of recycled wastepaper, however, some 70 % is used for boards and only 30 % for paper; for GD grades the link between the board price and the price of the raw material may be more direct than in the case of GC and woodpulp. Ultimately, however, a rise in the woodpulp price also feeds through to the price of recycled waste material.

According to the producers, raw material costs for the cartonboard industry generally followed woodpulp prices on the international market and rose by almost 30 % between 1986 and 1989 before faling back during 1990 and down almost to 1986 levels by 1991. However the other individual cost components show varying trends and from 1982 onwards labour and energy costs (which account for 20 to 25 % of total costs) continued to rise and to some extent offset the fall in raw material costs.

Over the period 1986 to 1991 the real per unit revenues of the cartonboard industry rose by approximately twice the amount of their production costs.

According to a market study commissioned by several of the producers for the purpose of these proceedings (see recital 110), the average operating margin earned by the west European producers on their cartonboard operations in the period 1986 to 1991 was ECU 162 per tonne in 1991 prices (= about 20 %) (6).

(17) There is a substantial price differential between GD grades and GC material; typically GD recycled board sells at some 70 % of the price of GC2. (As a rough approximation and taking GC2=100, the comparative price levels are GD: 70, GT: 80, GC 2: 100, GC 1: 110 and SBS: 120).

However, for many applications GD and GC are readily substitutable. There have been considerable improvements in the aesthetic aspect of recycled board which makes it acceptable for some higher-quality usages. On the other hand, using GC instead of GD for some purposes can result in a saving of up to 20 % in the weight of the board used, thereby considerably offsetting the price advantage of recycled board.

(18) The cartonboard producers' usual practice up to 1990 was for price increases to take place twice a year, in April and October. Price increases are invariably announced several months in advance. Producers normally send a circular letter to the customers (mainly manufacturers of printed cartons or 'converters') informing them of the amount of the impending increase. The sector has been noteworthy for the phenomenon of industry-wide price initiatives, with all the producers notifying identical or nearly identical increases in each West European national market due to come into effect on the same date. The large producers all announced their increases within a few days or weeks of one another. Although it was often the Nordic producers which first announced an increase, the pattern was not the same each time and other producers - for example Feldmuehle and M-M - might also 'lead' a price initiative. The smaller producers invariably applied the same list price increases as the major groups.

Besides a general price list, most large producers have special individual price lists for their large customers which might involve a lower basic price. (The basic price is usually that for 10- or 15-tonne lots of the same substance/'grammage'). In addition, quantity discounts or tonnage rebates are available. The standard procedure is to notify all customers of the same flat rate price increase (for example, DM 13 per 100 kg for GC and DM 11 per 100 kg for GD grades) and to inform individually those for which special arrangements are in place of the effect the general increase in basic prices will have on their own final price.

(19) Producers of cartonboard have usually attempted to justify a proposed price increase to their customers by reference to increases in the costs of raw material, energy, transport, etc. Generally speaking, the converters' own customers (who are mostly in the food sector) would expect their suppliers themselves to absorb any small increase in the cartonboard price. For the converters to be able to pass on to their customers an increase in the cartonboard price it would therefore have to be at least 5 %. There is on the other hand an upper limit in practical terms on the amount of any price increase that could be imposed unilaterally by the cartonboard producers on the converters. The converters have on some occasions resisted a proposd price increase for cartonboard on the ground that their own customers would in their turn refuse to accept a price increase for packaging; the cartonboard itself represents the largest cost factor (some 50 %) in the final price of a printed box. The usual scale of the list price increase contemplated by the cartonboard producers on each occasion was therefore in the region of 6 to 10 %.

9. Price initiatives

(20) At the beginning of 1986 the cartonboard producers announced price increases for both GC and GD grades in all west European markets of about 8 % (DM 120 and 100 per tonne) but the move had only limited success. From about the last quarter of 1986 market price levels were steady or even in decline, with GC net prices actually falling in most national markets during 1987. (There was however a price increase of 9 % in the United Kingdom at the beginning of 1987, sterling being then low as against CWE (continental western European) currencies and this move brought United Kingdom prices more into line with the rest of the Community).

By contrast, from 1988 onward cartonboard prices were regularly increased across western Europe by all producers in a series of so-called 'price initiatives'. Usually the price initiatives involved increases in all national markets for both virgin fibre and recycled cartonboard grades, with SBS usually (but not always) going up in line with GC grades.

- The first price initiative of 1988, effective between February and April, involved an increase for GC, GD and SBS of 7 to 8 % (in some cases 10 %), with the new prices to remain in force until 30 September.

- A second price increase for 1988 of about 7 % came into effect on 1 October, again for GC, GD and SBS, and was due to last until February 1989. The United Kingdom was excluded from this increase since its prices at the time were already some 10 % above CWE levels.

- In 1989 prices were again increased twice for GC grades and SBS but only once for GD.

The first increase involved an increase of some 10 % for GC grades and 6 % on GD and came into effect on 1 April.

- The second price increase of 1989 (on 1 October in most countries) applied only to GC and SBS and again was in the order of 8 to 10 % on list prices. This resulted in an increased differential between GC and GD and a consequent shift in demand back to GD.

- In April 1990 a price increase was implemented for GC, GD and for SBS involving a rise of between 6 and 10 % according to country. It was due to be followed by a second increase on 1 October 1990 but as a result of new production capacity coming on stream at the same time as an expected reduction in economic growth, the second increase was postponed until January 1991.

- The increase of 6 to 7 % came into effect in January 1991 but was further postponed in some markets until April for large customers which had opposed the timing of the increase.

(21) On the producers' own figures, the series of price initiatives between 1988 and 1991 brought west European basic list prices (in national currencies) up by an average of 42 % in absolute terms. Average net actual prices paid (i.e. after all discounts and rebates) also rose but by somewhat less. According to the market study commissioned by several producers actual net prices for cartonboard in domestic currencies increased by 33 % (in absolute terms) on average before falling off in mid-1991.

In real terms and converted into ecu so as to take account of fluctuations due to exchange rate changes, the increase in announced price during this period averaged 26 % in western Europe while actual prices went up 19 % before dropping somewhat in the second half of 1991.

There are of course some variations between the different producers, grades and national markets. GC prices increased more than those of the recycled grades (see recital 20).

As an indication, for one major producer the net price of GC grades in Germany went up from around DM 1 500 per tonne in January 1988 to DM 2 000 per tonne in mid-1991 (+ 33 %), while GD material rose from DM 1 200 per tonne to DM 1 450 per tonne in the same period (+ 21 %). The price increases achieved in Belgium over the period were substantially greater than the west European average and in Italy rather less than average.

C. PROCEDURE 1. Unannounced investigations under Article 14 (3) of Regulation No 17

(22) On 23 and 24 April 1991 Commission officials acting pursuant to Article 14 (3) carried out simultaneous investigations without prior notice at the premises of a number of undertakings and trade associations involved in the cartonboard sector. In some cases, owing to the fact that the headquarters of the suspected participant in the infringement were located outside the Community, the investigation was made at one or more of its subsidiaries or agents.

The investigations followed the receipt of an informal complaint (i.e. not one made under Article 3 of Regulation No 17) from the British Printing Industries Federation (BPIF), a trade organization representing the majority of carton printers in the United Kingdom.

In its letter dated 22 November 1990, the BPIF alleged that the producers of cartonboard supplying the United Kingdom had introduced a series of simultaneous and uniform price increases and requested the Commission to investigate whether any infringement of Community competition rules had occurred.

At the same time (but without informing the Commission) the BPIF issued a press release which ensured that its initiative received publicity in the specialized trade press. A report of the complaint appeared in 'This Week', a newsletter of 10 to 14 December 1990 produced by Pulp and Paper International.

Copies of the press release (or even of the BPIF complaint itself) were discovered at a number of the cartonboard producers or their agents: Cascades; MM Pegg (M-M), who had obtained it from Feldmuehle; Finnboard and SCA.

On 12 December 1990 the Fédération Française de Cartonnage, a trade organization representing the French cartonboard customers, also made an informal complaint to the Commission making allegations in relation to the French cartonboard market which was in similar terms to the BPIF complaint.

(23) It was apparent from documentation found by the Commission at a number of the undertakings or associations visited that the cartonboard industry was fully aware of the posssibility of an investigation under Article 14 (3) following the complaint by the BPIF. In one case at least external lawyers had been engaged to carry out a mock investigation or 'dummy run' at the undertaking's premises, and reported subsequently that certain documentation had been removed from the premises 'for further examination' (although both the undertaking in question and its lawyers denied to the Commission that documents had in fact been removed).

Notwithstanding the advance warning, the Commission officials discovered a number of highly incriminating documents during the investigations (in particular at Cascades and at M-M's subsidiary FS-Karton) which showed the existence over several years of arrangements to fix prices and restrict or control the supply of cartonboard under the cover of a body known as the 'Product Group Paperboard' or 'PG Paperboard'.

These documents will be described in detail in Part E of this Decision.

2. Requests under Article 11 of Regulation No 17

(24) Following its investigations under Article 14 (3), the Commission addressed requests for information under Article 11 to all the producers of cartonboard to which this Decision is addressed.

The requests concerned the activities of the PG Paperboard and the participation in its meetings and committees of each of the undertakings.

In addition, requests for information relating to specific references in the documentation which had been found at their premises (or those of their subsidiaries) were addressed to Cascades and to M-M.

All the undertakings involved in the present proceedings were also requested to provide any documentation in their possession relating to meetings of the PG Paperboard. Most of them provided the official minutes of meetings but except for Rena no privately kept notes or memoranda were produced apart from those already found during the investigations.

The Commission also requested certain relevant documentation from Fides, the Swiss-based organization which provided technical services for the PG Paperboard (see recital 27), as well as from the trade association of the Scandinavian producers, but the documents in question were not forthcoming.

3. The statement of objections and the hearing

(25) The statement of objections in the present case was sent to the undertakings by letter dated 21 December 1992 together with:

1. for each different addressee, a statement of individual particulars indicating its role in the suspected cartel and describing the principal evidence implicating it in the infringement;

2. appendices of documentary evidence cited in the statement of objections numbered 1 to 157;

3. full documentation on each of the seven identified price initiatives (A to G) including all the relevant internal price instructions of each producer and a recapitulative table;

4. all relevant Article 11 requests and replies thereto;

5. all documentation found at producers or their subsidiaries or agents relating to the complaint made by the BPIF;

6. all price instructions emanating from competitors found at or provided by producers, etc.;

7. all press extracts in the possession of producers, etc. relating to price increases;

8. an inventory of the files in the possession of the Commission together with an explanatory note on the identification and origin of documents.

In addition, the Commission made available for inspection by each addressee of the statement of objections:

1. all documentation which had been obtained from it or its subsidiaries or agents under Article 11 or 14;

2. the full set of minutes and other records of the PG Paperboard.

Further, undertakings which were represented via subsidiaries or agents in either of two United Kingdom trade associations (the PAA and ACBM, see recitals 94 to 99) were allowed to consult any material obtained by the Commission relating to the organization in which they were represented which had not been annexed to the statement of objections.

(26) The time limit for filing written observations on the objections raised by the Commission was set at 14 weeks from the date of receipt of the statement of objections. All addressees submitted written observations, although only about half of them requested the opportunity to put forward their arguments orally. An oral hearing was held on 7 to 9 June 1993 at which the following undertakings presented their case: Enso-Gutzeit; Europa Carton; Gruber & Weber; Kartonfabriek de Eendracht; Laakmann; M-M; MoDo; SCA Holding and Weig.

The salient features of the infringement are described in the following Parts (D and E) of this Decision.

D. THE ORGANIZATION, STRUCTURE AND OBJECT OF THE VARIOUS WORKING GROUPS OF THE PRODUCT GROUP PAPERBOARD 1. The PG Paperboard

(27) In 1955 the cartonboard producers then supplying the west European market set up an association known as the 'Section Cartonboard' ('Section Carton'/'Sektion Karton') which apparently operated under the aegis of the Fides Treuhandgesellschaft (Trust Company). Fides is a fiduciary company located in Zurich which (amongst other activities) manages information exchange systems for various industries. Few details are, however, available of the activities of the Section Cartonboard.

In 1980 to 1981 the cartonboard producers decided to reconstitute the Section Cartonboard as a special product group of the European Paper Institute ('EPI'), an organization set up primarily for technical and statistical purposes (7). The group was to be known in future as the 'Product Group (or PG) Paperboard'.

The PG Paperboard held its first annual general meeting on 12 June 1981 at Wolfheze in the Netherlands.

(28) The membership of the PG Paperboard consisted of the various national associations of the cartonboard manufacturers in western Europe as well as individual producers from Belgium, France, Germany, Italy, the Netherlands, the United Kingdom, Austria, Spain and Switzerland. The Scandinavian producers participated individually, together with their trade association Scanpapp (later known as the Nordic Paperboard Institute or 'NPI').

The product to which the activity of the PG Paperboard related was defined as:

'All kinds of coated and uncoated machine boards of 200 g/m² and more.'

(Liquid packaging board, wallpaper base and certain other board products were expressly excluded from the scope of the PG Paperboard. A few high grade GC types with a 'substance' as low as 160 g/m² have been developed for graphic usage but sales are negligeable.)

There was a separate 'Greyboard' group in the PG Paperboard covering grey board (GK) grades which are not considered to be cartonboard proper and are not the subject of this Decision.

Fides Trust Company, which had already been involved with the Section Cartonboard, was appointed as the secretariat of the new PG Paperboard.

2. The committees of the PG Paperboard before 1986

(29) Under the PG Paperboard there operated a number of different committees or groupings; originally these bodies included, apart from the annual General Assembly, a so-called President Conference, an Economic Committee and a Technical Committee. A 'Marketing Committee' was set up in 1984.

The President Conference met some three to six times each year, as did the Economic Committee.

Membership of the President Conference was open to the chief executives or commercial directors of all member companies of the PG Paperboard.

The Economic Committee was attended by marketing and/or sales managers and reported to the President Conference on the market situation in the various countries.

The Marketing Committee was set up later to analyse the information provided by the Economic Committee and to communicate its assessment of the market to the President Conference. It met some three to five times each year.

(30) The official minutes of both the President Conference and the Economic Committee were kept by Fides and are available for the whole of the period under consideration. They show that discussions took place in these bodies on such matters as the state of incoming orders, capacity utilization, the supply and demand balance and proposed machine standstills. The official minutes however give the impression that any such discussions were always conducted in general terms and as an exchange of information without the individual producers disclosing their own positions or reaching any agreement or decision.

No minutes at all were however available of the Marketing Committee, the producers claiming that none were ever drawn up.

3. The modifications in the structure of the PG Paperboard in 1986 to 87

(31) The structure of the PG Paperboard underwent a substantial modification in 1986 and 1987. First, a restricted 'Presidents' Working Group' (PWG) consisting of senior representatives from the eight or so largest cartonboard producers was set up in mid-1986. Its function was ostensibly to 'prepare' the President Conference on matters such as cost trends, the evolution of demand and sales forecasts. The PWG met regularly with between five and eight meetings annually.

With the institution of the new PWG, the President Conference itself now met less frequently; there was a spring meeting on the occasion of the Annual General Meeting of the PG Paperboard at which virtually all the producers were present, and a winter session in November with usually only one or two producers attending from each country.

(32) Somewhat later - in 1987 - the Marketing Committee was reformed (the precise details are not clear) and from then on was known as the 'Joint Marketing Committee' or JMC. All the producers to which the Decision is addressed (with the sole exception of Enso-Gutzeit) attended meetings of this body, although some did so more frequently than others. Finnboard seems to have represented the NPI as well as its own four member mills, Kyro, Metsae-Serla, Tampella and United Paper Mills. The JMC began to meet under its new designation in late 1987 or early 1988.

At the beginning it met about a dozen times or more a year, and although this was reduced in 1989 to some eight or so meetings, these involved separate sessions for GC and GD grades. The JMC apparently took over some unspecified functions of the Economic Committee. This latter body, however, continued to meet until the beginning of 1991, providing information to the JMC on the market situation in the different countries.

4. The absence of minutes or other documentary record

(33) Despite the fact that detailed minutes were always taken of the President Conference and the Economic Committee and distributed to participants, there was no official record whatever of any of the meetings of the PWG before February 1990 or of the JMC until after the date of the Commission's investigations. There were not even any invitations or attendance lists. In response to detailed and persistent Article 11 requests from the Commission, the participants for the most part claimed that owing to the 'informal' nature of the meetings no record was ever kept. Similarly, almost all the undertakings insisted that their representatives had neither kept contemporary personal notes during the meetings nor produced any subsequent reports for the purposes of informing others inside their own organizations of what had occurred. Fides, which provided the secretariat for the PG Paperboard, was present at all its meetings. The Commission does not accept that in this capacity Fides did not keep some record of both the PWG and JMC in the same way as it did for the other committees, but Fides has never produced any minutes or other documentary record in response to the Commission's repeated requests.

5. The Stora statements

(34) In response to the requests for information addressed to them under Article 11, almost all of the undertakings gave only a vague and anodyne description of the purpose and the functioning of the various committees of the PG Paperboard.

These corresponded in the main to the official description of their activities as set out in the annual reports of the PG Paperboard.

However, Stora, the Swedish forest product group which already included Kopparfors and had also recently acquired Feldmuehle, wrote to the Commission on 19 August 1991 accepting that '. . . the companies within the Stora group have engaged in certain policies and practices that are likely to constitute infringements of the competition rules'.

Stora subsequently provided (on 30 August 1991) a detailed response to the Commission's request for information concerning the PG Paperboard and its activities which was amplified in further responses provided by Stora under Article 11, in particular that of 28 October 1991 ('the second Stora statement').

6. The objectives and activities of the PG Paperboard and membership of its various committees

(a) The PG Paperboard up to 1986

(35) According to Stora (second statement, p. 2) the Cartonboard producers had 'attempted to bring order to the . . . market since 1975. Members of the PG Paperboard or its predecessor (prior to 1981) have met to discuss pricing and market shares during that period'. Before 1986 to 1987, the President Conference had discussed - albeit apparently in fairly general terms - various proposals and had made various attempts to increase prices and deal with overcapacity. The Marketing Committee, set up in 1984, examined whether or not the market would accept a price increase and reported to the Presidents. Stora claimed that efforts in this direction had for the most part been unsuccessful owing to endemic overcapacity in the industry during that period.

The attempts of the President Conference during this period to bring discipline to the cartonboard market were also apparently hampered by a lack of sufficiently detailed technical information. This perceived obstacle to effective collusion was to a large extent removed by the creation in 1986 of the PWG, the efficacity of which was further improved with the setting up of the new JMC in late 1987 or early 1988.

(b) The PWG

(36) The PWG consisted of representatives of the eight or so leading cartonboard producers and its members held the position of chief executive, commercial director or the equivalent in their respective undertakings.

The members of the PWG were Cascades, Papeteries Béghin-Corbehem and Feldmuehle (both now part of Stora), Finnboard, KNP (up to mid-1988), M-M, Saffa (later known as Sarrió), TBM (now part of MoDo), and from 1988, Weig.

The PWG meetings were chaired by the elected chairman of the PG Paperboard: during the relevant period this office was held successively by senior directors of KNP, Finnboard and M-M.

Between them the original PWG members represented almost all GC production capacity and two-thirds (a proportion which later increased as a result of acquisitions) of GD capacity in western Europe.

(37) The annual 'activity reports' of the PG Paperboard represented at the General Assembly give the impression that the function of the PWG was to prepare the ground for the President Conference by discussing general matters such as cost trends, developments in supply and demand, and forecasts of the sales situation.

In reality its secret terms of reference were altogether more specific.

According to Stora, the 'PWG met from 1986 to assist in the introduction of discipline in the market'. Its true purpose included 'discussions and concertation on markets, market shares, prices, price increases and capacity' (second Stora statement, pp. 4 to 5).

From soon after its inception, the PWG 'reached agreement and took broad decisions on both the timing and the level of price increases to be introduced by cartonboard producers' (second Stora statement, p. 6).

In connection with the moves to increase prices, the PWG held detailed discussions on the market shares in western Europe of the national groupings and of individual producer groups. As a result, certain 'understandings' were reached between the participants as to their respective market shares, the object being to ensure that the concerted price initiatives were not jeopardized by excess of supply over demand. The large producer groups in effect agreed to maintain their market shares at the levels disclosed for each year by the annual production and sales figures and available in definitive form through Fides in March of the following year. Market share developments were analysed in each meeting of the PWG on the basis of the monthly Fides returns and if significant fluctuations emerged, explanations would be sought from the undertaking presumed responsible.

(38) The PWG reported to the full President Conference. Its role included:

'assessing and explaining to the President Conference the precise state of supply and demand on the market and the measures to be taken to bring order to the market' (second Stora statement, p. 5).

The PWG invariably met before each scheduled President Conference, and since the same person was in the chair at both meetings, it was no doubt he who communicated the result of the PWG deliberations to others among the so-called 'Presidents' who were not members of the inner circle.

If there was no President Conference immediately after the PWG session, the participants would inform the smaller producers in their national grouping of what had been decided; (Stora reply under Article 11 of 17 September 1991). For Germany, there was no real need to adopt this procedure for GC since virtually all production was accounted for by members of the PWG. For GD, on the other hand, the independent producers like Buchmann and Laakmann were from time to time informed by Feldmuehle or M-M. Buchmann admits that it was 'fairly often' given details by Feldmuehle (country, date and amount) of intended price increases.

The Scandinavian producers (all members of the NPI) were usually told of the outcome by Finnboard. This was how Kopparfors was kept informed before the merger with Feldmuehle in 1990. Stora's belief that the same practice was followed for Rena and Enso-Gutzeit is largely corroborated by Rena's account (recitals 79 to 80). It is also in line with Finnboard's position in the PWG as a representative of the NPI as well as a participant in its own right (see also recitals 58, 79 and 83).

For France, it was Cascades or Béghin Corbehem (CBC) which informed Papeteries de Lancey of what the PWG had decided.

These channels of communication were not, however, formalized, since apart from Enso-Gutzeit the producers in question were all members of the JMC, which met regularly, and in the normal course of events they were informed by the chairman of that body of what had been decided in the last PWG meeting (which he had also attended).

(39) The PWG met on several occasions each year. In the period June 1986 to May 1987 it met four times; in 1987 to 1988, eight times; 1988 to 1989, five times, and on at least 10 occasions in 1989 to 1991.

As far as is known, the dates on which meetings of the PWG were held included the following:

"" ID="1">10 November 1986 > ID="2">Zurich "> ID="1">12 December 1986 > ID="2">Zurich "> ID="1">18 March 1987 > ID="2">Zurich "> ID="1">20 May 1987 > ID="2">Graz "> ID="1">12 October 1987 > ID="2">Zurich "> ID="1">4 December 1987 > ID="2">Zurich "> ID="1">10 March 1988 > ID="2">Zurich "> ID="1">25 May 1988 > ID="2">Barcelona "> ID="1">17 November 1988 > ID="2">Zurich "> ID="1">10 February 1989 > ID="2">Zurich "> ID="1">5 April 1989 > ID="2">Zurich "> ID="1">17 May 1989 > ID="2">Nice "> ID="1">18 October 1989 > ID="2">Zurich "> ID="1">28 November 1989 > ID="2">Zurich "> ID="1">6 February 1990 > ID="2">Zurich "> ID="1">23 May 1990 > ID="2">Helsinki "> ID="1">26 November 1990 > ID="2">Gothenburg "> ID="1">1 February 1991 > ID="2">Zurich "> ID="1">12 April 1991 > ID="2">Zurich "> ID="1">27 May 1991 > ID="2">Zurich "> ID="1">5 June 1991 > ID="2">Montreal ">

(not all the dates of meetings are known).

(40) A KNP representative was chairman of the President Conference from 1984 to 1988 and in that capacity officiated also at the PWG meetings. When he retired from the chair in 1988, KNP did not remain a member of the PWG.

The French producer Béghin Corbehem (CBC) continued however to participate separately in the PWG after Feldmuehle - already a half-owner - acquired the remaining 50 % of its shares in 1989.

The first PWG meeting attended by Weig was in May 1988 and thereafter it did not start coming regularly until Spring 1989.

Apart from Cascades and Weig, the members of the PWG have given few details of their participation in individual PWG meetings before the end of 1989 or beginning of 1990. The attendance of each producer from 28 November 1989 onward is shown in Table 2.

(c) The President Conference

(41) President Conferences, by now held only twice each year, were always preceded by a PWG meeting. As Stora has explained one of the PWG's functions included explaining to the President Conference the measures which were necessary to bring order to the market (recital 38). In this way, the managing directors attending the President Conferences were informed of the decisions taken by the PWG and of the instructions to be given to their sales departments to implement the agreed price initiatives. It also meant that the marketing managers attending the JMC and implementing agreed price increases (recitals 44 and 45) knew that their managing directors would support the PWG's decision. The official minutes of the President Conference do not record these contacts with the PWG. Nor is any mention whatever made in the official minutes of its discussions on pricing or price initiatives.

On the contrary, they continued to give the entirely misleading impression that any discussions which took place on sensitive matters such as the market situation, capacity utilization, order backlog, standstills, etc. were of a fairly general nature, so that particular producers' data were never disclosed.

Corroboration of Stora's admission that the President Conference did in fact discuss collusive pricing is provided by an internal note found at M-M's United Kingdom sales agent (MM PEGG) of a President Conference of 10 November 1986:

'United Kingdom pricing

Recent Fides meeting included the representative of Weig stating that they thought 9 % (8) too high for the United Kingdom and were settling at 7 %! Great disappointment as it signifies a "negotiating level" for everybody else.'

(42) All the undertakings to which this Decision is addressed were represented in the President Conference. Although some of the smaller producers attended relatively infrequently, the major producers (who were also all members of the PWG) were almost invariably present at every President Conference.

Officials of the NPI attended all but one of the President Conference during the period 1986 to 1991. Finnboard representatives (who had also been to the PWG meetings held just before) took part separately from the NPI in all the President Conference meetings. Occasionally individual member companies of Finnboard attended as well; Metsae Serla went each year to the Spring plenary meetings (but not the Winter meetings) and United Paper Mills went to one meeting in May 1989.

(43) President Conferences from 1986 onwards were held on the following dates:

"" ID="1">29 May 1986 > ID="2">Alghero (Sardinia) "> ID="1">10 November 1986 > ID="2">Zurich "> ID="1">20 May 1987 > ID="2">Graz "> ID="1">4 December 1987 > ID="2">Zurich "> ID="1">25 May 1988 > ID="2">Barcelona "> ID="1">17 November 1988 > ID="2">Zurich "> ID="1">17 May 1989 > ID="2">Nice "> ID="1">28 November 1989 > ID="2">Zurich "> ID="1">23 May 1990 > ID="2">Helsinki "> ID="1">26 November 1990 > ID="2">Gothenburg "> ID="1">5 June 1991 > ID="2">Montreal. ">

Details of the attendance of each undertakings are shown in Table 3.

(d) The Joint Marketing Committee

(44) The Joint Marketing Committee or 'JMC' was set up in late 1987 and was considered far more effective than its predecessor, the Marketing Committee. The JMC reported to the PWG. Officially its purpose was to prepare for that body a detailed analysis of market conditions and a sales forecast. For that purpose it received information from the Economic Committee.

From the outset however the main task of the JMC was:

- to determine whether, and if so how, price increases could be put into effect and to report its conclusions to the PWG,

- to work out the details of the price initiatives decided by the PWG on a country-by-country basis and for the major customers with the aim of achieving an equivalent (i.e. uniform) price system in Europe (first Stora statement, p. 17, second statement, p. 8 et seq.).

(45) Stora has given a detailed account in its second statement (pp. 8 to 9) of how the JMC operated. This committee discussed market-by-market how the price increases agreed by the PWG were to be implemented by each producer. The practicalities of bringing proposed price increases into effect were addressed in 'round table' discussions, with each participant having the chance to comment on the suggested increase.

Difficulties in the implementation of price increases decided by the PWG, or the occasional refusal to cooperate, were reported back to the PWG, which then (as Stora put it) 'sought to achieve the level of cooperation considered necessary'. Separate reports were made by the JMC for GC and GD grades. If the PWG modified a pricing decision on the basis of the reports it had received back from the JMC, the steps necessary to implement it would be discussed at the next meeting of the JMC.

No official invitation or minutes were available for any of the meetings of the JMC. It is, however, obvious that owing to the complexity of its tasks it could not have functioned without the participants making their own calculations and proposals and a detailed record being kept by the chairman or secretariat of its proceedings. A report had to be made to the PWG. During the oral hearing one of the participants (Gruber & Weber) in effect admitted that there was a general rule against keeping incriminating notes.

However, not all those who attended the meetings of the JMC were as meticulous as they ought to have been as regards destroying or not keeping notes; detailed personal notes of what had occurred at a number of JMC meetings were obtained during the investigation from M-M and from the small Norwegian producer Rena (see recitals 80, 82, 84 and 87).

(46) The JMC was throughout the relevant period led by the same person, a senior director of Feldmuehle (now retired); its success was largely attributed to his personal efforts. He also took part in the PWG and acted as the conduit between the two bodies. Meetings were attended by representatives of all or virtually all, the European cartonboard producers. The four Finnish GC producers were always represented in the JMC by Finnboard, which claims, however, to have attended not in its own right but only on behalf of the NPI (see the Article 11 reply of Finnboard). The NPI was not separately represented in the JMC, although this was the case for the President Conference. (Fiskeby admitted that 'on a few occasions' a representative of the NPI gave Fiskeby information over the telephone about matters dealt with at JMC meetings at which it was not represented). Some producers - particularly the majors who were also in the PWG - attended JMC meetings more frequently than others but in the complete absence of official records it is not possible to ascertain the attendance list of each meeting. However - with the exception of Enso-Gutzeit - all the undertakings to which this Decision is addressed took part in at least some meetings of the JMC. Separate meetings were held for GC and GD grades, usually on consecutive days.

According to the documentary evidence, including the annual reports of the PG Paperboard, the JMC met with the following frequency:

"" ID="1">June 1987 to May 1988 > ID="2">15 meetings "> ID="1">June 1988 to May 1989 > ID="2">11 meetings "> ID="1">June 1989 to May 1990 > ID="2">8 meetings (including several two-day sessions) "> ID="1">June 1990 to May 1991 > ID="2">8 meetings (including several two-day sessions). ">

(47) The last known meetings of the JMC were held in Vienna on 3 and 10 July 1991, 10 weeks after the date of the Commission's investigations.

Details of the admitted or identified participation of each undertaking in the JMC are set out in Tables 4 and 5.

Table 4 shows for each undertaking the dates of JMC meetings which it either admits attending or is proved to have attended. (This list cannot be taken as exhaustive).

Table 5 shows the participants at regular meetings as identified by each producer.

(48) In most cases the producers claimed in answer to repeated requests under Article 11 to have no recollection as to when they began attending Marketing Committee or JMC meetings, limited their answers to the most recent years, or otherwise provided evasive answers.

It was therefore not possible (with limited exceptions) to establish with certainty the dates of the meetings attended by individual producers particularly before 1989. Laakmann (which did not distinguish between the JMC and its predecessor the Marketing Committee) stated in a reply under Article 11 that Cascades, Europa Carton, KNP, FS-Karton, M-M, Deisswil, Feldmuehle, CBC, Saffa and itself took part in GD meetings from the beginning, i.e. 1984. According to Laakmann, Buchmann, Gruber & Weber, Prat Carton, Tampella Española and Weig began attending this type of meeting somewhat later than the other producers, which could indicate that they only started coming when the new JMC was set up in late 1987 or early 1988.

(e) The Economic Committee

(49) The 'Economic Committee', which despite its title was attended not by economists but by marketing and/or sales managers, discussed inter alia price movements in national markets and order backlogs and reported its findings to the JMC (or its predecessor the Marketing Committee before the end of 1987).

Although according to Stora the order backlog of individual producers was not discussed in great detail in the Economic Committee (as opposed to the JMC where it clearly was), from time to time individual producers compared their positions with the industry average.

Stora expressly states that in the course of 1987 the exchange of information in the Economic Committee revealed that all the producers had full order books, a fact which confirmed the growing belief in the cartonboard industry that a balance between capacity and consumption had emerged.

(50) The 'central theme' of the discussions of the Economic Committee was the analysis and assessment of the cartonboard market in the various countries. The information provided to the Economic Committee on market conditions in each Member State appears to have come from national committees on which there were represented the local producers and the main importers (minutes of President Conference, 10 November 1986). The discussions on market conditions were not unfocused; talks on the state of each national market must be seen in the context of the planned price initiatives, including the perceived need for temporary plant shutdowns to support price increases.

A private note made by the FS-Karton representative of the 'highlights' of the Economic Committee held in Zurich on 3 October 1989 and sent to the managing director of M-M shows that in addition to a detailed survey of demand, production and orders inhand in each national market, the meeting was concerned with:

- perceived strong customer resistance to the last GC price increase, effective on 1 October,

- the respective state of the order backlog of the GC and GD producers, including individual positions,

- reports on downtime taken and planned,

- the particular problems of implementing the price increase in the United Kingdom and its effect on the necessary price differential between GC and GD grades,

- the comparison against budget of incoming orders for each national grouping.

These matters are not adverted to in the official minutes of the meeting.

The details of the attendance at meetings of the Economic Committee from late 1986 are shown in Table 6. The only addressees of this Decision which did not attend any meetings of the Economic Committee were Enso-Gutzeit, Europa Carton, Gruber & Weber and Weig. (Enso-Gutzeit was a member of the NPI which attended every meeting of the Economic Committee. The other three were members of the JMC).

E. THE MECHANISM FOR PRICE AND VOLUME CONTROL 1. Volume control

(a) The 'price before tonnage' policy

(51) The key to the success of the price initiatives from 1988 onwards (as the producers realized) was maintaining a near balance between production and consumption. All members of the PWG were concerned that the relaunched price initiatives should not be undermined by substantial increases in the volume sold. This was referred to by Stora as a 'price before tonnage' policy (Stora Article 11 reply of 14 February 1992).

It meant the major producers could agree price increases in the PWG with some certainty that they would be successful.

(52) The agreement reached in the PWG during 1987 included the 'freezing' of the west European market shares of the major producers at existing levels, with no attempts to be made to win new customers or extend existing business through aggressive pricing.

According to Stora (second statement, p. 11), the understanding on market shares between the major producers related to the shares in western Europe as a whole of each of the major producer groups. It did not make much sense (Stora says) to discuss their shares in individual national markets: as a result of cross-border mergers by the large converters, the cartonboard producers often did not even know for certain the final destination of their deliveries.

(53) Documentation found by the Commission at FS-Karton (part of the M-M group) confirms that at the end of 1987 agreement had been reached in the two Presidents' groups on the linked issues of volume control and price discipline.

An internal report of 28 December 1988 headed 'Vertrauliche Aktennotiz' ('confidential file note') and sent by the marketing manager responsible for M-M group sales in Germany to the managing director of M-M in Vienna reviews in considerable detail the steps which had been taken by the European cartonboard producers at the Presidents' level since late 1987 to ensure so-called 'price discipline'.

(54) The M-M note confirms that a new consensus had emerged during 1987 which implemented the 'price before tonnage' policy. The author of this note considered, however, that there had been both 'winners and losers' in this exercise.

All participants had gained in that the continuous downward price spiral which had been a feature of the market had been reversed and turned during 1988, in two clearly defined steps, into an upward trend. (The mention of the two 'steps' is evidently a reference to the two price 'initiatives' during 1988).

On the other hand, M-M had - in the author's opinion - lost out in relative terms, as had Feldmuehle. For its part, having increased its market share during summer 1987, M-M had been required by other producers - no doubt as the price for a comprehensive agreement - to make certain 'sacrifices':

- its market share was frozen at the 1987 level and assurances had clearly been given to the other producers that it would not seek to gain new business by means of promotional pricing,

- firm instructions had been given by M-M to the sales force in Germany and Austria and to its sales agents in other countries which reflected this rigid pricing policy. Previously the only objective had been to increase sales: now it was 'absolute price discipline' with the danger of having to stop machinery in order to reduce production.

(55) M-M had been one of the first producers to implement the March 1988 price increase (already announced in December 1987) as well as the second increase of that year which took effect in October. It had made the sacrifices required of it and lost tonnage in high price markets. M-M's firm attitude on price had made some regular customers unhappy. On the other hand, the marketing manager suspected that not all the other producers had been such firm supporters of the price initiatives as had M-M. Their sales personnel behaved in the market place in a manner different from that which had been agreed at the top level. Citing an example of where another producer had underquoted M-M at a major customer by DM 150 per tonne, he asked rhetorically how such behaviour could fit into the 'agreed system'. He therefore urged his superior (who attended the PWG meetings) to 'swear in' the other producers to abide by the same rigid rule as that imposed on M-M, i.e. turn away business rather than break the agreed price.

The Commission attempted to obtain from M-M further details of the precise circumstances of the agreement which had been made between the cartonboard producers in 1987.

In its reply under Article 11 M-M claimed that there was no agreement 'in the strict sense' and that the repeated use in the memorandum in question of this term (and similar expressions) by its marketing manager should not be 'taken literally'.

(56) The basic understanding between the major producers on maintaining their respective market shares continued throughout the period covered by this Decision.

Originally, the main concern of the PWG in this direction had been to restrict the increase in market shares being obtained in the Community by the EFTA producers: M-M, Finnboard, Kopparfors and Iggesund. The Community-based producers wished to protect their home territory while the Nordic producers (and M-M) regarded it as their natural export market. Discussions took place with these EFTA producers as to the level of market share at which they would be prepared to stop. It was made clear to them that increasing their market share at the expense of others would upset the production/consumption balance and undermine the concereted efforts to increase prices. Later, as the EFTA producers themselves acquired production facilities in the Community, the policy of the others to limit the market share of non-Community producers in the Community became less relevant. Increasingly the concern was to maintain a balance between the major corporate groups so as not to jeopardize the price initiatives (Stora Article 11 reply of 14 February 1992).

The producers took as the basis for their calculations the total sales figures for the previous year, which were generally known by about the following March.

Knowing also the forecast percentage for market growth in the coming year each producer was able to work out the volume of additional sales which it could make during the year without increasing its market share (and thereby destabilizing the market).

The undertakings which took part in these discussions on market shares were those represented in the PWG, namely Cascades, Finnboard, KNP (until 1988), M-M, MoDo, Sarrió, the two Stora group producers CBC and Feldmuehle, and (from 1988) Weig.

(57) 'Market share development' was analysed at each meeting of the PWG on the basis of provisional statistics (see recital 63). Shares for western Europe as a whole were discussed and to a lesser extent, the position in individual countries. According to Stora 'significant fluctuations in market shares would be analysed and discussed and explanations sought for major changes'. A change in sales patterns might (for example) be attributed to a special order in a particular market or to a customer beginning to source its total European requirement in one country.

It was, however, left to the producers to decide for themselves the exact measures each should take to maintain its market share at existing levels. Matters such as taking downtime or diverting excess production to overseas markets were discussed in the meetings, but implemenation of the measures discussed depended on each producer's individual circumstances.

The PWG members hoped and expected that by giving the lead in this way, they would encourage the smaller producers also to accept restraint.

(58) While the smaller cartonboard producers attending meetings of the JMC were not privy to the detailed discussions on market shares in the PWG, they were, as part of the 'price before tonnage' policy to which they all subscribed, well aware of the general understanding between the major producers to maintain 'constant levels of supply' and no doubt of the need to adapt their own conduct to it.

This is confirmed by a note originating from the then managing director of Rena of a special meeting of the NPI (see recital 28) at Arlanda airport, Stockholm on 3 October 1988. The meeting was most immediately concerned with the next price increase which was due to take place in April 1989. The stated objective was to raise prices by 15 % by the end of 1989.

The writer went on to note:

'In difficult times: control of production with downtime for all producers. Proposal will be worked out. Prices to be maintained.' (translated from original Norwegian)

It is not without significance that at that time the then managing director of Finnboard was both chairman of the NPI (and was at the Arlanda meeting) and chairman of the PG Paperboard presiding by virtue of that office over the President Conference and the PWG (see also recital 38).

(59) For the producers in the PWG the arrangement on freezing market shares depended upon 'voluntary restraint' and a system of mutual encouragement. Stora says that in the final analysis 'whether or not producers complied with the understandings depended on their perception that it was in their best interests to do so'.

So far as is known, there was no formal machinery of penalties or compensation to reinforce the understanding on market shares but the producers were aware of the possibility of 'retaliation' if one of them won substantial business at the expense of another in a particular market (Stora reply under Article 11 of 14 February 1992, p. 4).

There is certainly some indication that any producer which broke ranks and increased its market share at the expense of the others would be taken to task; this seems to have happened to Weig.

(60) It is accepted by the Commission that despite the understanding on market shares the share of some large individual producers did creep up from year to year. Stora has explained that producers found that their own interests and difficulties were such that steps could not always be taken to limit their sales. No doubt producers in a position to negotiate from strength would expect an increased share in the market. Certain producers were possibly regarded as less reliable than others. Each year, therefore, the discussions on market share would resume with the producers starting from a new base.

Market share levels were, however, kept under constant review in the PWG and the particular problems and needs of individual members were acknowledged and discussed. The understanding between the producers on market share was thus not static but was subject to periodic adjustment and re-negotiation.

(b) The Fides information exchange

(61) In the context of the successful implemenation of price initiatives, it was considered essential to develop a comprehensive system for the reporting and monitoring of production, sales volumes and capacity utilization.

Most of the members of the PG Paperboard contributed periodic (weekly, monthly, six-monthly, annual) reports on orders, production, sales and capacity utilization to Fides as follows:

- weekly order inflow reports,

- monthly production and sales reports,

- monthly production forecast (from April 1991),

- six-monthly GC and GD production reports broken down according to 'substance' (i.e. the different weight categories),

- annual capacity returns.

The Scandinavian producers did not provide the information on all these matters directly to Fides but instead sent the details via their trade association the NPI.

The Fides system covered the whole of western Europe (EC and EFTA).

(62) Under the Fides system the individual reports were colated centrally and the aggregated (and supposedly anonymized) data then sent to the participants.

The statistics sent out by Fides to the subscribers were as follows:

- weekly order inflow statistics,

- monthly consumption statistics (by country for each of 28 grades or groups of grades),

- monthly production and delivery statistics (GC, GD and SBS grades by producing country),

- GC and GD consumption summary (on a 'running 12 months' and 'projected annual' basis),

- market statistics (every six months),

- substance breakdown (every six months),

- annual capacity statistics,

- machine inventory (from time to time).

The 'production and delivery' and 'consumption' statistics were distributed to the participants by Fides in both 'quick' and 'final' form each month. The quick statistics, which were issued pending the preparation of the final figures, were to some extent based on estimates from the previous year's averages.

Weekly order inflow figures were supplied to Fides by some 75 % of the members of the PG Paperboard. The collated statistics were sent out by Fides the following day. These statistics showed the total volume of orders outstanding for the participating producers both worldwide and for western Europe.

(63) The collated statistics sent back to the participants by Fides were broken down for each main grade on a country-by-country basis, apart from the weekly order inflow reports which were for the whole of western Europe.

The M-M note of 28 December 1988 (recital 53) had suggested that (in order no doubt to assist in monitoring the 'price before tonnage' system) each producer should declare to Fides its total production figure and then break this down into five segments: home market, rest of Community, other European, overseas and own usage. According to M-M, the Fides system was subsequently amended broadly in line with this proposal. It is not known whether or to what extent the Fides returns of individual producers were made generally available to the PWG. Even on an aggregated basis, however, the Fides statistics could be (and were) used to assist in the determination and monitoring of individual market shares and in the analysis of capacity utilization. The most accurate analysis was made when the fully preceding year's figures were available, usually in March. During the year the 'quick' statistics were normally used, although owing to fluctuations they might not accurately reflect the final year's end position and had to be treated with caution. The results of this exercise were examined at PWG meetings, charts were prepared and 'explanations' sought from any producer whose market share showed a significant increase (see recital 57).

(64) In many cases, information relevant to monitor the market shares of the various groups were available or could be worked out easily enough from the Fides reporting system itself without any additional disclosure. The 'safeguards' employed by Fides in other product reporting systems to prevent identification of the deliveries of individual producers were not incorporated in the cartonboard system. An example is provided by the 'production and delivery' statistics for Finland. Besides the tonnage of SBS and GC produced in Finland (there was no GD), they show the deliveries of each of these grades in each national market which originated in Finland; in fact they could only have come from Enso-Gutzeit and Finnboard respectively. Similarly, the same set of statistics for the United Kingdom (GC and GD) revealed the sales in each market made by Iggesund (formerly Thames Board) and Reed Paper & Board (UK) Ltd; they are, respectively, the only national producers of GC and GD grades.The same information is given in greater detail in the 'consumption' statistics.

(c) Capacity reports

(65) From the inception of the PG Paperboard in 1981, Fides produced an annual capacity report on a country-by-country basis as well a more detailed 'machine inventory', both covering all grades of board, i.e. including products such as greyboard produced on cartonboard machines.

In addition, the marketing manager of Finnboard presented to the PG Paperboard an annual study of capacity utilization in the market for cartonboard proper (using a more restricted product definition than the Fides capacity report and machine inventory).

Because of the different bases of assessment, the Fides capacity report and the Finnboard study were not directly comparable. Attempts were made to put the data contained in the two reports on a similar basis and from 1985 onwards the Fides report distinguished between 'cartonboard' and 'other types of board' (the 'revised Fides capacity report').

(66) In 1987 the members of the PWG became aware that demand for the product had increased so strongly that the overcapacity in the industry had disappeared.

Despite the split into 'cartonboard' and 'other board' there were still divergences between the Finnboard study and the revised Fides report. At the 1987 General Assembly Fides suggested that the revised Fides capacity report be abandoned and only the inventory of machines be retained. In the event the General Assembly resolved to continue the revised Fides capacity report in its existing form and to complement it with a new capacity survey covering only cartonboard.

(67) The new capacity survey when it came out in 1988 (President Conference minutes 25 May 1988) confirmed what the Economic Committee had already discovered, namely that 'the often quoted overcapacity does not really exist'. The minutes continue:

'The clients' attention cannot be drawn to this fact too often.'

In the Annual General Meeting the following day the representative of Feldmuehle (who chaired the JMC) pointed out that 'these are practical and not theoretical capacity values. Consequently, the data are extremely important for the daily routine. They can and must be used to counter the frequently prevalent opinion among clients that there are very high overcapacities in the paperboard industry'.

Following a proposal from Feldmuehle that it be publicized, the report was provided to customers for the first time by the European Paper Institute in spring 1989.

According to Stora:

'The purpose of this publicity was to demonstrate that the industry was running at very nearly full capacity, to convince the sales/marketing managers that an opportunity existed to recoup the large losses of the previous years and to persuade customers that room for negotiation on price increases was negligible.' (second Stora statement, p. 13).

(68) The new capacity survey (which came to be known as the 'Green Book') was compiled by Fides from information supplied by the members of the PG Paperboard in September/October each year and including an estimate of their capacity for the following year.

Comparison of reported capacity with the consumption statistics for the previous year enabled the PG Paperboard to estimate the capacity utilization rate.

The report showed the annual 'practical production capacity' of each cartonboard machine in use, calculated according to a standard formula.

The actual output of each individual machine in the year was not, however, shown. The report gave the total actual tonnage produced for the preceding years in western Europe and a forecast of total production for the coming year. From these two sets of figures the percentage operating rate for the industry was calculated.

(d) Orders in hand and machine downtime

(69) A comparison could be made of the weekly order backlog and the available capacity, in the light of which the PWG reached an assessment of the overall state of demand in the cartonboard industry.

If a major producer's outstanding orders fall below a certain level, its production programme cannot be planned efficiently and it may have to shut down the mill temporarily in order to avoid the risk of deterioration in the quality of the material produced.

Besides the Fides procedure which gave globalized figures, it was regular practice for each individual producer to disclose its own order backlog to competitors in JMC meetings.

The information on the number of days' orders in hand was relevant for two purposes:

- deciding whether conditions were right for introducing a concerted price increase,

- determining the downtime necessary to maintain the supply-demand balance (second Stora statement, p. 14).

(70) In 1988 and 1989 the industry operated at full capacity and virtually no additional downtime was required beyond normal stoppages for holidays and maintenance.

From the beginning of 1990, however, the industry leaders were faced with increased capacity and reduced demand and considered it necessary to concert on the need for taking downtime in the forum of the PWG. The major producers recognized that they could not increase demand by lowering prices and that maintaining full production would simply bring prices down. In theory, the amount of downtime required to bring supply and demand back into balance could be calculated from the capacity reports. For example, if machine utilization rates for the year were forecast at (say) 92 %, this meant that 8 % of capacity was not going to be used. It would therefore need four weeks of downtime by the industry to bring production and demand back into equilibrium.

(71) However, the PWG did not formally allocate the 'downtime' to be taken by each producer. According to Stora there were practical difficulties in reaching a coordinated plan on downtime to cover all the producers. Stora says that for these reasons only 'a loose system of encouragement existed' (second Stora statement, p. 15).

It seems again that it was the main producers who took upon themselves the burden of reducing output so as to maintain price levels.

The unofficial notes made of two JMC meetings, one in January 1990 (see recital 84), the other in September 1990 (recital 87), as well as other documents (recitals 94 and 95) confirm, however, that the major producers kept their smaller competitors closely and continuously informed in the PG Paperboard of their plans to take additional downtime as an alternative to decreasing prices.

2. Price initiatives

(72) With the improvement in the supply-demand balance and the reorganization of its various bodies, the collusion on pricing in the PG Paperboard was to prove more effective than in the years before 1987.

Rather than allowing prices to rise naturally in accordance with market conditions, the method used to increase the price level across the whole of western Europe involved the planning and implementation of concerted 'price initiatives'. The price was raised in a series of regular and clearly defined 'steps'. It is clear from the documentary evidence found by the Commission that the issues of price increases and of volume control are two inextricably linked aspects of the same plan. On the basis of the preparatory work done in the JMC, the PWG took the decisions in principle on the timing and the amount of the increase. Given the natural ordering and consumption patterns of cartonboard customers, the normal practice was for price increases to come into effect in April and October. On occasion, and depending upon market conditions, a price increase might apply to GC grades only and not to GD; the producers were, however, concerned as a general rule to maintain the price differential (30 to 40 %) between the two grades at approximately the same level. A price increase might also be delayed or not even apply in a particular national market (e.g. the second increase of 1988 excluded the United Kingdom except for SBS).

The JMC discussed for each national market the detailed implementation of the broad decision taken in the PWG. The new 'list' prices for each category of customers ('AA', 'A', 'B', 'C' and 'D' in descending order of importance) were agreed in each national currency using a standard grade and weight as a reference. The new prices to be charged to the individual major customers were also discussed in the JMC. Separate reports were made to the PWG for GC and GD grades, and if any difficulties were foreseen the PWG would then seek to resolve the problem.

The documentation obtained by the Commission (see especially recitals 79, 80 and 83) confirms that price increases and the date they came into effect were fixed by the PG Paperboard for Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, the United Kingdom and Spain, as well as for the EFTA countries.

One of the principal tasks of the JMC was to achieve an 'equivalent' European pricing system, i.e. a uniform price level across the Community. When the concerted price initiatives were relaunched in late 1987 to early 1988, they started from different levels in different national markets. As a result, some divergences occurred. Over the period up to 1991 those divergences were reduced.

(73) A particularly grave and disquieting feature of the concerted price initiatives from end-1987 onwards was that the major producers agreed in advance in the PWG on which one of them would 'lead' the increase (and when) and then the dates on which each of the others would 'follow' by sending out their letters. For obvious reasons they did not follow the same sequence each time.

The JMC was fully informed of the plan and the smaller producers could make their own decision as to exactly when each would 'announce' its intention to apply the increase.

Had they been challenged, the producers could as a result of this elaborate scheme of deception have attributed the series of uniform, regular and industry-wide price increases in the cartonboard sector to the phenomenon of 'oligopoly behaviour'. They could argue that it made sense for all the producers to decide of their own volition to copy an increase initiated by one or other of the market leaders as soon as it became publicly known; unlawful collusion as such would not necessarily be indicated. Customers might well suspect and even accuse them of operating a cartel; and given the relatively large number of producers, economic theory would be stretched to its limits and beyond, but unless direct proof of collusion were forthcoming - and they went to some lengths to ensure it was not - the producers must have had hopes of defeating any investigation into their pricing conduct by the competition authorities by invoking the defence of oligopolistic interdependence.

3. Individual price initiatives

(a) January 1987

(74) While the new mechanism of the PG Paperboard was still being set up there was a concerted price initiative for the United Kingdom at the end of 1986. The exchange rate of sterling against other CWE currencies was then low; according to some producers the price level in the United Kingdom was 15 % below that in other major European markets.

In early November 1986 Finnboard and TBM announced a price increase in the United Kingdom for GC grades of £ 45 per tonne (8 to 9 %) due to take effect on 26 January 1987.

The minutes of a Feldmuehle (UK) Ltd board meeting of 7 November 1986 reported that:

'TBM and the Fins (sic) have announced price increases of approximately 9 % to be effective from February 1987 and it would appear that most other mills will be looking for the same sort of increase.'

For GD grades, most of the producers (led by M-M) also advised customers during November of a price increase of 9 % to take effect at various dates in January and February the next year. Reed P & B, which as the sole domestic producer did not have the same currency problems in the United Kingdom of the CWE producers, announced a slightly lower increase.

GC graphic grades and SBS were increased by £ 55 by Finnboard and Iggesund in December 1986. Enso-Gutzeit, the other SBS producer, also put up its prices in December but the amount is not known.

(75) The announcement of a simultaneous and identical price increase in the United Kingdom by virtually all the producers provoked an angry reaction from the customers who accused them of a 'cynical manipulation' of the market. The allegations of collusion were of course strongly denied.

It is clear, however, from the note made by M-M's sales agent on the outcome of the President Conference of 10 November 1986 (recital 41) that the price initiative had been discussed and considered at the 'Presidents' level.

Further evidence of concertation is provided by a handwritten note in the desk diary of a Feldmuehle employee on the pages covering 15 to 17 January 1987 showing that an exchange of detailed information on pricing, order backlog and downtime has been conducted between Feldmuehle and several other producers in the context of the price increase.

It refers to Tako (the main Finnboard producer of cartonboard for graphic usage), Tampella ('Igerois') and UPM ('Simpele'), Enso-Gutzeit, Kopparfors, Iggesund and TBM (which last two producers were at the time still independent of each other).

The director of Feldmuehle who was responsible for running the Marketing Committee is reported as being 'sceptical' of Kopparfors (it had not yet merged with Feldmuehle) and he apparently also accused M-M of being irresponsible ('ohne Verantwortung').

The note says that in the United Kingdom the price increase was going through, 'TBM included'. (Feeling at the time amongst the customers had been reported as running particularly strongly against the main local producer TBM apparently since it did not have the excuse fo the CWE producers of the fall in sterling against other currencies).

The precise occasion and nature of the contacts between Feldmuehle and the other producers is not apparent from the note. It is not, however, disputed by Stora (which later took over Feldmuehle) that the information contained in the note came directly or indirectly from competitors.

(b) February to April 1988

(76) Against the background of the new 'price before tonnage' policy there were two concerted European-wide price increases during 1988.

According to the M-M report of 28 December 1988 (see recital 54) this new policy succeeded in reversing the downward price spiral of 1987.

The PWG meeting of 4 December 1987 agreed on a 7 to 8 % (in some markets, 10 %) increase for both GC and GD grades to be introduced in March 1988 and to hold until 30 September of that year.

The increase was already being notified to customers by the major producers (M-M and Feldmuehle) at the end of 1987.

The first move was in the German market and was 'led' by M-M and Feldmuehle. By letter dated 18 December 1987, M-M announced an increase of DM 15 and DM 12 per 100 kg for GC and GD grades respectively for deliveries by M-M and FS Karton after 15 February 1988.

Feldmuehle, in its turn, announced on 28 December 1987 that it was increasing its list price by DM 15 (per 100 kg) for GC grades and DM 12 for GD grades with effect from 15 February 1988.

Finnboard notified the increases to its customers in Germany on 4 to 5 January but in their markets it was somewhat later; in the United Kingdom, for example, it did not finally decide on the increase until 11 February 1988 and notified customers on the following day. As a result, Finnboard seems to have been chided by the others for dragging its feet. According to a minute of a Iggesund Board Sales Ltd meeting of 28 to 29 January 1988: 'Pressure has been put on the Finns from all over Europe to increase prices. Finnboard have been told we will not move on prices until they have published an increase price (sic)'.

Documentation obtained from Buchmann, Cascades, Europa Carton, Fiskeby, KNP, Kopparfors (now part of Stora), Laakmann, Deisswil (now M-M), Sarrió, Reed P & B (now SCA) and Weig show that they all implemented the price increase in Germany.

(77) For France the increase was FF 700 per tonne for GC 1 grade, FF 500 per tonne for GC 2 and FF 400 per tonne for GD. Cascades had notified the price increase for GC grades by letter of 24 December 1987 to take effect on 1 March.

The same increase was applied by the other producers: Finnboard, M-M, Deisswil, De Lancey, Saffa, Reed P & B, Feldmuehle, CBC, Tampella Española and Weig.

In the United Kingdom most of the producers for which price documentation is available informed their customers of a price increase of 6 % across the range of cartonboard grades and due to take effect at various dates in April 1988. Feldmuehle, Finnboard, Iggesund, M-M, Kopparfors, Djupafors, Rena, Saffa and TBM all notified increases of 6 %. Reed P & B announced an increase of £ 20 (5 %) for its GD grade cartonboard, as did Laakmann, Fiskeby, KNP and Deisswil.

Documents obtained from Cascades dating from March 1988 show that the planning of the price initiative in the JMC involved setting the 'floor prices' ('prix planchers') for GC 2 and GD 2 grades in each national currency which were to be applied after the increase to A, B and C category customers. Confirmation that these floor prices had been established in collusion and were not internal to Cascades is provided by a note made by Fiskeby's German agents of a telephone conversation with their principals on 21 March 1988 (the date of the Cascades note for GD prices) which instructs them to apply exactly the same minimum price for each category of customers, A, B and C, for GD 2 in Germany as Cascades had noted.

The drawing up of price lists in each national currency for each category of customers was in fact one of the routine tasks of the JMC (see recitals 80, 85 and 87).

According to press reports, the price increase was considered by the producers to have met with mixed success, but did result in a more consistent pricing structure; the rises had gone through when prices were lowest and the gap between the highest and lowest prices had been narrowed.

(c) October 1988

(78) The second European-wide price increase of 1988 was, like the first, based on a DM 15 per 100 kg increase for GC grades, but only DM 9 for GD grades. There