The European Commission (EC) has issued a Statement of Objections (SO) as part of the merger control approval process for the planned graphic paper joint venture between UPM and Sappi and warned that the deal could restrict competition.

The EC said its preliminary view was that the proposed joint venture “may restrict competition in the markets for different types of communication paper”.

“In particular, the Commission is concerned that the joint venture would be able to increase prices and that customers would have less choice as a result of the transaction,” it further stated.

The EC opened its investigation in late April to assess if the transaction would allow UPM and Sappi to reduce competition for certain communication papers, specifically in the markets for magazine paper and coated woodfree paper in the European Economic Area (EEA), UK and Switzerland.

It explained: “The Commission conducted a wide-ranging investigation to understand the affected markets and the potential impact of the transaction. This investigation has included, among others, the analysis of internal documents provided by the parties and the gathering of views and data from competitors and customers.

“As a result of this in-depth investigation, the Commission is concerned that the joint venture between UPM and Sappi would acquire market power allowing it to increase prices and decrease quality to the detriment of its customers for coated mechanical paper, a type of magazine paper, and for coated woodfree paper.

“The Commission is currently unconvinced that integrating the relevant activities in the joint venture would bring enough benefits – in terms of cost savings or environmental or resilience improvements – to offset the potential harm.”

Printweek – EC states UPM-Sappi JV concerns – Printweek