In December, Paperlinx’s German subsidiary filed a complaint with the German Federal Cartel Office (GFCO) against Sappi Fine Paper Europe for anti-competitive behaviour relating to indent sales. 

The paper merchant claims the South African paper manufacturer’s European division is restrictive in regards to the customers it can make indent sales to, since Sappi requests detailed information about end-users and varies prices depending on their identity. If the merchant refuses to give details or if a different merchant that works with Sappi has previously supplied the buyer, the paper firm won’t provide a quote at all, Paperlinx claims.

Sappi immediately dismissed the allegations as being “entirely unfounded” saying that the claims were not new and that its activities, both in Germany and elsewhere, were “in line with the industry’s long established practices”.  

Then a fortnight ago, Sappi claimed that the complaint had been dismissed by the GFCO. 

But Paperlinx blasted Sappi’s statement as “inaccurate and misleading” and said that the merchant had in fact been requested to submit additional evidence in connection with the allegations. It claims there has been no formal decision and that the complaint remains on file. 

In a statement, Paperlinx said Sappi was breaching EU and German competition laws and impacting “billions of euros of indent paper sales”.

Sappi has so far not responded and declined an interview for the purpose of this article. The row has provoked a mixed response from the industry with some strong backing for both sides, although with nerves jangled at the possibility of an EU investigation (a likely outcome if the complaint is upheld by the GFCO), few at the moment are willing to put names to their voices, at least until a formal decision has been reached. 

Speaking to PrintWeek, one ex-paper merchant, who wished to remain anonymous, said in his experience mills all too often pushed for answers to “unnecessary questions”. 

“They need to know the product, the weight and the geographic location and the quote should be the same no matter what. They don’t need to know the specifics of the end-user unless of course they are being protectionist. I’m glad someone has flagged this up. It is in the printers’ interest to sort this out so there is a level playing field.” 

‘A bit odd’

However, one industry source called the complaint bizarre. He says: “Paperlinx is essentially calling for a flat rate for all businesses and that’s a bit odd in itself. I think perhaps this is a sideshow to something else, otherwise why would you create this issue with a major supplier?”

Another paper industry figure also voiced support for Sappi saying: “I think that Sappi is trying to make sure their product isn’t devalued by unnecessary competition. 

“Mills have always asked for this information, one reason being that they might have a discount if it’s an existing customer or maybe they simply don’t want to give the same price to someone that isn’t one of their loyal customers. There has always been an argument about this and this complaint is causing a lot of head-scratching in the industry.

“You can’t force a company to sell to another company, but if you refuse to quote for no other reason than protectionism you are, of course, treading on very thin ice,” he adds.

Put in simple terms, indent sales are an almost direct route to market for the mills where the merchant acts only in a sales capacity, winning the business with the end-user and obtaining and passing on the quote from the mill, adding on a small margin for their services. The mill then delivers the order directly to the buyer meaning the stock never sees the merchant’s warehouse.

Estimates suggest that while the total tonnage of paper sold to printers in the UK by merchants between 2008 and 2013 declined by around 35%, about 45% of the total volume of sales was indent business. 

Typically indent sales are available on orders of over five tonnes and while in general anecdotal evidence points to a decline in this route to market, due to mills going direct and changes in market requirements, others are experiencing an increase.

Arjowiggins Graphic key account manager Julian Long says that he works with three major merchant groups and that of that business around 20% is indent and growing.

“More and more print shops work on a ‘just in time’ basis where they need to get paper stocks quickly from merchants, so you’d expect the amount of indent to decline, but actually indent enables printers to buy bespoke sizes particularly for larger jobs and it means they can make great reductions on waste.”

Long says that the company’s main route to market is and will continue to be through merchants. He refuses to comment on the Paperlinx debate but says asking questions about the end-user is a useful way to gauge the market. “We need to understand the market into which our product is being sold, especially with new digital print techniques that require different substrates. We need to be confident our product is fit for purpose,” he explains.

He adds that going direct to printers, except for very niche requirements, is out of the question for them. “It is impractical for a mill to offer the sort of service to printers that a merchant can,” he says.

Denmaur Paper marketing director Peter Somerville says that if their suppliers ask questions they are open, but that if it results in a mill’s reluctance to quote, it needn’t be the end. “It’s not necessarily so black and white. Just because the printer buys a certain paper doesn’t mean they have to always use that paper. It can be an opportunity for us to put forward another option.”

Whether or not Paperlinx’s allegations are upheld and the mills have to rethink their practices, the fact remains indent sales in the paper industry will continue to be a vitally important route to market. As one merchant put it: “This is how the industry operates. If they rule that it is anti-competitive then the mills will simply have to change their ways. But indent will continue in some form or other.”

OPINION

Indent is more key than ever but change is likely

Tim Bowler, director, Focal Strength

Indent sales are still vitally important to the UK merchanting industry and account for around 45% of the total volume of woodfree UK paper sales by volume. In fact, as consolidation continues, indents could become even more important.

The BPIF estimated that there were around 12,000 printers in the UK a decade ago, whereas now its probably nearer 7,000 or 8,000, so the merchants previous “stock in trade” of 7.5 tonne vans doing 30 drops a day to printers around a city are gone forever.  So indent is incredibly important to merchants because they’re dealing with fewer, larger clients.

The mills have nibbled away at indent over the years by selling direct and in some respects the UK and Germany are the only remaining European markets where indent sales are still significant to merchants, partly due to the strength of the merchanting trade associations, like the old NAPM.

I think the mills will have to change their ways and I think Paperlinx has been brave to take Sappi on.

While I can’t comment on the specific situation with Sappi, as soon as the term ‘anti-competitive’ is mentioned it can only mean one thing: that prices are perceived to be artificially high and that’s not good for any industry.

Of course, there is still fierce competition in the indent market, but is it always on a level playing field? Under the “current practices”, as Sappi put it, the merchant holder of a specific printer, publisher or other large user’s indent business with a mill is essentially protected, which can’t be a good thing.

From all accounts, Paperlinx’s complaint to the German competition authorities is already having an impact and I understand that some mills are changing their practices in light of this case.

The upshot is that indent sales are incredibly important to UK merchants, but removing some of the more protective practices will ultimately be good news for merchants, mills and most importantly printers and large volume paper users.

READER REACTION

How do you go abou t sourcing your paper requirements?

Gary Charlton, head of production and procurement, Haymarket Media Group

“At Haymarket we made the decision to buy paper directly from a merchant, Antalis, as we felt it put us in the best position to ensure the total cost, quality, security and competitiveness of supply. A great example of the benefits of this was Antalis’s work on our Olympics publications. Antalis sourced the market to ensure we got the best quality and managed stock to ensure that neither we nor our customer was left with a large inventory of paper. We couldn’t have managed this project without them.”

Darren Coxon, managing director, Pensord

“For us it’s economies of scale. We look to exercise our buying power on behalf of smaller publishers in the UK but even this is not sufficient to go it alone. Instead we partner with a UK merchant and together build a relationship with the mill. The merchant is important to the mill and if, in turn, we are seen to be important to the merchant, we achieve our objective of understanding, price stability and continuity of supply. Key to this is having a merchant you can trust and who is aligned to your business. Relationships are everything.”

Robert MacMillan, chief executive, HH Global

“We have partnerships with merchants around the globe where the partner would supply the printer but we would instruct the merchant supplier of what to supply. We have regular contact on a region by region basis with the major paper suppliers both from a mill and stockists/merchant perspective. This enables us to monitor any changes in material specifications and in particular, material availability within region as well as the source of these materials.”