Australian packaging cartel investigation widens

Related tags Carter holt Corrugated fiberboard Cardboard

The investigation into a possible cartel in Australia's highly
concentrated corrugated box sector has widened, exposing the
problem of duopolies within the country's isolated economy.

Regulators are now demanding documents from Visy and Carter Holt Harvey, as well as Amcor, the company that triggered the investigations.

Amcor, the world's top manufacturer of plastic bottles, has since ousted its chief executive after former staff in Australia were suspected of being involved in an illegal operation to drive up box prices.

The scandal has already knocked eight per cent off the company's shares. Amcor has now accepted the resignations of chief executive Russell Jones and Australasian head Peter Sutton, and has promised to cooperate with ongoing investigations.

But now Visy has also been asked to provide information to the competition authorities in both Australia and New Zealand. The company said officials from he Australian Competition and Consumer Commission (ACCC). visited its operations last week to demand documents concerning pricing and contracts.

Carter Holt Harvey, the New Zealand-based wood, paper and packaging group, has received similar requests.

Investigations into possible collusion began after the Amcor filed a lawsuit seeking the return of confidential information taken from company by five top people who had quit its Australian cardboard box division. Last month, the Federal Court ordered the former executives to return any such confidential information.

Amcor has since confirmed the allegation that certain of its officers and employees appeared to have entered into and given effect to arrangements that constituted cartel conduct in the corrugated box business. And it subsequently emerged that the team of five was hired to provide consultancy advice to Carter Holt.

Amcor alleges the team took confidential information with it, including details of its top 200 customers.

Ousted CEO Jones was at the cutting edge of Amcor's transformation into one of the world's top five packaging groups since taking over in 1998. The company said it was not yet able to assess the financial implications of the announcement, but claimed that performance was in line with its forecast for 20 per cent earnings growth in the two years to June 2006.

The corrugated box division accounted for about 9 per cent of the group's A$10.4 billion (€6bn) sales in fiscal 2004 and about 8 per cent of the group's A$831 million in operating profit.

Carter Holt has less than 5 per cent of the Australian box market, which is dominated by Amcor and Visy. The pair control about 90 per cent of the segment.

The investigations follow the introduction of a so-called leniency policy under which companies that come forward and admit to price collusion, and co-operate with the ACCC receive smaller penalties. The ACCC says that Australia's medium-sized and isolated economy suffers from virtual duopolies in several sectors and, as a result, an active competition authority has been critical.

Related topics Processing & Packaging

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