American newsprint 'cartel' inquiry

DAVID USBORNE

New York

Prompted by complaints from several newspaper publishers, the US government has launched an investigation into possible anti-competitive pricing practices by North American suppliers of newsprint.

The Justice Department in Washington confirmed the inquiry, but would give no details. It is thought likely that investigators are trying to establish whether suppliers have been colluding to push up newsprint prices, which is illegal.

Newspaper publishers in the US, as in Europe, have been badly hurt by steep increases in newsprint costs over the past 12 months. Newsprint typically accounts for about 20 per cent of a newspaper's production costs.

The rise in newsprint prices has been cited as a factor behind recent decisions to close the Houston Chronicle in Texas and to merge some other regional dailies. Most other US newspapers, such as the New York Times, have been obliged to curtail editorial space and to raise news-stand prices.

In Britain, many newspapers have suffered the double hit of escalating newsprint costs and a brutal price war instigated by Rupert Murdoch's News Corporation, publisher of the Times, the Sun and Today.

Recently, US publishers have been put on warning to expect yet another increase in newsprint prices from February, although prices are expected to level off thereafter. After rising steadily for several years, the price of newsprint in the US shot up from $469 (pounds 303) a tonne in 1994 to $675 last spring. In the 10 months of this year, prices have soared by 40 per cent.

Suppliers have cited rising pulp prices and a sudden surge in demand for newsprint worldwide as reasons for the price increases. After several years of huge losses, newsprint producers have been keen to generate good profits while holding back from building new capacity.

The increased demand for newsprint has come as economic recovery in many countries has generated new advertising flows for publishers, who have subsequently tried to step up their pagination. There have been virtually no new mills built in North America for several years. Newsprint in Britain is largely supplied by Scandinavian producers.