Label Stock Vendors Under Investigation
The criminal investigation is in part connected to a separate lawsuit by the DOJ. The DOJ is currently also challenging the proposed merger of UPM Kymmene's Raflatac subsidiary and MACtac (a division of Bemis) in U.S. District Court in Chicago, on the belief that certain aspects of the label stock industry are ones in which competitors have sought to coordinate rather then compete.
On August 21, 2002, Bemis signed an agreement to sell its pressure-sensitive materials business segment to UPM-Kymmene for $420 million in cash.
Raflatac and MACtac are said to be the second and third largest producers of pressure-sensitive label stock in North America.
The DOJ concluded that the merger would facilitate coordination between the merged company and other North American producers of bulk paper label stock, and would substantially reduce competition in the production of bulk paper label stock for use in variable information printing and prime labeling. The merger would result in higher prices for bulk paper label stock throughout the United States, the DOJ contends.
"Unless this transaction is blocked, the result will be increased prices for bulk paper label stock," says R. Hewitt Pate, acting assistant attorney general in charge of the DOJ's Antitrust division.
"Our investigation has revealed that this market is already one in which competitors have sought to coordinate rather than compete. This merger would increase the likelihood that UPM and others will coordinate on bulk paper label stock prices."
UPM-Kymmene counters that its label stock subsidiary, Raflatac, is a relatively small player in the U.S. label stock market.
The MACtac acquisition would allow Raflatac to introduce a full line of products in the U.S. and compete more efficiently. Even after the MACtac acquisition, Raflatac would only have a market share in America of approximately 15 percent, according to the company.