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Proposed Acquisition by Japan Pulp and Paper Company Limited of Spicers Paper (Singapore) Pte Ltd

Reference:

CCCS 400/009/18

Notifying Parties:

Japan Pulp and Paper Company Limited

Notifying Date:

16 October 2018

Summary of transaction:

(i) the names of the merger parties;

a. Japan Pulp and Paper Company Limited ("JPP") 
b. Spicers Holdings (Asia) Pte. Ltd. 
c. Spicers Paper (Singapore) Pte Ltd ("Spicers Singapore", and together with JPP, the "Parties")

(ii) a description of the transaction;

The Proposed Transaction will involve JPP acquiring 100% of the issued shares of Spicers Singapore from the Seller ("Proposed Transaction"). As such, JPP will, following completion of the Proposed Transaction, hold and control 100% of the issued shares of Spicers Singapore.

(iii) a description of the business activities of the merger parties worldwide and in Singapore;

JPP

JPP is a global business specialising in the wholesale distribution of paper, paperboard and related products, with operations in Japan, Asia, Oceania, the Americas and Europe. JPP's operations in Australia are carried out by (a) its Australian agent subsidiary, Japan Pulp & Paper (Australia), which is primarily involved in the supply of paper and related products, sourced from various paper mills all over the world mainly to local paper merchants, and (b) its Australian paper merchant subsidiary, Ball & Doggett Group, which is primarily involved in the distribution of paper and related products within the local market (e.g. printing companies, packaging companies, etc.). JPP is also involved in the manufacture of containerboard, household paper and packaging products, with facilities located in Japan, Indonesia and Vietnam. Additional information on JPP is available at https://www.kamipa.co.jp/eng/company/.

In Singapore, JPP's wholly owned subsidiary, JPP Far East (S) Pte. Ltd. ("JPPFE") is a distributor of office papers, offset printing papers, specialty papers, synthetic papers and related products. JPPFE distributes paper to customers from varied industries, ranging from printers, educational institutes, ministries, banks, copy centres and walk-in individuals. JPPFE also imports paper from countries which include Japan, Korea, China, Europe, and Indonesia. Additional information on JPPFE is available at http://jpp.com.sg/about-us/.

Spicers Singapore

Spicers Singapore is a wholesale distributor of paper and other visual communication materials, including papers for digital printing and products for Sign & Display. Spicers Singapore's products include recycled paper and paper from sustainable sources as certified by PEFC[1] and FSC.[2] Additional information on Spicers is available at http://spicersasia.com/.

[1] "PEFC" refers to Programme for the Endorsement of Forest Certification, which is an international non-profit, non-governmental organization dedicated to promoting Sustainable Forest Management (SFM) through independent third-party certification.

[2]“FSC” refers to the Forest Stewardship Council (see http://ic.fsc.org/en)

(iv) a description of the overlapping goods or services, including brand names;

(1) JPP has submitted that the overlapping goods sold by Parties consist of:

(a) Coated Paper;
(b) Uncoated Woodfree Paper;
(c) Copy Paper;
(d) Synthetic Paper;
(e) Coated Board (1 Side and 2 Side); and
(f) Carbonless Paper.

(2) JPP has submitted that the brands of Coated Paper sold by the Parties in Singapore are as follows:

JPP

(a) Gold East (Gloss/Matt);
(b) Hi-Kote (Gloss/Matt);
(c) Huatai (Gloss);
(d) Light Weight Coated (Matt);
(e) Moorim Neo Star (Gloss/Matt); and
(f) Superkote (Gloss/Matt).

Spicers Singapore

(g) Goldeast Gloss & Matt;
(h) UPM-Finesse Classic Gloss & Matt;
(i) Ozone Gloss & Matt; and
(j) Impress Gloss & Matt.

(3) JPP has submitted that the brands of Uncoated Woodfree Paper sold by the Parties in Singapore are as follows:

JPP

(a) A-print Woodfree;
(b) April Fine Paperone;
(c) Eco Plus (100% Recycled);
(d) Golden Sun;
(e) IKPP;
(f) Magna Bond; and
(g) Pindo Bond.

Spicers Singapore

(a) April;
(b) IKPP;
(c) UPM Fine;
(d) Thai Pro Offset; and
(e) Ozone Offset.

(4) JPP has submitted that the brands of Coated Board sold by the Parties in Singapore are as follows:

JPP

For 1 sided Coated Board:
(a) Ningbo Zenith;
(b) Rizhao (Board One); and
(c) APRIL.

For 2 sided Coated Board:
(d) Suncard;
(e) Neo Knight;
(f) Neo Grand Board;
(g) Ningbo Star; and
(h) Matt Post.

Spicers Singapore

For 1 sided Coated Board:
(i) Pacesetter 1/S Whiteback Board;
(j) Savvi Kote;
(k) Hi-Q Duplex Greyback Board; and
(l) Rizhao 1/S Whiteback.

For 2 sided Coated Board:
(m) Ningbo Star Artcard;
(n) Shinmoorim Neo Knight;
(o) Winner Super White Ivory Board; and
(p) Oji Sun Art Card Plus.

(5) JPP has submitted that the brands of Copy Paper/PPC sold by the Parties in Singapore are as follows:

JPP

(a) April Paperone All Purpose;
(b) April Paperone Copier;
(c) April Paperone Digital;
(d) Double A;
(e) IK Copy; and
(f) Sinar Spectra.

Spicers Singapore

(g) Double A;
(h) HP;
(i) Pacesetter Coloured;
(j) Paperone; and
(k) Smart Copy.

(6) JPP has submitted that the brands of Carbonless Paper by the Parties in Singapore are as follows:

(a) JPP: Japan CCP;
(b) Spicers Singapore: Phoenix.

(7) JPP has submitted that the brands of Synthetic Paper by the Parties in Singapore are as follows:

(a) JPPFE: Yupo Synthetic Paper;
(b) Spicers Singapore: Fusion, Robuskin.

(v) a description of substitute goods or services;

Printing and Communications Paper Products

JPP has submitted that from the demand-side, Coated Paper, Uncoated Woodfree Paper and Copy Paper are substitutable for each other to a certain degree, depending on the customer's intended applications for the paper product. In addition, other grades and types of printing and communications paper are also substitutable for each other to a certain degree. In particular, there is competition between different grades and types of paper depending on factors such as price and trading terms.

Paperboard Products

JPP has submitted that Coated Board such as coated white-top testliner, is substitutable with uncoated white-top testliner to a certain degree, depending on the customer's intended applications for the board product. However, board products are generally not substitutable for paper products. Although there are no real differences in the coating operations for paper and board, board products are not substitutable for paper products as board products are thicker and have different applications from paper products.

Carbonless Paper

JPP has submitted that while Carbonless Paper has characteristics distinct from other types of printing and communications paper, the importance and usefulness of its main purpose (i.e. physical replication of documents) has been diminished given developments in technology. For example, businesses no longer need to rely on Carbonless Paper for physical replication of documents such as invoices and this is evidenced by the fall in demand for carbonless paper over recent years.

In respect of all the products described above, JPP has submitted that customers are generally able to switch suppliers and brands easily. According to JPP, the price differential between different suppliers and brands is very small, and almost negligible, which is largely due to the ability of customers to easily conduct price comparisons across the various paper distributors before making a purchase. Pricing is transparent, and customers are even able to obtain information directly from paper mills.

(vi) the applicant’s views on:

  1. definition of the relevant market(s);

    JPP submits that the relevant markets are the markets for:

    (a) wholesale supply of printing and communications paper in Singapore;

    (b) wholesale supply of paperboard products in Singapore; and

    (c) wholesale supply of carbonless paper in Singapore.

    In respect of the printing and communications paper market, JPP has submitted that the Parties overlap specifically in the supply of Coated Paper, Uncoated Woodfree Paper, Copy Paper and Synthetic Paper. As for the paperboard market, JPP has submitted that the Parties only overlap in respect of Coated Board. 

  2. the way in which competition functions in this market;

    JPP has submitted that the paper distribution industry in Singapore is characterised by the following:

    (a) competitors compete based on several factors, including:               

    (i) the variety of the types of paper carried;
    (ii) the quality of each type of paper, which depends on brand;
    (iii) the volume of paper it is able to distribute;
    (iv) the credit terms it is able to extend to customers;
    (v) timeliness and speed of delivery;
    (vi) availability of stock;
    (vii) quality of service offered; and
    (viii) access to paper mills;

    (b) common paper products generally sold by all market players are:

    (i) Coated Paper;
    (ii) Uncoated Woodfree Paper; and
    (iii) Coated Board;

    (c) paper is generally supplied either in bulk quantities, or in smaller quantities, for e.g. in loose packets or palettes; and                             

    (d) consistent with global trends, the industry is generally declining for the same reasons as described above, with the exception of certain products such as carton boxes and packaging materials (which make up a relatively small percentage of the Parties' turnover in Singapore) which
    will increase in tandem with the trend of online purchases being on the rise.
     

  3. barriers to entry and countervailing buyer power; and

    JPP has submitted that barriers to entry and expansion in the paper distribution market in Singapore are generally low. According to JPP, there is very little brand loyalty given the homogeneity of the products and as such brand barriers do not exist. There are also no technical, regulatory or IP related barriers to entry. Further, given the ease at which customers are able to switch between suppliers, new entrants are able to compete by offering lower prices, better credit terms and better services.

  4. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

JPP has submitted that the Parties would remain constrained by, and subject to strong competition from, existing competitors and potential entrants after the completion of the Proposed Transaction, because:

(a) the relevant markets are fragmented, with many competitors;

(b) end-customers have an abundance of alternative distributors, including both paper merchants and paper mills (and their agents in Singapore) to choose from given the price transparency of paper products. In addition, the cost of switching is very low, enabling customers to switch suppliers easily;

(c) competitors can react quickly to any changes in price, output or quality, as supply-side substitution is sufficiently strong, thereby posing significant competition to the Parties; and

(d) although there have not been new entrants recently, paper mills overseas have become more active in recent years and have been actively looking to expand into different geographical locations. As such, the threat of entry by potential entrants would also serve to constrain the Parties' conduct.

As such, JPP has submitted that the Proposed Transaction will not cause a substantial lessening of competition in any of the relevant markets in Singapore.

Decision:

The proposed merger, if carried into effect, will not infringe the Section 54 prohibition.

Decision Date:

27 November 2018.

Read Media Release.

Read the Grounds of Decision.


Updated Date

Last Updated on 12 December 2018