When it comes to protecting buyers of coated paper from price-gouging, monopolistic suppliers, the federal government has its eye on the wrong targets, an industry analyst says.
The U.S. Department of Justice seems likely to force NewPage and/or Verso Paper to divest at least one paper mill, Verle Sutton wrote this week in his subscription newsletter The Reel Time Report. DOJ is concerned that combining North America’s two largest makers of coated paper would give the new company the power to drive up prices.
History says otherwise, Sutton wrote: “Publication paper prices have been nearly flat (cyclically) for more than thirty years,” he wrote.
“On the other hand, out-of-control postage costs have been an almost insurmountable problem for print advertising customers and, in fact, have led to many bankruptcies, catalog/magazine closures, and paper demand losses to electronic competition,” Sutton added.
“Postage costs have escalated sharply for decades, but particularly in the last decade. It is ironic that one government agency (the DOJ) is chartered to make sure there is no possibility of 'unilateral reductions' or 'coordinated effects' in the coated paper business, when the vastly more serious cost problem for print customers is an incredibly inefficient government-sponsored monopoly.”
The bulk of coated paper purchased in the U.S. ends up in the U.S. Postal System in the form of catalogs, magazines, direct-mail pieces, etc. But Sutton is only half right: Yes, rising postage rates are suppressing demand for such items.
But what really hurts is that customers are making strategic decisions knowing that USPS’s future is in the hands of a deadlocked Congress for which "postal-reform legislation" means trying to repeal the laws of supply and demand.