Newsprint price ‘not realistic’

Press, 28 October 1982, Page 4

Newsprint price ‘not realistic’

PA Auckland Newspapers publishers have paid less than a "realistic price” for their newsprint purchased under agreements negotiated in 1974. the High Court in Auckland was told yesterday. The 10-year-old Contracts for the purchase of newsprint from the Tasman Pulp and Paper Company, Ltd. allowed Newspaper Publishers’ Association members to buy newsprint cheaper than others, the counsel for the company, Mr E. W. Thhomas. Q.C.. submitted to Mr Justice Barker.

The association is seeking an injunction to prevent Tasman from increasing the cost of newsprint by $4O a tonne.

It asserts that the increase would be illegal and in breach of the price freeze regulations which came into effect on June 23.

Before the regulations came into effect, the N.P.A. had agreed to the $4O increase to take effect from October 1. The case for the N.P.A. concluded yesterday with cross-examination of Mr David Patten, executive director of the N.P.A. and the evidence of Mr Peter Beresford, the purchasing officer for Wilson and Horton, Ltd. publishers of the “New Zealand Herald." Mr Beresford said that

before the price freeze regulations, Wilson and Horton was paying $503.63 a tonne for newsprint from Tasman.

Opening the case for Tasman, Mr Thomas (with him Mr L. L. Stevens), said that though the 1974 contracts allowed for price increases of 3 per cent there had been nine increases of more than 3 per cent. He said it was not conceded that the surcharges were voluntary payments. He said it was agreed by a witness for the plaintiff that there were many factors which led the N.P.A. to negotiate prices for newsprint well in excess of the original contract price formula. “Tasman has not been in a position to negotiate what it considers realistic newsprint prices.

“The N.P.A. price has consistently lagged behind the price for non-N.P.A. clients and below Tasman’s export price,” Mr Thomas told the Court.

Mr Michael Horton, the managing director of Wilson and Horton, Ltd. and the chairman of the N.P.A.’s paper committee, told the Court he had been involved in negotiating the supply contract with Tasman in 1974.

He said that negotiations with Tasman late in 1981 resulted in agreements for the 1982 price rises of $5O

per tonne on April 1 and $4O on October 1. He said that when the agreements were settled there was no suggestion the newspapers would not be able to recover their costs.

Mr Horton said his own company had been due to move towards the adjustments on the first Monday of the new quarter, but the price freeze had been announced a few davs before.

An urgent meeting had been arranged with representatives of Tasman Pulp and Paper to discuss the implications of the price freeze regulations on June 29.

Tasman executives had attended the half-yearly meeting of the N.P.A. in September and at no stage mentioned the $4O increase still being implemented. Mr Horton said that during a conversation with Mr A. G. Fletcher, of the Tasman company, on September 29, it had been “dropped into the conversation" by Mr Fletcher that the increase was still to be charged. "He was saying that in two day’s time the industry would be asked to pay $4O a tonne extra.”

Mr Horton told the Court that if his company had been aware of a pending price increase, it would have begun a financial exercise to see how best to recover the

costs, either through a higher newspaper price or increased advertising charges. Mr Horton told Mr Thomas that he had understood the association had an implied contract with Tasman that an agreed paper price increase would be renegotiated if it was found that newspapers could not pass on the increase.

"I was conscious that I represented small and vulnerable newspapers which might be put out of business if they could not recover higher’costs." he said.

Mr Horton conceded there was no such implication in contracts for power supply and wage agreements.

Raymond Francis Smith, the chairman and managing director of United Publishing and Printing, Ltd, publishers of newspapers in Rotorua. Wanganui and Levin, and president of the N.P.A.. said he was summoned by Mr Horton for an urgent meeting with Tasman on June 29, seven days after the freeze began. At that meeting, he said, it was agreed that Tasman would not impose the increase until it had taken legal advice. Mr Smith said his strong impression was that Tasman would not impose the increase, and his companies were managed on that basis for the next three months. However, he said that on

September 29 he was told Tasman would proceed with the October increase. He would have expected three months’ notice of that deci sion.

To Mr Thomas, he said he could not say whether he knew on June 29 that the Department of Trade and Industry was unsure of the application of the freeze to existing contracts.

Mr Smith agreed that N.P.A. members were aware after June 29 that an imported content in Tasman’s costs might permit some price increase during the freeze.

David Joseph Patten, executive director of the N.P.A.. said the June 29 meeting with Tasman reached a consensus that the $4O a tonne price rise could not be implemented.

He said it was understood that any price increase permitted on the basis of imported content could be - passed on. in turn, by newspaper publishers. The information on September 29 that Tasman was proceeding with the price increase "came as a very great surprise to me." Mr Patten said an increase of that order was of fundamental importance to the industry, and he would have expected one of New Zealand’s major companies to have consulted its major customer much earlier.