Cartels: The spirit lives on

COMMENT

Juha Niemelä

Martti Ahtisaari

Jorma Ollila

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By Teija Sutinen
     
      Even without the papers of the Finnish Competition Authority (see article linked below) it is clear that the surprise resignation of Juha Niemelä from his post as CEO of the wood processing company UPM in January was prompted by the events leading to the present investigation into a paper cartel.
      The UPM board forced Niemelä to resign soon after UPM had applied to the US Department of Justice for clemency for its suspected involvement in various cartels in the field. The pardon frees the company, which disclosed the existence of a cartel, of all punishment.
      In the whole cartel affair less attention has been paid to the fact that internal investigations within UPM were launched at the initiative of the company’s board of directors, and not by its operational management.
      The UPM board noticed that something was wrong when US competition authorities denied the company permission to buy the US sticker product manufacturer MACtac.
      When the board learned from its own investigations that UPM had been involved in illegal activities of various kinds, it forced the company’s management to take quick action. In January UPM disclosed the existence of a cartel to competition authorities in the EU, the United States, and Canada, and helped in the launch of official inquiries.
      The board did not see any alternative. There was not enough time to wait until someone else discovered the existence of the cartel first.
     
The revelation of the existence of a cartel was an embarrassment for both the executive management and the board of directors. Involvement in a cartel suggests that the board of directors has neglected its duty to supervise the activities of the management.
      By sacking Juha Niemelä and launching its whistle-blowing operation, the UPM board saved the company from a massive fine. The members also saved their own skins.
      The UPM board of directors includes former President Martti Ahtisaari and Nokia Chairman and CEO Jorma Ollila, both of whose reputations were on the line. The top executive of the world’s market leader in mobile telephony needs to be squeaky-clean in competition matters both in his own company and in any positions he might hold on company boards.
      The board can be criticised for not giving out the reasons for Juha Niemelä’s departure - even now. The impression has been given that something shady has been going on, which tends to give credence to even the silliest of rumours.
      The anti-trust investigation in the United States seems to have shut all mouths quite efficiently, but even from the point of view of Niemelä himself, it would be more open and honest to come right out and say where the problems lie.
     
The main reason for the scandal would appear to be that Niemelä and his closest colleagues at work joined the industry at a time when cartels were legal in Finland. Until quite recently, products of the forest industry were sold through common sales organisations, such as Finnpap.
      The sales organisations were banned when legislation outlawing cartels came into effect in Finland in 1992, but their spirit seems to live on. The management of UPM apparently did not take anti-trust legislation seriously enough.
     
One more time: cartels are wrong. They hurt customers, they raise prices, and they weaken quality and selection. They also erode corporate efficiency. Nowadays it is easy to be caught, and the punishments are severe.
      Judging from this spring’s events, this lesson seems to have finally sunk in here in Finland as well.
     
Helsingin Sanomat / First published in print 5.6.2004


Previously in HS International Edition:
  Juha Niemelä unexpectedly resigns as CEO of UPM-Kymmene (30.1.2004)
  Competition Authority refuses to hand over documents in forest industry cartel case (7.6.2004)
  Police raid offices of numerous forest companies over cartel suspicions (26.5.2004)
  Minister Pekkarinen sees paper cartel allegations as blow to Finnish reputation (28.5.2004)

TEIJA SUTINEN / Helsingin Sanomat
teija.sutinen@hs.fi