The Paper Rip-Off

Commercial and institutional consumers of paper products are increasingly outraged and despairing over the paper industry’s alleged shortages and its zooming price levels.

William White, procurement officer for the Washington Board of Education, says prices have gone up an average of 100% for the school system’s paper in less than a year. School cafeteria paper supplies are 106% higher than last year’s, with paper towels going from $3.60 to $8.90 per case. “How you’re going to get that big a budget, I don’t know,” bemoans Walter Coley, the school cafeterias’ buying officer.

New York City and Los Angeles school systems are experiencing the same super paper inflation. Louise Valesano, the paper buyer at the Los Angeles Board of Education, said, “It will bankrupt the school system if we don’t watch it.”

Robert D. Nelson, executive vice president of the Los Angeles Times, didn’t mince words when he told us:
Newsprint manufacturers have been unconscionable in their pricing policies in recent months and this is creating a hardship for U.S. publishers.

Nelson asserts that his newspaper cannot get all the news­print it needs. His paper was paying $163 per ton for 32 lb. newsprint at the start of 1973; it is now paying $230 per ton. Paper companies are pushing 30 lb. paper at $245 per ton on newspapers, some of whose executives complain about its poor quality and greater “show-through.”

With the lifting of price controls over the paper industry this spring, the crunch descended mercilessly on small business. Laundries, print shops and small magazines face cutoffs or price increases of up to 300%.

Take, for example, the pleas of Richard Heinrich of the Heinrich Envelope Company in Minneapolis. Some of his paper prices are up 100% over last year and the paper companies are requiring his firm to pay up within ten days from the ordering date. Previously he had 60 days to pay and sometimes received a discount for prompt payment. Now he often finds the paper arriving days after he has paid for it.

“You don’t dare complain to the mills,” Heinrich explained. Supplies are too low and he can’t risk further cuts. The giant paper mills are in the driver’s seat and are selling the kinds of paper that are most profitable and dropping the kinds of paper that aren’t as profitable. It’s a take-it-or-leave-it industry attitude.

Smaller printers in the Washington, D.C., area think they are being rated by the paper companies according to their size. These printers are not getting what they need from their traditional suppliers and some believe that, as one printer put it, “There’s tons and tons of collusion going on.” Increasingly, the words “black market” are heard by merchants who say that paper is available if you’ve got the money to pay the exorbitant prices demanded by intermediaries.

The head of an average size printing firm told us, “Three paper houses called the same day with the same increases. I thought I might ask them to put out a joint communique instead.”

A usually outspoken chief executive of a large New York publishing company declined to be quoted by name because he didn’t want to lose his suppliers. But he did note “an interesting correlation” of price increases by different companies. Even with book paper prices up 25 30% over 1973, he is still unable to purchase some kinds of paper and finds other grades in very limited supply.

Other smaller users of paper are stunned victims. The 116-year-old Atlantic Monthly found itself, in editor Garth Hite’s words, “completely and arbitrarily” cut off last October by the St. Regis Paper Company. Hite said that the cutoff was precipi­tated when St. Regis decided to sell more paper to a bigger customer, Time, Inc., which was launching the new magazine, People.

Another small magazine, The New Leader, was confronted with a 300% increase. Editor Mike Kolatch points to other small magazines which are suffering or failing, in significant part due to paper prices.

The paper mills know the effects their prices and allotments are having on their customers but they claim their costs — labor chemicals, freight, and pollution controls – are rising to justify their price hikes. However, paper company profits are not simply keeping up; they are soaring. The industry giant, International Paper Company, is not atypical in expecting to nearly double its net profits this year over 1973 – a year in which its profits were 56% higher than its 1972 level.

Concerned about a potential backlash from Washington and organized smaller businesses, the paper companies have just recently announced plans for expanding their plant capacity torelieve the fight supply situation. But the three year lead—time for new plants, if they are actually built, won’t help the bankruptcies, the further concentration of economic power, or today’s fight against inflation (Next week, more about paper and demands for an inquiry).