EU says UPM-Sappi deal could hurt competition in print paper market

BRUSSELS, Aug 26 (Reuters) - The European Commission said on Wednesday it is concerned that a proposed €1.42 billion ($1.66 billion) ‌paper joint venture between Finland's UPM-Kymmene and South Africa-listed Sappi could restrict competition.

The Commission said the joint venture would acquire market power that could allow it to increase prices and decrease quality of coated mechanical paper and coated wood-free paper. Both are types of paper used to print magazines, books and promotional materials.

"The Commission is currently unconvinced that integrating the relevant activities in the joint venture would bring enough benefits, in terms of cost savings or environmental or resilience improvements, to offset the potential harm," it said in a statement.

UPM-Kymmene said in a separate statement it was reviewing the Commission's statement with Sappi and that it was confident it would be able to respond fully to its concerns.

UPM-Kymmene said it "remains convinced that the planned joint venture is a necessary step to secure reliable supply continuity for graphic paper customers in Europe and strengthen the resilience of the entire European graphic paper industry".

Separately, Sappi said the Commission's statement is a "standard" step and that it remained committed to the process and is confident of a positive outcome by the end of the year.

($1 = 0.8568 euros)

(Reporting by Bart Meijer, additional reporting by Louise Rasmussen in Copenhagen and Inti Landauro;Editing by Anna Ringstrom, Kirsten Donovan)