A Price Freeze on Household Waste Collection Prices in Ireland: Consistent with Competition Policy and Law?
Kluwer Competition Law Blog
July 12, 2016
Please refer tot his post as:, ‘A Price Freeze on Household Waste Collection Prices in Ireland: Consistent with Competition Policy and Law?’, Kluwer Competition Law Blog, July 12 2016, http://competitionlawblog.kluwercompetitionlaw.com/2016/07/12/a-price-freeze-on-household-waste-collection-prices-in-ireland-consistent-with-competition-policy-and-law/
The Irish Waste Management Association (IWMA), an association of undertakings accounting for 75% the household waste currently managed in Ireland, announced that it is committed “to freezing prices at current rates for twelve month period from 20th June 2016 to 1 July 2017.”[fn]IWMA, “IWMA Agrees Measures to Alleviate Consumer Concerns on Pay by Weight,” Press Release, 21 June 2016.[/fn] What position should Ireland’s Competition and Consumer Protection Commission (CCPC), which has yet to comment, adopt?[fn]Based on an examination of its website, www.ccpc.ie.[/fn]
Precedent & Guidance
The first port of call for the CCPC is its own enforcement record and guidance.
On the 1st December 2008 the two trade associations representing publicans in Ireland announced a twelve month price freeze. The CCPC[fn]More accurately, the CCPC’s predecessor, the Competition Authority. The latter was merged with the National Consumer Council and in October 2014 became the CCPC. We will refer to the CCPC throughout.[/fn] was in no doubt that this was a breach of competition law: “It is inherent within both section 4 of the [Competition] Act  and Article 81  EC that each undertaking must determine independently the policy which that undertaking intends to adopt on the market… The fact that the announcement purports simply to freeze, as opposed to raise, prices does not exclude it in competition law terms. Any agreement or concerted practice among competitors or decision of a trade association which sets the price to be charged for a product has the potential to distort competition in the market to the detriment of customers.”[fn]The Competition Authority v The Licensed Vintners Association & ors (2009) IHEC 439, para. 7. The Authority successfully instituted legal proceedings on the basis that the price freeze was against earlier undertakings given to it. The issue of whether or not the price freeze breached competition law was not decided by the Court.[/fn]
In a subsequent November 2009 guidance note on trade associations and compliance with competition law, the CCPC stated “the freezing of prices at a certain level in order to resist downward pressure on prices” is an example of coordinated pricing that breaches competition law.[fn]Competition Authority, Notice on Activities of Trade Associations and Compliance with Competition Law, Decision N/09/002, November 2009, para. 4.5.[/fn]
No doubt mindful of the views of the CCPC, IWMA stated, four days before it announced its price freeze, that as “a trade association, the IWMA cannot and does not make recommendations on pricing structures to its members. That is a matter for individual operators and ultimately market forces will determine the prices charged for waste collection services.”[fn]IWMA, “Statement from IWMA,” Press Release, 17 June 2016.[/fn]
This Time Its Different?
There was, however, extensive government involvement in the IWMA’s, but not the publican’s, price freeze.
For environmental reasons pay-by-weight (PBW) charges for household waste collection were to be introduced as of 1 July 2016.[fn]S.I. No. 24 of 2016, Waste Management (Collection Permit)(Amendment) Regulations 2016.[/fn] It was estimated that almost 90% of households would save money through PBW.[fn]Department of the Environment, Community and Local Government, “Almost 90% of Households will Save Money Through Pay-By-Weight – Minister Kelly,” Press Release, 1 Feb. 2016. The 90% estimate appears to have been based on existing patterns of prices and behaviour. Approximately 20% of operators used some form of PBW prior to 1 July 2016.[/fn] Nevertheless, substantial public disquiet was expressed over the introduction of PBW in mid-June 2016. There was a widespread concern that household waste collection prices would rise.
Against this background the relevant Minister negotiated with the IWMA a dual pricing structure, householders could either: switch to PBW; or remain on their existing pricing plan, which would be frozen for a year. Furthermore a Government press release stated that the “operation of the price freeze by the industry will be closely monitored by Government and, in the event of evidence of it not being honoured, the Minister will ensure that primary legislation is brought forward to legislate to enforce the freeze.”[fn]Department of the Environment, Community and Local Government, ‘Government plan for Pay By Weight introduces Price Freeze and phased introduction of Pay-by-Weight,” Press Release, 21 June 2016.[/fn]
A Better Alternative
The CCPC is thus in a difficult position. How can it satisfy the Minister’s concerns over pricing while ensuring that the solution is not a price freeze?
One solution is competitive tendering, in which the lowest bidder collects waste for a defined period of time for a defined local geographic area. Currently competition in the household waste collection market in Ireland takes place between individual household waste collectors. Collectors, once they have obtained the required regulatory approval and permits, can approach householders to collect their waste. This is referred to as side by side competition.
A series of studies have found that side by side competition is not working well for consumers in Ireland and that competitive tendering is the best alternative.[fn]See, for example, Forfas, Waste Management in Ireland. Benchmarking Analysis and Policy Priorities: Update 2010. See also Competition Authority Decision cited in next footnote.[/fn] Competitive tendering is able to take advantage of economies of scope, scale and density, while ensuring householders benefit.
The CCPC was initially in favour of competitive tendering.[fn]Competition Authority, Alleged Excessive Pricing by Greenstar Recycling Holdings Limited in the Provision of Household Waste Collection Services in Northeast Wicklow, Enforcement Decision E/05/002, 30 August 2005. The author, who was a member of the Competition Authority between 2000 and 2008, was responsible for this Decision.[/fn] However, in 2011 the CCPC softened its support somewhat. While acknowledging in theory that competitive tendering was superior to side by side competition, the CCPC suggested that there were certain difficulties in the implementation of competitive tendering, such as designing the contract and ensuring that bid rigging does not take place. It reached this conclusion notwithstanding the fact that competitive tendering is common in many jurisdictions[fn]OECD, Ireland: Towards an Integrated Public Service, Public Management Reviews, 2008, p. 329. This report contains a case study on local waste management in the local government sector.[/fn] and had already been employed by some local authorities with respect to the collection of dry recyclables. Indeed, the CCPC went so far as to state that “From a competition perspective, there may be merits in retaining side-by-side competition in areas of high population density, if such an approach is not too administratively costly or legally difficult.”[fn]Competition Authority, Altering the Structure of Household Waste Collection Markets, S-11-009, September 2011, para. 1.5.[/fn]
The CCPC should be in a strong position to provide guidance on the recent performance of the household waste collection market. In 2012 it was tasked with maintaining “ongoing oversight of household waste collection markets,” with a report due in 2016 as part of the review of the household waste collection market.[fn]Department of the Environment, Community and Local Government, A Resource Opportunity, Waste Management Policy in Ireland, 2012, p. 32.[/fn]
If based on that review the CCPC felt that side by side competition was not working well for consumers and that its earlier concerns over the practicality of competitive tendering were exaggerated, then it would be able to suggest competitive tendering as an option to replace the current market arrangements, including the price freeze.
One possible barrier to the switch to competitive tendering is that the property rights of incumbent collectors might be compromised. However, a 2015 High Court judgment ruled taxi license owners should receive no compensation consequent on the State’s removal entry controls in the taxi market, which saw the value of such licenses decline dramatically in value.[fn]Alphonsus Muldoon & ors v Minister for the Environment and Local Government & ors (2015) IEHC 649.[/fn] It could be argued that similar arguments apply with respect to the introduction of competitive tendering.