Whatever happened to competition of bin collectors?

Government’s threat to cap waste charges shows collection system is not working

Competition for the market rather than competition within the market is the favoured model across the EU, in order to prevent monopolistic-type behaviour by waste collection companies.  Photograph: Bryan O’Brien

Competition for the market rather than competition within the market is the favoured model across the EU, in order to prevent monopolistic-type behaviour by waste collection companies. Photograph: Bryan O’Brien

 

Domestic bin collection services in Ireland are run in a way that is highly unusual in the European Union and the developed world generally, according to those in the know.

In the mid-2000s, the four Dublin local authorities wanted to introduce a system whereby one of them would either operate a domestic waste collection monopoly for all houses in the region, or be in charge of a competitive tendering service for a single provider of the service.

However, the proposal was challenged successfully in the courts by waste collection companies Panda and Greenstar. The judgment, given in 2009, is not being appealed.

Interestingly, the court was told that Dublin City Council assistant manager Matt Twomey had told Panda in 2007 that it was his intention to “stop private operators collecting domestic waste in the Dublin region”. The allegation was not disputed.

There are considered to be two types of competitive model for markets such as domestic waste collection: competition within the market; and competition for the market.

The councils had wanted to introduce a competition for the market model, whereby one council would either deliver the service in the Dublin region, or run a competitive tendering process to select a single provider for the service.

Mr Justice Liam McKechnie (now of the Supreme Court) issued a ruling in the Panda case which scuppered the councils’ intentions. The ruling, in favour of a competition within the market system, was accepted as covering the Greenstar case also. At the time, Poland was the only EU member state running such a system for domestic waste collection.

Natural monopoly

The judge did not agree. “I do not believe that the Dublin market for the collection of household waste is a natural (local) monopoly either taken as a whole or in each individual local authority area.”

Even the smallest local authority area could support up to three operators, he said. He was also of the view that only competition in the market could provide price reductions to consumers.

He dismissed concerns about decreased coverage of service and possible cherry-picking. These matters could be covered in the terms of the permits given to operators, he said.

Competitive tendering would only motivate operators to do what best suited the local authority, not the consumer, the judge said, while a monopoly operated by the local authorities would involve “no incentive to improve services or to reduce consumer costs”.

In relation to arguments that multiple operators would place more rubbish trucks on the road, and this would be bad for the environment, Mr Justice McKechnie said the effects from one or two extra trucks on the road “must be considered below de minimis”.

Competition law

Interestingly, he did not find that Panda had a “legitimate expectation” that it would be allowed continue to collect waste in the Dublin region, or that its “property rights” would be infringed by a change to a tendering system.

In the current controversy, there is concern that the Government’s room for manoeuvre in relation to pricing might be limited by fears that the private waste operators might sue.

In its 2011 programme for government, the previous government said it would introduce a competitive tendering regime but, in a 2012 Regulatory Impact Assessment, the Department of the Environment, Community and Local Government decided to stick with the competition within the market system.

“In European terms, the evolution of the structure of household waste collection markets in Ireland has been somewhat unique, in that a system of side-by-side competition, primarily among private-sector waste collection firms, has developed,” that document noted.

Economists say the reason the competition for the market model is more favoured internationally is because of the danger of monopolistic-type behaviour by waste collection companies, and the obvious public service aspects of domestic waste collection (such as servicing remote homes or poorer communities).

The system run here presumes competition between waste operators. Threats from the Government that it may cap waste collection charges creates the impression that the truth could be otherwise.

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