Emerging conflicts between Extended Producer Responsibility and European competition policy
On Wednesday, June 25, 2014, SME Europe hosted the Working Lunch: “Emerging conflicts between Extended Producer Responsibility and European competition policy” in the Salon des Membres of the European Parliament.
Dr. Paul Rübig MEP, Committee on Industry, Research and Energy and Honorary President of SME Europe, opened the discussion and introduced the speakers and the subject of the Working Lunch with further questions. He questioned how Europe and the Member States will handle energy and waste in the future and how they could be even more effective in environmental areas and in recycling. The European People Party (EPP) will follow a strong line to achieve more efficiency in the future.
Dr. Hanno Wollmann, Partner at Schoenherr Attorneys at law, held the first key speech.
He emphasized the rising tensions between the European Commission and the subsidiarity of the Member States. In the field of packaging, Extended Producer Responsibility (EPR) has been regarded a successful approach to environmental protection and resource efficiency. Altstoff Recycling Austria AG (ARA) is the leading non-profit compliance scheme for packaging in Austria.
Following a complaint filed by a competitor, DG COMP opened formal antitrust proceedings against ARA in 2011. Since then, DG COMP has conducted an inquiry into the suspected abuse of a dominant market position. According to the Statement of Objections (SO), ARA has allegedly prevented competitors from accessing its household collection infrastructure. In the response to the SO, ARA made clear that ARA has never prevented competitors from using the collection infrastructure as agreed with DG COMP already in 2004. On the contrary, ARA provided for this partial shared-use model in all contracts with waste companies and municipalities.
But contrary to its 2003 exemption decision, DG COMP now regards the household scheme as an essential facility and demands not partial, but total shared use. Under this model, the collected packaging waste must be simply handed over to competitors on a pro-rata basis with no participation in system planning, R&D or communication and without any incentive for efficiency. All planning and managerial efforts would have to be done by the incumbent operator only, at it’s own cost and risk. This contradicts fair and also more effective models of competition in Member States. The German competition authority, Bundeskartellamt, warns that shared-use solutions are advantageous for consumers only if they incentivise an efficient design of the collection infrastructure. Consequently, the recent amendment of the Austrian Waste Management foresees a lottery model to create economic incentives for competing compliance schemes.
With the intended provisions based on the assumption of “essential facility”, DG COMP is intervening in the implementation of the EU Packaging Directive in the Member States: If the household collection infrastructure was an essential facility in Austria, the same would apply to all Member States. The measures render obsolete DG ENV’s attempts to establish Golden rules (Guidance on Extended Producer Responsibility). While DG ENV tries to identify best practices for EPR according to the local situation, DG COMP aims at only one specific model – total shared use – and uses the ARA case as a precedent. Thus the proceedings have far-reaching implications for the implementation of the EU Packaging Directive in all other Member States.
The main goal for the consumer should be a better service with sinking costs, as achieved by ARA over 20 years with an increase in recovery and recycling by 34% while reducing unit costs and process by more than 60%. ARA spends 5 million euros annually on information activities to increase awareness and to support recycling. DG COMP’s doctrine of a mandatory “total shared use model” could potentially remove all incentives for innovation, efficient collection and campaigns to promote public awareness.
The second speaker, Mag. Markus Stock, Head of EU Office, Austrian Federal Economic Chamber, stated that the main challenges are not only environmental issues but also waste management costs and quality. 20 years ago, no one really wanted to take the risk and establish a collecting and recycling system. Not only investments were needed but also infrastructure. The big challenge was to find companies willing to invest in the system, and to make the consumers use the system. So far the results are very successful, since the costs are decreasing.
In a nutshell, EPR means that producers should bear the cost of collection and recycling. Consequently, industry wants effective and cost efficient solutions. Thus the future expectations are fair competition, on-going innovation and cost efficiency. A key element of cost efficiency is a low free rider level in order to prevent the obliged company from not bearing the financial burden. The Austrian enterprises support competition but request a level playing ground for compliance schemes. Even in competition, standards of convenience, quality, recycling and environmental protection as well as efficiency have to be kept high. A discussion arose and Bob Schmitz from Cabinet Bob Schmitz mentioned that there is no one-fit-all-solution. He pointed to investigations held in France, Italy and Germany. The analysis concluded that all those national systems work differently. He also asked why the European Commission/DG COMP is looking for a general solution, as there is no model of unity.
Mathieu Hestin from BIO Intelligence summarized for all participants the main results of the study ‘Development of guidance on Extended Producer Responsibility’. This study has been commissioned by the European Commission, DG ENV, in order to identify best practice/golden rules for the implementation of EPR in the Member States. Mr Hestin informed the present stakeholders that the study, that is based on 36 case studies of waste management systems in the EU Member States, including Austria’s household packaging collection and recycling system operated by ARA, has just been finished.
The most important conclusions of the study were that there is no “one-size-for-all”-solution. The best way how to design and implement EPR schemes is influenced not only by the specificities related to every product category and waste stream, but also by organisational, historical and cultural aspects.
Joachim Quoden from the Extended Producer Responsibility Alliance (EXPRA) is worried about a “new layer of monopolistic approach” in the role of clearing houses. Karl-Heinz Florenz MEP added that we have to increase the quality of recycling not only the quantity. Finally the representative from the Commission (DG Environment), Marianne Muller stated, that the goal is common rules about competition, and the competition has to be fair and helping the environment. There should be a balance between competition and environment. Furthermore, one of the point of views mentioned by Peter Kurth from BDE e.V. was, that reduction of costs is not unconditionally good. Some of the problems can be solved with the quality of the recycling, the recycling quotas and more control with the waste and packaging.
Dr. Christoph Scharff, CEO of ARA, acknowledged SME Europe and Paul Rübig for their initiative and reminded the participants that while we are discussing best solutions for efficiency, quality and recycling, DG COMP has already made up their mind: Total shared use as the one-size-fits-all model for EPR, based on the still unjustified assumption the household collection infrastructure as an essential facility. The ARA case just serves as the vehicle for a precedent. He encouraged all delegates to contact their representatives and commissioners to raise the awareness for this arising conflict between EU environmental targets and competition policy and the massive threat to the subsidiarity principle.
