Germany may have created the monopoly model replicated around the world for extender producer responsibility (EPR), but so far, it’s also been the only country to dismantle it as well.
Ontarians, primarily under an EPR monopoly model, got a lesson in how to follow in Germany’s footsteps, as one of of its competition watchdog members presented Germany’s story of EPR transition to delegates at the Recycling Council of Ontario’s annual general meeting.
The selling statistic in favour of competition, according to Bundeskartellamt, the German Federal Cartel Office, is a more than 50 per cent drop in the amount of money needed to operate the monopoly-based system, after its reign was stopped. What cost some two billion Euros to operate in 1995, dropped to just less than one billion Euros by 2011. With inflation, that’s about a 66 per cent drop in the cost to run Germany’s Duales System Deutschland (DSD) EPR agency.
“There were all these horrible scenarios painted by participants (of DSD),” said Arno Rasek, who spoke on behalf of Bundeskartellamt. “None came true.”
One of the most common fears of opening up Germany’s EPR market was that it would result in achieving the lowest environmental standard. But Rasek says that theory was flawed.
“You want the highest sorting result because it means more money,” he says, noting that the environment and the economy were linked in a positive way.
Life was good for those involved with DSD. Rasek says there were no tenders, and payments to sorters and collectors were typically 30 per cent higher than they should have been. Those involved with DSD were eager to protect the cartel-like structure that had emerged through the good intentions of creating an EPR program. This made it all the more difficult to dismantle when the time came, and even included efforts to exempt DSD from federal competition laws.
In 2003, the year DSD was dismantled, the 500 shareholders of DSD consisted of producers, retailers and waste management companies. The DSD market share was 100 per cent, says Rasek. A year later, the agency was sold to a private equity firm, and its lock on industry contracts was removed in favour of a tendering system.
By 2011, DSD’s market share had dropped to just 44 per cent as an effect of the demonopolization.
But other more important statistics had changed for the better. When private industry got involved with Germany’s EPR process, the plants started getting much larger, and there was an overall improvement of the system’s efficiency, notably a rapid shift from manual to automated material sorting systems, says Rasek.
Critics of the demonopolized system warned that recycling quotas and diversion rates would drop in a free market. But that, too, never happened. Quotas, for example, remained steady at around 70 per cent.
Rasek uses an electronics recovery model to show some more details about how Germany’s new EPR system works. First, producers and importers are placed on a centralized national register. The register helps municipalities co-ordinate product collection points within neighbourhoods. Large containers are available for residents to freely include the appropriate recyclables. When the bin is full, the municipality contacts the register staff, who then notifies the producer or importer that the bin is ready for pickup. That full bin must then be collected and replaced with an empty one.
Interestingly, the Competition of Bureau of Canada was on hand for Rasek’s presentation, and even made one of its own. Chris Busuttil is a Major Case Director and Strategic Policy Advisor for the Economic Policy and Enforcement Branch of the Competition Bureau. He says that while there may be some evident flaws within the Ontario EPR system, the Bureau is driven by the mandate of the Commissioner.
“We’re not at a point where we’ve taken major enforcement action,” says Busuttil, noting that that day may still come.
Busuttil says the Bureau is, however, committed to a free market and preventing any company that may abuse a position of power by actively ensuring competitors never touch them.
Despite Germany’s success dismantling its EPR monopoly, “everywhere there are still monopolies,” says Rasek. “But Sweden is working on it.”