With the Ontario Bill of Rights public comment period having ended on May 9, 2008, the waste electronics and electrical equipment (WEEE) recycling program proposed by Ontario Electronic Stewardship (OES) is now subject to ministerial approval or rejection.
OES is an industry funding organization convened under the provincial Waste Diversion Act. It’s comprised of major electronics product producers as well as “first importers” of electronic products.
While a number of producer/stewards coalescing to develop a collective program for the recovery and recycling of WEEE is not in itself problematic, it does raise serious competition law and policy issues if the collective market power of the group is used in a manner to unduly lessen competition (i. e., set prices, control the flow and allocation of materials, etc.). This is especially true if the lessening of competition is unnecessary in meeting the environmental objectives.
Unfortunately, this seems to be the case with the WEEE program plan proposed by OES.
The existing WEEE processing sector in Ontario is characterized by as many as 50 businesses ranging from small five-person integrated collection and primary processing operations (that refurbish/reuse, dismantle and sell recyclable materials to “downstream” processors) to the largest four Ontario processors with anywhere from $3 million to over $15 million in capital investments in sophisticated “downstream” WEEE processing technologies. OES reports that, in concert, this sector recovers, reuses and recycles 27 per cent of the WEEE generated in Ontario annually.
Notwithstanding this economic reality, OES has proposed what is in essence a “flow control” model for the collection and processing of WEEE in Ontario.
The OES program is to be funded by a series of consumer point-of-sale levies on the sale of designated consumer electronics and information technology products.
Revenue from these levies — estimated at $62 million in year one — is to be used largely to pay fixed collection prices that (while insufficient to support existing integrated private sector proactive collection-processing operations) are just sufficient enough to induce municipalities to recover WEEE as an incremental service to their hazardous waste depot system.
Existing WEEE collector-processors report that the effect of the program will be to redirect WEEE from their businesses to the municipal hazardous waste depot collection system as well as to general waste haulers; the latter will collect and deliver WEEE to OES consolidation points as an additional service to their existing IC&I waste disposal services.
Under OES’ tendering scheme only a small subset of the existing Ontario processors currently operating in Ontario would be selected to receive preset volumes of WEEE allocated to them by OES from its regional consolidation points.
OES’ rationale for its preferred model is perfectly rational in the context of its own interests; the model allows it to contain program costs by being a collection and processor price setter and by restricting the overall number of market players it has to administer.
Not surprisingly, virtually all Ontario collector-processors are opposed to implementation of the OES plan as drafted. Where smaller collector-processors fear marginalization by the OES program (and thus elimination from the WEEE market) larger processors note that the program will position OES as the sole consumer of waste electronics recycling services, with complete market-power to set prices. With OES fixing processing prices and controlling the flow of WEEE feedstock, several larger processors have stated they will not invest further in Ontario WEEE processing capacity.
The Competition Bureau
In its May 5, 2008, comments to Ontario’s environmental minister regarding the proposed WEEE program, the Competition Bureau stated that, “…we are unable address the potential impact on competition without a great deal of further analysis. We do, however, encourage you to take whatever steps you feel are necessary to ensure that competition issues are considered when evaluating the fairness of the plan.” Adding, “We hope the result will be a program that promotes competition …”
It’s clear from the Bureau’s statement that undertaking a rigorous competition policy analysis is not a trivial matter. Furthermore, it stands in sharp contrast to the fact that the proposed WEEE program contains no such analysis whatsoever.
In his magnum opus An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith stated, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices,” adding, “But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
In the case of Ontario’s Waste Diversion Act, the law renders it necessary — actually demands — that “people of the same trade” work together. Where the drafters of the WDA eschewed Adam Smith it now behooves the Ontario government at the very least to undertake, “…a great deal of further analysis…”of what OES has proposed.
Usman Valiante is principal of Corporate Policy Group in Orangeville, Ontario. Contact Usman at firstname.lastname@example.org