Queensland, Waste & Resource Recovery

Local Law 20 anti-competitive: WRIQ

Local Law 20 anti-competitive: WRIQ

The proposed local law is intended to replace Chapter 5A: Waste Management by Local Governments of the Environmental Protection Regulations 2008 and section 7 in Part 2A of the Waste Reduction and Recycling Regulation 2011. Both are scheduled to expire on July 1.

The City of Gold Coast has said that its proposed Local Law 20, which was open for submissions till last week, would protect public health and amenity related to waste management by:

  • regulating the storage, servicing and removal of waste;
  • regulating the disposal of waste at waste facilities; and
  • ensuring that an act or omission does not result in human injury, property damage or environmental harm.

In essence, the proposed law will do that by allowing Council to designate areas where it may conduct general waste or green waste collections. While this is in line with powers already granted under Chapter 5A and section 7, WRIQ pointed out that the objects of the proposed law are broadly stated and use the broadly defined “waste” as opposed to limiting the scope of Council’s powers to a certain waste stream, for example domestic waste.

“This indicated that Council may intend to expand the scope of the proposed law to cover all types of waste and recyclables, in addition to domestic, commercial, and green waste. This potentially gives the proposed law a broader scope than the Chapter 5A provisions,” WRIQ CEO Rick Ralph said in the association’s submission.

“The broader scope cannot be justified by environmental concerns, health and public safety or community amenity; environmental regulation and operating conditions of the waste management and recycling industry is well managed by existing legislation and the Department of Environment and Heritage Protection.”

Law 20 will drive prices up

WRIQ acknowledged that domestic waste management is one of local government’s roles and assured that industry is not trying to “usurp” Council’s role in providing these services.

However, the association said its members were “gravely concerned” that Council is seeking to restrict competition in the commercial waste and recycling sector without proper consultation or genuine consideration of the impact of the proposed law.

Ralph said WRIQ is opposed to the introduction of the proposed law for a number of reasons. For one, industry believes it is anti-competitive and will result in higher prices for consumers without a commensurate increase in quality or innovation.

“The proposed local law is anti-competitive in that it allows Council to create a monopoly over commercial waste collection services in designated areas, thereby creating a barrier to competition in that market,” Ralph said.

“In addition to WRIQ’s concerns about the impact on competition in the commercial waste collection industry, the objects of the law show that the proposed local law may extend further than regulating the collection, storage, and disposal of domestic and commercial waste, and may extend to all forms of waste collection and disposal. This creates great uncertainty for business moving forward.

“For example, the intent to regulate the disposal of waste at waste facilities undermines all existing industry assets whose owners have invested locally, employed local people and obtained the required state approvals for the operation of the facilities.”

Additionally, in being able to create a monopoly over services in designated areas, Council will tender for collection services here, allowing one or two large waste collection companies to dominate the market for a significant period of time.

“This will have the effect of freezing the market for the length of the tender and it is unlikely that smaller businesses could continue to operate during this period,” Ralph said.

“By forcing businesses in designated areas to use the Council’s waste collection services, Council will eliminate the ability of business to negotiate the best rates for their rate collection services and prices will increase. As smaller operators go out of business, there will be less incentive for the remaining large operators to compete on price,” he added.

With fewer operators in the marketplace, there would also be less incentive for operators to innovate or introduce new technology and ultimately, all of this could lead to higher prices for lower quality and less innovative services.

No public benefit

In its submission, WRIQ put forward a list it considered to be relevant to constituting public benefit based on the RE ACI Operations PTY LTD and the Competition Principles Agreement, such as economic development including encouragement of research and capital investment, fostering business efficiency, promotion of equitable dealings in the market, employment growth, and industrial harmony.

The proposed law however, would not create public benefit, Ralph said. Instead, it would create a long-term detriment to the Queensland public and to the market.

For one, WRIQ noted that the proposed law would interfere with the normal operating market environment by forcing on all commercial ratepayers and other businesses, Council-controlled waste and recycling services.

“This will result in significant dislocation of businesses of waste and recycling service providers throughout the Gold Coast and reduces choice for commercial premises in choosing their waste services,” Ralph said.

Additionally, if all commercial waste and recycling services were provided by Council’s single contractor, there would be a detrimental effect on local businesses operating within the region and there is a risk that smaller, family businesses would collapse or fall into financial ruin.

There could also be long-term dislocation of existing suppliers to the market if Council has control over all general waste as this would likely result in a single contractor having direct access to the provision of all waste and recycling collections in the area.

Further, a Council imposed monopoly could reduce the incentive for technical development, improvements in productivity, performance and efficiencies, innovation, economic development, research, and capital investment.

A violation of the competitive neutrality principle

WRIQ also warned that the introduction of the law would cause the Council to violate the competitive neutrality principle.

“Under section 43 of the Local Government Act 2009, a local council conducting a business in competition with the private sector should not enjoy a net advantage over competitors only because the entity is the public sector. The competitive neutrality principle applies if the public benefit outweighs the costs of implementation,” Ralph highlighted.

And as mentioned above, WRIQ has claimed that there is no public benefit in enacting the proposed local law.

“The imposition of a mandatory waste collection levy over businesses in designated areas, without an opt-out provision, will provide Council with a competitive advantage because no commercial provider can charge a levy to a potential customer, even when the customer’s preference is not to use the supplier’s service,” Ralph continued.

“In this respect, we note that in June 2012, in response to a complaint from WRIQ, the Queensland Competition Authority found that provisions similar to the proposed local law that were enacted in the Sunshine Coast Regional Council area violated the competitive neutrality principle. Notably, the Council has not considered the use of tax and subsidy mechanisms as an alternative method to achieve their stated objectives.”

WRIQ also voiced its concerns over the consultation period, pointing to a request it made for an extension of time for submissions because of the Easter break, ANZAC Day, school holidays and impact of Cyclone Debbie.

Council did not grant WRIQ’s request, which the association said contravened section 4 of the Competitive Policy Guidelines, which state that the review process must include “meaningful consultation with relevant businesses about the anti-competitive provisions”.

Summing up, Ralph said: “WRIQ strongly objects to the enactment of the proposed local law. As set out above, such law is anti-competitive and fails to deliver any public benefit.

“Further, the proposed local law will put the Council in a position very likely to breach the competitive neutrality principle enshrined in the Local Government Act 2009. WRIQ does not consider that Council has adequately reviewed all the alternative policy options as no tax and subsidy mechanisms appear to have been considered.

“Finally, WRIQ remains concerned about the manner in which Council’s review has been conducted and reserves its rights to challenge the proposed local law on this basis.”