The Competition Council of Latvia (the CC) has identified a number of existing competition barriers created by both market structure and regulatory framework in the waste-management market in Latvia after commencing a sector inquiry. Thus, providers of waste-management services are prevented to compete under conditions of a level playing field, as well as new entrants are limited to enter waste-management market.
In 2015, the CC launched the sector inquiry into the waste-management sector to assess competition situation, to provide proposals for its improvement and to clarify prospects of the sector development.
During the sector inquiry, the CC identified a number of challenges, including increased municipalities’ involvement into business, problems with separate waste collection, issues concerning quality of concluded agreements and provided services of waste-management, as well as barriers created by regulation that hinder effective competition.
While assessing competition neutrality in context of municipalities, the CC found that municipalities possess a number of various even conflicting roles – they are responsible for development of regional waste-management plans, choose the waste-management service provider and set price for this service in the region, as well as in many cases they themselves are providers of waste-management services. The CC found that at least half of Latvian municipalities wholly or partly own undertaking that provides waste-management services in the region thus closing this region for competition or competing with the private sector service providers.
The CC invites all municipalities to choose their waste-management model responsibly. Taking into account their regulatory role, as a first choice though tenders an opportunity should be given to private undertakings to provide this services. At the same time, the CC highlights the importance of completive tendering system that does not unduly restrict amount of competitors to take part in the tender as well as to make sure that procurement criteria are clear in order to prevent misunderstandings when service is being provided. Only as a last resort municipality should take a decision to enter waste-management market itself.
Furthermore, the CC sees a requirement of regulatory framework as challenging. For example, in order to enter packaging waste collection service market, undertaking is obligated to conclude agreements with at least 50 sorted waste collection areas in the whole territory of Latvia (three in each of the waste management region). During the sector inquiry, the CC stated that in most cases operators of sorted waste collection areas refuse to conclude agreement without objective justification, thus, creating additional administrative and financial barriers for entering packaging waste collection service market.
The aim of such requirement is to provide packaging waste collection system from households in the whole territory of Latvia. At the same time, data gathered by the CC shows that these agreements are rather formal and collectors mostly derive waste not from these areas but directly from households and other polluters. Thus, an aim of the collection of packaging waste throughout the country in fact is not implemented effectively.
To promote achievement of environmental goals and to avoid barriers to the development of fair competition, the CC invites all stakeholders to further discuss necessity to change the current system of packaging waste collection.
Furthermore, the CC points out that private undertakings may stop expansion as well as new entrants may be deterred from entering waste-management market in Latvia if barriers both mentioned above and other those identified during the sector inquiry are not mitigated. Thus, overall competition situation in the waste-management market may be distorted, as well as consumers and entrepreneurs may be deprived from receiving services of a good quality and competitive price.
The CC presented finding of the research in the conference Waste Management in Latvia: Business. Competition. Responsibility which was held on 23 November in Riga, Latvia.
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