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Change needed to encourage competition in organic waste treatment, OFT finds

22 Sep 2011 01:41 PM

The OFT has today issued recommendations designed to encourage increased competition and greater efficiency in the treatment of organic waste.

In its market study into the treatment of organic waste in England and Wales the OFT identified a number of barriers to competition related to aspects of economic, environmental and planning regulation, and to the apparent corporate culture of some water and sewerage companies. The market study followed a request to the OFT from Ofwat and the OFT has worked closely with Ofwat throughout the market study.

The report makes a range of recommendations aimed at promoting competition, hence driving efficiency and innovation in the sector.

At the heart of the recommendations are proposed changes to the economic regulation of water and sewerage companies to foster efficiency and help create a level playing field between them and other suppliers of organic waste treatment. The study also recommends greater harmonisation of the environmental regimes applicable to sewage sludge and other organic waste.
In addition, the OFT considers that planning policy proposals currently under consideration could contribute to greater competition.

Sonya Branch, OFT Senior Director of the Services, Infrastructure and Public Markets Group said: 'Our market study, conducted with Ofwat's support, identifies that there is greater scope for competition in the treatment of organic waste, however the current economic regulation, environmental protection and planning regimes are barriers to this competition developing.

'We have therefore today made a number of recommendations to Ofwat and other government bodies that have the potential to tackle these barriers to competition, benefit consumers and drive efficiency and innovation in organic waste treatment.'

The OFT has provisionally decided that a market investigation reference to the Competition Commission would not be appropriate at this time, as it considers that the regulatory barriers and distortions to competition identified in this market study can be better and more proportionately addressed by Ofwat and other government departments acting on the recommendations in this study.

The OFT is now consulting on this provisional decision.

Further information on the OFT's organic waste market study, including the full scoping document, is available from the market study page.

NOTES

  1. Written responses to the consultation on the OFT's provisional decision not to refer the matter to the Competition Commission should be sent by 5pm on 27 October 2011 to organicwaste@oft.gsi.gov.uk or to Organic Waste Market Study, Floor 4C, Office of Fair Trading, Fleetbank House, 2 - 6 Salisbury Square, London EC4Y 8JX. 
  2. The OFT launched the market study in January 2011, see launch press notice OFT to examine advanced treatment of organic waste
  3. OFT market studies are carried out under sections 5 to 8 of the Enterprise Act 2002 (EA02) which allow a market-wide consideration and report on both competition and consumer issues. 
  4. Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; recommendations to business; campaigns to promote consumer education and awareness; or a clean bill of health. 
  5. Organic waste comes from a number of sources. The main ones are agricultural waste, food waste and sewage sludge. Most organic waste in the UK is from agricultural sources, such as slurries and manure (around 90 million tonnes), around 16 million tonnes is food and drink waste (both from domestic sources and from industrial and commercial sources), with sewage sludge accounting for one to two million tonnes. see note 1 The sector is of strategic significance to the country, given its role in relation to a number of sustainability objectives, including those related to the efficient use of waste and the production of renewable energy.
  6. Ofwat is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly and finance them. Further information on Ofwat's review of economic regulation in the water and sewerage sectors is available at www.ofwat.gov.uk/future.

Note 1. Based on data from DEFRA (2011b) 'Anaerobic Digestion Strategy and Action Plan', available at www.defra.gov.uk/publications/files/anaerobic-digestion-strat-action-plan.pdf. As above, note that this data relates to the UK.