The European Commission has adopted a positive decision with obligations through a set of contracts concluded by the Duales System Deutschland AG concerning its system of selective collection and recovery of packaging waste.
After having already adopted an abuse decision for this sector in the same case on April 20, 2001 this decision defines further the EC's competition policy in the field of collection and the recovery of packaging waste.
The EC set clear principles for the competitive assessment of exclusive, long-term service agreements in the waste management sector. Concerning DSD's service agreements this has led to reduced contractual duration times. In addition the principle of free and unimpeded access to the collection infrastructure for competitors of DSD has been established.
By this decision, the Commission defined two fundamental principles of its competition policy for the waste disposal sector. First, the Commission makes clear that it can only accept long-term, exclusivity provisions in favor of the collectors in the service agreements concluded between DSD and its collectors, when the indispensability of such provisions is justified on the basis of convincing economic evidence. In this case it has led to reduced contract lengths.
Secondly, by this decision the EC underlines the importance it attaches to free and unimpeded access to the collection infrastructure for competitors of DSD. Together with the abuse decision adopted in this case earlier this year, which concerns the payment provision of the trademark agreement concluded between DSD and the companies obliged by the German Packaging Ordinance, this decision establishes conditions allowing the occurrence of competition in the area of collection and recovery of sales packaging waste in Germany.
DSD is currently the only company running a countrywide system to collect and recycle packaging in Germany. DSD uses local collecting companies. There are 546 collection districts in Germany.
The original service agreement raised competition concerns due to the exclusivity provisions in favor of collectors as well as the zero interface principle.
According to the Agreement the collector has the exclusive task of collecting and sorting packaging in a designated district. The assessment of this provision showed that access to the market by collectors is obstructed; this goes a considerable way towards partitioning off a substantial part of the common market. Article 81 of the EC Treaty is therefore applicable to the exclusivity clause in the Service Agreement.
Most of the Service Agreements initially notified were to run until the end of 2007 thereby having overall contractual duration times of up to 15 years. Consequently the EC scrutinized whether such long-term exclusive agreements were necessary. The results of the analysis suggested that if the Service Agreements were to run until the end of 2003 collectors would have sufficient time to achieve an economically satisfactory recovery of their investment.
The EC informed the applicants of this finding, and the applicants then set a termination date of Dec. 31, 2003 for the agreements. This allows the Commission to exempt service agreements containing an exclusivity clause running no further than the end of 2003. Afterwards these service agreements have to be put out for tender according to the German Packaging Ordinance.
This assessment by the Commission was further motivated by the fact that the service agreements contain no provisions which would prevent or restrict competitors of DSD from sharing the collection facilities of the collectors. Although DSD has given commitments regarding the joint use of collection facilities by competitors, nevertheless, given the vital importance of unimpeded access to the collection infrastructure for competition on a market characterized by special supply conditions, the EC considers it necessary to attach obligations in order to ensure that competition on the relevant markets is not restricted.