International Review of Waste Management Policy - Department of ...

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Greenstar claims that when the local authorities first left the waste collection
business, private operators cornered territories and it is now very difficult to
enter another operator’s high density area. Unless a firm goes into its rival’s
high density area very aggressively it is unlikely to succeed. One operator
interviewed confirmed that in order to compete with Greenstar in northeast
Wicklow they would probably have to go in below cost to try and secure a
sufficient customer base. Another operator noted Greenstar’s customer
density as a factor affecting its decision not to enter that market and the fact
that Greenstar has sufficient resources at its disposal to respond to attempts
to compete with it by directing additional resources to the area in question.
Greenstar overcame the difficulties associated with entering other operators’
high density areas in the northeast Wicklow market by entering via acquisition
in 2000 and acquiring the incumbent operators’ existing customer bases.
However, any new entrants in the relevant market will now have to secure a
customer base via the greenfield route, the difficulties with which are
described above.
In addition, the commercial reality of the Irish household waste collection
market is that collectors generally appear unwilling to enter each other’s
areas of operation or to compete head-to-head with each other, although
competition may occur at the boundary between the areas served by each
firm. One operator contacted as part of a previous enquiry by The Competition
Authority claimed that household waste collection has naturally evolved in
such a way that each of the operators tends to have control over certain areas
but that some overlap occurs on the outskirts of their areas of operation. The
Competition Authority’s previous market enquiries have shown that even
where there are three or more private operators servicing a particular county
in the State, this does not automatically imply that these operators compete
head-to-head within that county. Often these firms have control over
household waste collection in a certain part of that county and compete only
on the boundaries of their areas of operation. Even in some boundary areas
where household waste collectors operate side-by-side The Competition
Authority has received complaints regarding a general unwillingness among
collectors to infringe on each other’s territory and a general preference to
focus on retaining their existing customers without trying to expand into their
competitors’ terrain.
While this general business model may help explain the lack of new entry into
the northeast Wicklow household waste collection market since 2000, it is
unlikely in itself to constitute significant evidence of entry barriers as it is more
a choice or preference of the individual firm rather than a rigid structural
feature of the market concerned. It is nonetheless consistent with the finding
that an incumbent firm enjoys substantial cost advantages in terms of its
existing customer density and can consequently react strongly to any new
entry into its high density area. Economies of density would therefore appear
to constitute a significant entry barrier into this market and protect Greenstar
from potential competition in the relevant market.
The DoEHLG consultation on Regulation of the Waste Management Sector noted that
excessive profits may be generated for the supplier in a situation where there is
International Review of Waste Policy: Annexes