The European Commission has informed Czechia that measures appointing EKO-KOM as the only company authorised for the collection and recovery of packaging waste for over two decades may be in breach of the EU competition rules.
EKO-KOM, based in Czechia, offers collection and recovery services for packaging waste. Since the entry into force of the Czech Packaging Act in 2002, EKO-KOM has been the only operator authorised to serve over 20,000 businesses in Czechia. No other company has succeeded in obtaining an authorisation for the provision of the same services.
The Commission's preliminary view is that certain provisions of the Czech Packaging Act as well as Czechia's enforcement of such rules may have created significant entry barriers for rival companies. Such barriers include authorisation requirements that are very difficult to meet, such as strict contractual and financial conditions. They also include the possibility for EKO-KOM to influence the authorisation proceedings of other applicants given that, as the established incumbent, it has access to and the right to comment on the application files of potential new entrants. Moreover, potential entrants are required to coordinate certain aspects of their planned commercial activities with EKO-KOM as the established incumbent.
The Commission preliminarily considers that such State measures led to unequal opportunities for EKO-KOM's rivals and placed EKO-KOM in a position of conflict of interest, due to its dual role as both a market participant competing with any new entrant and a third party enjoying certain procedural rights in the authorisation process of new applicants. The measures effectively prevented other companies from being authorised by the Czech authorities and allowed EKO-KOM to operate as a de facto monopolist for more than two decades, thereby hindering the development of effective competition in the Czech market for waste collection and recovery.
The Commission has voiced its competition concerns in the form of a Letter of Formal Notice. If the Commission's preliminary view is confirmed, this conduct would infringe Article 106 of the Treaty on the Functioning of the European Union ('TFEU') in conjunction with Article 102 TFEU.
Background
The Commission's investigation was triggered by a complaint from the Czech company REMA AOS, which unsuccessfully tried to enter the market for the collection and recovery of packaging waste in Czechia. Five other companies have been equally unsuccessful in entering the market.
Procedural background
Article 106 TFEU requires Member States not to take or maintain in force measures that are contrary to the EU Treaties, in particular to the EU competition rules, such as Article 102 TFEU. Article 102 TFEU prohibits the abuse of a dominant position by companies, including those that have been granted special or exclusive rights to operate in a particular sector, in the sense of Article 106 TFEU.
A Letter of Formal Notice is a formal step in the Commission's investigation into suspected infringements by Member States of the EU competition rules. It informs the Member State concerned of the Commission's preliminary concerns and allows the latter to review the documents in the Commission's case file and to provide observations within two months.
The sending of a Letter of Formal Notice does not prejudge the outcome of an investigation. If the Commission finds, after reviewing the Member State's observations, sufficient evidence of an infringement, it may require the Member State concerned to remedy the competition concerns identified.
There is no legal deadline for concluding an investigation against a Member State for a potential breach of the EU competition rules. The duration of an investigation depends on different factors, such as the complexity of the case and the Member State's cooperation with the Commission.
Regulatory Framework for packaging and packaging waste
The Czech Packaging Act transposes EU legislation requiring Member States to introduce extended producer responsibility ('EPR'). Under EPR, all natural or legal persons placing packaging on the market must assume responsibility for it throughout its whole lifecycle, including during the end-of-life phase ('obliged persons').
Obliged persons must take back and recover packaging at its end-of-life stage. Due to the complexity and cost of fulfilling these responsibilities individually, the Czech Packaging Act allows the establishment of authorised packaging companies to assume these duties collectively. To be authorised on the Czech market, companies must obtain an authorisation from the Czech Ministry for the Environment.
