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Commission grants authorisation to Nelson and Tasman Councils’ joint landfill application

24 April 2017

The Commerce Commission has granted authorisation, subject to conditions, to allow the Nelson City Council and the Tasman District Council to form a business unit to jointly operate the two landfills in the Nelson-Tasman region.

At present, each Council owns and operates separate landfills although these landfills are located in close proximity to one another. The two Councils asked for authorisation to establish a Regional Landfill Business Unit (RLBU) that would be responsible for managing and operating both landfills.

The Councils have noted that they will close Tasman’s Eves Valley landfill and all of the region’s solid waste will be sent to Nelson’s York Valley landfill. Then, when the York Valley landfill reaches capacity, the two Councils will share the costs of reopening and redeveloping the Eves Valley landfill.

Commerce Commission Chairman Dr Mark Berry said that the proposed RLBU would remove the existing competition between the two landfills.

“By imposing conditions to ensure that any surpluses generated will only be used to fund the Councils’ respective waste related activities, we are satisfied that any reduction in competition is likely to be outweighed by the public benefits,” Dr Berry said.

“While the Councils submitted that this is their current policy, the conditions we have imposed ensure that these policies will remain in place under the RLBU. The conditions remove the incentive of the Councils to exercise market power created as a result of the proposed arrangement while allowing them the flexibility and discretion to adjust their pricing in response to changes in demand and costs, such as costs associated with the Government’s emissions trading scheme and the national waste levy.”

The reasons for the decision will be available on the Commission’s website shortly.

Background

The parties and the proposed arrangement

The Nelson City Council’s York Valley landfill is located in Bishopdale, Nelson. The Tasman District Council’s Eves Valley landfill is located relatively close by on Eves Valley Road, west of Richmond.

Each Council would continue to own its respective landfill under the proposed arrangement. However, from July 2017 the Eves Valley landfill would be closed, with all rubbish in the Nelson-Tasman region being sent to the York Valley landfill. Sometime after 2030, the York Valley landfill would be closed and all rubbish in the region would be sent to a redeveloped Eves Valley landfill.

The proposed RLBU would comprise representatives from both Councils, and would be responsible for setting landfill disposal fees and charges. The Councils would, however, retain oversight of landfill fees through the approval of annual plans. The ownership and authorisation of the Councils’ transfer stations and resource recovery centres will be unaffected by the proposed arrangement.

Authorisation requirements

The Commission may grant authorisation under section 58 of the Commerce Act for certain agreements that may otherwise breach the Commerce Act, if it is satisfied that the public benefits of the agreements outweigh the detriments arising from the loss of competition. The granting of a restrictive trade practice authorisation protects the applicant from court action under the Commerce Act by the Commission and private individuals.

Under section 61(2) of the Commerce Act, when considering restrictive trade practice authorisation applications, the Commission is able to impose conditions on the applicant in order to address competition concerns.

On 17 March 2017, the Commission published a draft decision that set out the Commission’s preliminary view that, subject to conditions, it should allow the Nelson City Council and the Tasman District Council to form a business unit to jointly operate the two landfills in the Nelson-Tasman region. We received no additional information in response to the draft that caused us to change our preliminary view on granting authorisation, subject to conditions, to the proposed arrangement.