Voluntary Environmental Agreements and Competition Policy the Case of Germany's Private System for Packaging Waste Recycling

Abstract

By analyzing Germany's voluntary Dual Management System for Packaging Waste Collection and Recycling (DSD), the paper highlights two aspects crucial for assessing voluntary environmental agreements from an antitrust viewpoint. First, specific features of DSD's governance structure are argued to mitigate anticompetitive effects stemming from centralization, and to improve management performance, aspects which have so far been neglected in the German discussion. Other features identified in the debate as hampering competition are shown to have an economic rationale from the viewpoint of the neoinstitutional theory of the firm. Hence, the institutional fine-tuning of a voluntary agreement matters when assessing its implications for market competition. Second, it is shown that the emergence of DSD is the result of a basic principle of German waste management policy. This principle formed the regulatory threat in the negotiations that ultimately led to the implementation of DSD. By presenting the British waste management regulation as a counter-example, it is demonstrated that this basic principle is not a precondition to meet the quantitative policy targets stipulated in the regulation. In conclusion, the design of the regulatory threat with respect to the instruments it prescribes is of crucial importance for the degree of centralization and the anti-competitive impact of the private institutions that subsequently emerge. An earlier involvement of antitrust authorities in the regulatory process, during the design of the regulatory threat, is therefore desirable.