For this reason urgent reforms are needed to ensure fairer market dynamics, the authority added, in recently published analysis.

The Ministry of Climate's waste reform aims to improve market competition, something the Competition Authority deems necessary to ensure fair competition and reasonable prices in Estonia's refuse disposal market.

In its analysis, the authority also recommended separating waste transport tenders from waste management tenders to open the market to as many operators as possible.

The authority cited cases of waste carriers charging unreasonably high fees for gate opening or container relocation, describing this as a classic example of abuse of a dominant market position.

The analysis states: "The waste disposal market has an extremely low level of competition, and the sector is not sufficiently attractive to new potential competitors." It further adds, "The current tenders, which allow for the procurement of multiple services, act as barriers to market entry and hinder company specialization."

Additionally, the analysis noted that, according to waste transport companies themselves, tenders are often based on rough estimates, while offers are frequently made at deliberately low prices—an issue potentially exacerbated by deficiencies in tender data or insufficient preparation by local governments.

"A situation of this kind harms competition and stifles market development, as it allows companies with already significant market shares to solidify their positions and hinders new market entrants," the analysis pointed out.

Waste market dominated by few, predatory pricing hurts competition

The main market players as of this year include Eesti Keskkonnateenused with 55 transport zones, Ragn-Sells with 23, Ekovir with seven, Tallinna Jäätmete Taaskasutuskeskus with five, and Lääne-Viru Jäätmekeskus, which has three zones.

The Competition Authority's examination of organized waste transport from 2016 to March this year revealed rapid market concentration, with Eesti Keskkonnateenused's market share growing to 59 percent while Ragn-Sells' share has fallen since 2018.

Participation in public tenders has generally declined since 2021, often leaving only Eesti Keskkonnateenused in the competition.

Furthermore, the Competition Authority's analysis indicates that granting a single operator long-term transport rights has led to market concentration and significant uncertainty, with 39 percent of contracts modified since 2016.

Larger firms further create barriers for new entrants, using predatory pricing to undercut competitors and later raising prices to dominate the market, the authority stated.

In the waste transport market, predatory pricing may involve offering tender prices significantly below cost to drive out competitors, leading to market consolidation, higher prices for additional services, declining service quality, and a lack of competition, ultimately removing incentives to offer quality services at reasonable prices.

In recent years, complaints to the Competition Authority have risen regarding increasing costs, service issues, and infrequent collection in organized waste transport. Companies, in turn, argue that the complexity of tenders often results in only one operator participating, which further reduces competition.

Low tender prices and unstable contracts distort waste market fairness

The authority explained that deliberately low tender prices, combined with market instability and frequent contract amendments, lead to offers that do not reflect the true value of services.

Waste carriers often charge high fees for additional services like gate opening, bin rental, unscheduled emptying, and container washing, which are often specified separately in tenders.

The Competition Authority finds that a company with a dominant market position through non-substitutable additional services must not abuse this position with unfair pricing.

However, numerous instances over the past decade have violated competition law, forcing consumers—unable to switch providers during contracts—to pay significantly higher prices for essential add-on services.

The authority recommends that local governments reject unjustified price increase requests, develop standard conditions for public tenders in organized waste transport, and establish clear criteria for modifying contracts, including defining when and how contract terms may be altered.

Additionally, the authority recommended that tender documents specify costs that do not justify price increase requests, and that local governments reject such requests if they relate to foreseeable conditions, as businesses should account for risks when bidding.

Effective supervision of contract performance, a simple complaint system for public feedback, and local government management of waste fee collection and customer service are also recommended to prevent market distortion and ensure fairness, the Competition Authority adds.

The analysis was published this month and titled "Analysis and recommendations on organized waste transport."

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