Council defeats first subsidy control challenge

The Competition Appeal Tribunal has dismissed a waste collection firm's challenge that contended a subsidy decision taken by Durham County Council was contrary to its duties under the Subsidy Control Act 2022 and that the council failed to consider the subsidy control principles.

In The Durham Company Limited v Durham County Council [2023] EWCA Civ 729, Sir Marcus Smith, Professor David Ulph CBE and Lord Young KC unanimously concluded that while the private firm succeeded in a contention that there was a decision within the meaning of the 2022 Act, its claim that there was a "subsidy" failed.

The Durham Company Limited, which trades under the name Max Recycle, provides waste collection services across the North of England, including in Durham, where it competes with the council.

The council is the sole "Waste Collection Authority" and sole "Waste Disposal Authority" for County Durham. Its duties involve the household waste collection duty and the commercial waste collection duty.

So far as the collection and disposal of household and commercial waste is concerned, the council performs the function of the collection of household and commercial waste itself and does not outsource this function. The council is generally not entitled to charge for the former service but is obliged to charge for the latter.

The disposal of waste is not done by the council, but is carried out by third parties that are paid by the council.

The council charges for its commercial waste collection services as follows:

1. It seeks to recover the actual cost of employing staff that deal with only commercial waste.
2. It seeks to recover proportions of the actual cost of costs common to household and commercial waste (namely, staff, disposal costs and overheads) in accordance with a "formula" based upon an approximation of the total commercial waste as a proportion of the total (household plus commercial) waste.
3. Charges are set to individual businesses "based on bin size and number of lifts". Charges are not set by reference to the weight of the refuse collected and are charged annually. The level of commercial charges is set annually by the council and was last done on 31 March 2023.

At the tribunal hearing, Max Recycle contended that a subsidy decision was made on 31 March 2023 and that, contrary to its duties under section 12 of the 2022 Act, the council failed to consider the subsidy control principles before making that decision.

The council accepted that if a subsidy decision was made, then it did not consider the subsidy control principles. However, the council argued that there was no subsidy decision. Rather, the council made what would have been a decision to put in place a subsidy scheme, had that decision been made when the 2022 Act was in force.

The hearing considered three main questions:

1. Whether the decision under review was capable in law of amounting to a "decision" within the meaning of section 70 of the 2022 Act.
2. Whether the decision under review constituted a "subsidy" within the meaning of section 70 of the 2022 Act.
3. Whether the subsidy control principles, to which section 12 of the 2022 Act refers, were satisfied.

Max Recycle alleged that Durham was subsidising as between its household waste and commercial waste collection operations.

"The essence of the point was that the council were permitting the household waste collection operation to subsidise their commercial waste collection operation, thereby permitting the council to charge individual businesses at less than the rate that they would or could have charged had they run the commercial waste collection operation as an altogether separate, self-standing and independent operation”, the tribunal decision reads.

The Tribunal noted that it was not possible for Max Recycle to identify any person, other than the council itself, implicated in the provision of waste collection or waste disposal services.

"As a result, the giver of the subsidy was the same person as the person on whom the subsidy was conferred", it noted. 

Accordingly, the Tribunal concluded that it "was in no doubt" that there was no "subsidy" within the meaning of section 2 of the 2022 Act as:

1. the advantage did not involve subsidisation, because the "economic benefit" simply circulates within one entity;
2. the natural reading of the definitions of "public authority" and "enterprise" mean that when a person has been designated a "public authority" that person cannot also be an enterprise in relation to the advantage under consideration; and
3. the language of the 2022 Act supported the Tribunal's conclusion.

Max Recycle did succeed in its contention that there was a "decision" within the meaning of the 2022 Act, but the Tribunal rejected its application noting that the firm needed to also succeed in its subsidy point.

Alan Patrickson, Durham County Council’s corporate director for neighbourhoods and climate change, said: “We are pleased with the Competition Appeal Tribunal’s decision to reject the application. The Tribunal’s decision in the UK’s first Subsidy Control case is a positive result for Durham and for all public authorities.”

Adam Carey