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Articles Local Government 31st Jul 2023

The Durham Company Limited v Durham County Council

The Durham Company Limited (trading as Max Recycle) v Durham County Council [2023] CAT 50

Why is this case important?

This case is important as the first Competition Appeal Tribunal (CAT) decision to consider the Subsidy Control Act 2022 and demonstrates how the Subsidy Control Act 2022 (whether intended or not) departs from State Aid, in that subsidy must be conferred by one entity (a public body) on another (an enterprise).

What it does not answer is what happens where a public body (e.g., Central Government) confers a financial advantage (a grant) on another public body (a local council) is that also outside of the scope of the definition of a subsidy, given that it is public authority to public authority? Further, the case is also helpful in exploring the concept of economic advantage.

Facts

On the 27th July 2023 the first decision under the Subsidy Control Act 2022 was handed down by the Competition Appeal Tribunal (“the Tribunal”) and it has important implications for local authorities.

The facts of the case were that the Durham County Council (“Council”) collected household waste (for which it could not charge) and commercial waste (for which it was required by law to charge) using the same set of collection vehicles and staff. It was alleged by the claimant, Max Recycle, a commercial waste collector in competition with the Council, that it was effectively using resources deployed to collect household waste to also collect commercial waste and therefore, the Council were able to charge less for the collection of commercial waste than they would otherwise, undercutting Max Recycle thereby distorting competition.

Decision

The Tribunal analysed whether there was a subsidy within the definition of the Subsidy Control Act 2022 and concluded there was not because the definition of “subsidy” requires that it is given by one person (public authority) to another (the enterprise). Where an entity is defined as a public authority it cannot at the same time be an enterprise in relation to, for example, the receipt of a financial advantage.

This is not the case under State Aid law where it is possible for a single entity to operate in different economic capacities. The Tribunal concluded this point by saying (paragraph 39), “…, on the true construction of the 2022 Act, a subsidy must move between persons, and that a “subsidy” moving within a single person is no such thing and falls outside the statutory definition of “subsidy” contained in the 2022 Act.”

The Tribunal then went to hold that even if it were wrong in its approach, a key ingredient of subsidy is the conferring of an economic advantage on an enterprise. Here that enterprise was the Council’s commercial waste collection activity and the advantage conferred was the ability to charge less for the service. However, as any benefit of charging less would be conferred on the users of the service, i.e., lower cost commercial waste collection, then the commercial waste collection service did not benefit. The benefit of any cross-subsidy would only be realised by the commercial waste collection service if it charged the full price for the service, but if it did that, “then the very mischief that Max Recycle is alleging arguably vanishes, because there no advantage is conferred”, i.e., the impact that Max Recycle complained of, of being undercut.


If you have any queries or want more information on this please contact Nathan Holden or another member of our Local Government team.


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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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