Examination of Witnesses (Questions 240
- 259)
TUESDAY 23 OCTOBER 2001
DR ALISTAIR
KEDDIE, MS
SARAH CHAMBERS,
DR MARK
DOWNS AND
MRS SHEILA
MCKINLEY
240. Are you talking about the 20 per cent of
the market not controlled by the two players?
(Dr Keddie) I do not know the number, but what I am
saying is there are not obviously competition issues at the present
time.
Chairman
241. Our understanding is that in the shredding
market there are about 35 players.
(Dr Keddie) Yes, that is correct.
242. Of whom two have somewhere between 60 and
80 per cent of the market. Now when you are getting over 30 per
cent of a market you are getting into very difficult grounds,
and if there is going to be a period of turbulence, which could
result in people bailing out, not wanting to go on, costing them
too much for new kit, costing them too much to meet the environmental
requirements, and the smaller players, by and large, tend to be
more vulnerable than the bigger ones in such a situation, although
it could be argued that the bigger ones might close down some
of their marginal plants, so it is difficult to say, but it does
raise the faintest tinkling of alarm bells, does it not, that
a situation like this should be under some kind of scrutiny by
the Department?
(Dr Keddie) I have not used the words "alarm
bells"; what I have said is we are alive to there being an
issue there and we are actually keeping an eye on that issue,
and we have been in discussions with the OFT about it.
(Ms Chambers) Could I just add to that. This is a
fairly standard sort of competition issue and it is one of the
reasons, this sort of market, where you do have dominance by one
or two key players, why we have got a new competition law, we
have a competition law which is effective against abuse of dominant
positions. So far, as Alistair was saying, we have had no evidence
of abuse, there may be dominant positions but there is no evidence
so far of abuse of a dominant position. If there were such evidence,
we now have mechanisms in place, much more effective than we used
to have, to deal with that through the competition authorities,
and that is irrespective of the Directive.
243. I must say, with respect, that I am not
sure how valuable that assurance is, given that you are not very
certain as to the number of players in certain parts of the market;
that you are not aware of the extent to which there are cowboys
and others outwith; there is, at least in one part of the market,
a trade association which has perhaps only 16 to 20 per cent of
the potential membership, because the others are beyond the pale,
in respect of their activities. It is not a place that the policing
functions of your Department, of other Departments within the
Government machine, have been either that active or successful
in the recent past; so I am not sure that you can talk with quite
the near complacency that you seem to be talking with?
(Ms Chambers) I am certainly not meaning to be complacent,
but I think there is a distinction between the shredding industry,
where we have got dominance and where I think those issues of
having lots of little cowboys does not arise, and the dismantling
issue, where we have got very large numbers, and, for reasons
which I think are fairly understandable, no precise understanding
of exactly how many there are out there. But there is one part
of the industry where there is a lot of competition, another where
there is slightly less.
Mr Djanogly
244. Can I just say, on the back of that, just
in reply, is not the point that the concern is that, what you
refer to as all those little cowboys, they are going to provide
a level of competition to the people who control 60 to 80 per
cent of the market, and if they are not going to then there is
an issue with which we should be concerned?
(Ms Chambers) If I gave the impression that the cowboys
were dominating this market, that was completely wrong and I did
not mean to. What I was saying, just in response to what the dismantlers
were saying, was that they have a very large number of players
in their industry, a small number of whom, no doubt, are cowboys,
or cowgirls, as you were mentioning, and they do not know how
many there are out there; inevitably, some people are the people
who do it out of their backyards, and that is all I am saying,
and I do not think you can expect us to have records of all those
people.
(Dr Keddie) Can I just say, I do not think we are
being complacent about it. As I said, right at the start, we are
alive that there is an issue here, you rightly raised it and we
are alive to that. But can I also just pick up one or two other
points here, and maybe you were not implying this but I think
it is wrong to imply that because certain facilities or firms
are not members of a trade association therefore they are operating
outside the law; that is not the case in the UK, there are very
many businesses who are operating well within the law who choose
not to be members of trade associations. So we need to be very
careful about that, and I do not want DTI to be misunderstood—we
need to be careful.
Chairman
245. I understand the point you are making,
but what I was saying was that one of the reasons why a number
of businesses are not part of it, not the only one but one of
them, was that their reasonably rigorous requirements are not
being adhered to, and there is the fact that good trade associations
operate disciplinary Codes where they expel people who do not
meet the standards that they try to require their members to live
up to. So there is an element there but it is not the only element.
But the difficulty that we find is that we know that there are
different parts of this chain of destruction, if I can put it
that way, and some of them are operated in different market conditions
from others; but what does seem to be consistent is the somewhat
patchy knowledge and the statistical base that seems to exist.
And what worries us, as a Committee, I think—and some of
the members have alluded to this—is that we are perhaps
not confident that the Department has a handle on the nature of
the industry in quite the way that it ought to have, if we are
going to move into a period of substantial change and the likelihood
of economic uncertainty within the industry?
(Dr Keddie) I think we have a better handle on it
than we succeeded in conveying to you, but we take the point.
Chairman: Time will determine that.
Sir Robert Smith
246. Can I just pin down one of the factual
handles again. In answer to an earlier question, we had a suggestion
that the estimate of 1,500 illegally operating dismantlers was
an overestimate, when it should be nearer 700 or 800. But in paragraph
12.35 of your submission you say: "There are around 3,500
dismantling sites in the UK. 1,500 of these believed to be operating
illegally." Does that mean that you had an estimate of other
forms of illegal operation over and above the Environment's understanding,
or was that figure wildly overoptimistic, in which case, is it
there are still 3,500 sites but fewer of them are operating illegally
than was actually the basis of this paper here?
(Dr Keddie) There is also a distinction between the
site and ownership, but Sheila may want to comment on that.
(Mrs McKinley) I really was just going to say that
we ourselves are aware that getting a handle on the number of
dismantlers operating out there, whether under licence or exemption,
or no licence or exemption, is difficult and needs to be looked
at; and since that paper came out we have been doing quite a lot
of work with the Environment Agency to find out a bit more about
the numbers, and I think all that we are saying is that we now
have a slightly better picture. But, in answer to your specific
question, the 3,500, or I would say probably closer to 3,000,
is probably what is operating, and, of that, we think possibly
around 700 to 800 are operating illegally. The other thing we
have to remember is, that all the time we were talking about this,
over the last few months, the Agency has been out there carrying
on the exercise that I referred to earlier on, to try to bring
into the system those that are operating illegally. So this is
happening all the time; numbers are going to change, I am afraid.
So it is really just a question probably of us tracking this so
that we know at any given time when numbers change. So I accept
that the numbers do seem to jump around a bit. But, frankly, the
system and the situation out there is moving all the time.
(Dr Keddie) And it is moving in the right direction.
247. And the key point being made was that those
that are already up to speed and up to standard, who have put
their own personal investment in, have they got then the confidence
to feel that, sort of pinning down the earlier point, they will
not be undercut by those that, there will not be any sense of
we need these people there because otherwise there is going to
be a log-jam; will people be forced to get up to the standard?
(Dr Keddie) People will be forced to get up to standard,
yes.
(Mrs McKinley) People will be forced to get up to
standard, there will be quite clear standards to adhere to, otherwise
we will not be implementing the Directive.
Chairman
248. You will not be able to implement it otherwise
unless you do it with enough people as well. You could put businesses
out of operation and not meet the Directive because the standards
you are imposing are high, but if you did not do that then you
would undercut them. So you are damned if you do and you are damned
if you don't, at the present moment. It is not a very optimistic
scenario, but we will have to see.
(Dr Keddie) That is part of the challenge that you
gave us at the start and we intend to deliver on.
Mr Hoyle
249. Mention has been made of mechanisms. I
wonder what study on mechanism will be used to distinguish between
ELVs with a positive value and ELVs with a negative value and
on what constitutes a `complete' car?
(Dr Keddie) I think, in terms of what is a vehicle
with a positive or a negative value, to a large extent, the market
will determine that. In terms of what defines a complete car,
I am not sure to what extent we have done that; but it is the
extent to which all the sort of recognisable drivable parts of
the car, like chassis, body, engine, gear-box, all these things,
are complete. There is a grey area, I guess, as to, do you have
to have mirrors attached or the radio attached; the answer to
that is, probably not.
250. So what you are saying is a body, four
wheels, drive chain, engine?
(Dr Keddie) Yes, a recognisable car that you can drive
legally.
251. Seats do not matter, they do not count,
the trim is not included, or not?
(Dr Keddie) Well ...
252. So really what you are saying is you have
not done the study, would I be right in saying, at this stage?
(Dr Keddie) No, it is not a question we have not done
the study, it is a question that there are some issues like this
that we still have not finally come down on definitions.
(Dr Downs) I think it is very much a legal concept,
it will be defined in the legislation which will be put in place,
the guidance will have to be there to make it clear what constitutes
a car. We have looked at a number of options, things like weight
might be used, the basis of components might be used, there are
a lot of options there. But if you are saying is there a list
of all the things here and now, the answer is no, because that
is something we are still looking at and should come out as part
of the consultation as well.
Linda Perham
253. You talk about Certificates of Destruction.
The consultation paper proposes that it should be an electronic
notification system from the start, so have you been working with,
presumably you have been working with, DVLA on this?
(Dr Keddie) Yes. We are aware of what they are doing
and what they are piloting at the present time, and, as I understand
it, the pilots are going reasonably well; but the intention is
to set up an electronic Certificates of Destruction system.
254. And how do you think that it is going to
work? Some earlier evidence talked about possibly two stages;
would they be issued by dismantlers and shredders, or just by
the last one?
(Dr Keddie) The current intention, as I understand
it, is that they would be issued at the point of entry to the
system, whether that is at a dismantler, or shredder, or what
have you, and it would only be issued once.
255. At the depollution stage?
(Dr Keddie) The depollution stage, yes. So it would
be just before the actual depollution, dismantling, recycling,
shredding process has started to take place.
256. Would there be any safeguards to ensure
that if a CoD is issued by a dismantler and then the vehicle went
to a shredder it did not reappear on the road?
(Mrs McKinley) There is an intention to have stated
on the face of the CoD an undertaking that the vehicle will not
go back on the road, and there is also some discussion being held
as to whether there might also be some sort of undertaking that
the registration documents have been destroyed. These are issues
that have not quite been finalised yet, but actually we are meeting
with the DVLA later this week to talk about just that thing. Certainly,
there will need to be something there, yes.
257. Because the SMMT, in their evidence, I
think it was, were saying that they were, I did not quite catch
the words, surprised and amused that you had actually said in
the consultation about perhaps an acceptance that the vehicles
could come back on the road; the wording is: "A further issue
that needs to be considered is whether it should be possible for
vehicles to be returned to the road after a CoD has been issued.
Clearly, it would be preferable for no CoD to have been issued
for vehicles that are to be repaired, but we accept that in some
cases this may occur"?
(Dr Keddie) Discussions with DVLA have also moved
on since the consultation document. The current intention is that
when a CoD is issued then the vehicle, in fact, has got to go
through the depolluting, dismantling, shredding process; there
is no exception to that.
258. So the intention is obviously that it would
not go back on the road?
(Dr Keddie) Yes.
259. But you accept, in some cases, this may
occur?
(Dr Keddie) It is like all things, you cannot actually
rule things necessarily out 100 per cent, there is a question
of balance between the extent to which you police these things,
and so on; but the clear intention is that we do not allow vehicles,
once they have had a CoD issued, back on the roads, in any form.
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