Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)



  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.


  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.


  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.


  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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