City competing with Ragn-Sells

Photo: Sander Ilvest

Tallinn just took delivery of five new garbage trucks the capital plans to use to compete with Ragn-Sells that has canceled its contract in the Kesklinn borough.

City-owned Tallinn Waste Recycling Center (TJT) was issued a waste permit that allows the company to offer refuse collection services in Tallinn.

Tallinn's Kesklinn borough (with the exception of the Old Town) will become a so-called free market area in terms of waste collection where citizen will be able to pick their own service provider from May 25. The choice will probably be between TJT and Ragn-Sells as other companies seem disinterested in competing on a free market.

Public procurement winner Ragn-Sells delivered an ultimatum to the city earlier this year: either Tallinn hikes waste collection prices, or the company will cancel its contract.

The problem is that the Riigikogu amended the refuse act in a way to make it impossible for local governments to organize waste collection through self-owned companies after the contract with Ragn-Sells was signed. The city had held twofold procurements where companies competed for separate waste transport and waste conditioning contracts. Because Ragn-Sells canceled its contract, the city decided to procure garbage trucks and collect waste in the Kesklinn borough itself.

„A city cannot function in a situation where someone is blackmailing it, saying that either you pay more or we leave. So we decided that everyone will do what they think is best, and the city government decided TJT will procure five new trucks for which it will pay form its own pocket. These are new, modern trucks. One, called RotoPress, sports very sophisticated technology and is smaller than the others. It is especially suited for collecting organic waste, and it is our goal to promote recycling,“ Deputy Mayor Arvo Sarapuu said after looking over the new trucks yesterday.

„I believe that when people see our new trucks and how reliable we are, they will retain their contracts with the Tallinn Waste Center instead of signing new ones with Ragn-Sells in the free market situation,“ he added.

Ragn-Sells recently sent a letter to the borough's waste holders offering them so-called free market service at exactly the same prices maintained by the city's refuse center that mediates services of companies that prevailed in the public procurement.

„It is a recognition for us that Ragn-Sells laid down the exact same price on the free market that the Tallinn Waste Center has. Until recently they were saying the center charges five times as much. Now they can come and show those low prices they've been talking about,“ said head of the company Kertu Tiitso.

Head of marketing and communication at Ragn-Sells Rainer Pesti said that she commends Tiitso for her train of thought.

„This is the first time a representative of the city admits that their commission is so high that free market conditions would allow private companies to offer better prices than what the center has today.

Lower prices remain a possibility if we can keep our recent volumes; in other words if the majority of Ragn-Sells' clients stay with us, we can offer lower prices than what citizens are currently seeing,“ Pesti said.

Partner at law firm Cobalt, representing Ragn-Sells, Elo Tamm said the city's actions are illegal and could lead to very unpleasant consequences. She added that the incompatibility of the city's actions with EU law has so far not been talked about at length.

„A situation where the city of Tallinn gives a single company special rights furthermore constitutes breach of EU competition rules. The latter state that neither the central government nor its local counterparts can give any company special rights leading to a competitive edge on a given market. And a city doing not just that, but giving these special rights to a company it owns, is a problem not just for Tallinn but rather on the state level,“ she explained.

„A city's breach of EU competition rules gives the European Commission the right to bring proceedings against the state over the latter's failure to ensure normal competition rules for both domestic and foreign companies looking to offer services here,“ the attorney added. The dispute could result in a hefty fine for Estonia.

Tamm said that the Tallinn Waste Center, that currently offers services and charges clients for them, does not have a waste permit and therefore cannot offer waste transport services.

TJT (formerly Tallinn Landfill) is a city-owned public limited company. „They can procure garbage trucks, apply for waste permits, and theoretically offer services based on the latter. However, TJT does not have contracts with clients in the Kesklinn borough, nor does the company have the right to get client information from the Tallinn Waste Center without clients' consent. The arrival of May 25 will also end the current situation that allows the Tallinn Waste Center to invoice clients in place of transporters as there will no longer be a legal basis for such practice,“ Tamm explained.

According to Tamm, the waste center simply handing client information over to TJT would constitute a serious breach of data protection regulations.

Tiitso countered by saying that Ragn-Sells has no more right to make use of old client databases. „If the client's contract with Ragn-Sells has expired, the company cannot use the data after one year; however, they still do,“ she said.

The extent to which Tallinn is in violation of the law in the Kesklinn borough will become clear next month, Tamm said, and added she perceives one violation already. „Today the Tallinn Waste Center and TJT are run by the same person – Kertu Tiitso. I find that this fact alone gives TJT an advantage it shouldn't have,“ she said.

„It is not against the law, despite Tamm's desire to make it look that way. TJT is owned by the city of Tallinn in full,“ Tiitso said.