When a solid waste collection company enters into a contract to transfer ownership of assets, a petition for approval must be submitted the New Jersey Department of Environmental Protection. Assets may not be transferred until this approval is obtained. One area which the NJDEP evaluates prior to issuing such an approval is the impact of the transfer upon effective competition. This is a very detailed analysis which can be time consuming.
The solid waste industry serves a dynamic market and the NJDEP must continually evaluate the market to ensure that there are multiple companies serving the customers in each market. The controlling case law is found in United States v. Philadephia Nation Bank, 374 U.S. 321 (1963), in which the United States Supreme Court held that any sale which results in one company controlling thirty percent or more of the market and results in a significant increase in the concentration of companies in that market creates a lessening of effective competition. When that is found it creates a presumption which is rebutted if it is shown that the sale is not likely to have such anti-competitive effects.
When the NJDEP performs an analysis of effective competition, it will only prohibit asset transfers if the transfer increases the company’s level of concentration in the market to an extent that could facilitate collusion among a small number of remaining competitors. The NJDEP considers the following factors to determine effective competition: 1) the size of the company compared to the other companies providing the same service in the markets affected by the transfer; 2) the percentage of customers in the affected markets which will be served by the company after the transfer; and 3) this Herfindahl- Hirschman Index (HHI) of market concentration.