Competition Concerns in Battery Recycling Plants

Introduction

Battery recycling plants recover valuable materials such as lithium, nickel, cobalt, manganese, copper, aluminium and graphite from spent batteries. The sector is strategically important because electric vehicles (EVs), energy-storage systems and portable electronics generate increasing quantities of end-of-life batteries.

From a competition-law perspective, battery recycling can raise concerns at multiple levels of the value chain: collection, transportation, access to used batteries, processing technology, recovered-material sales, waste-management services and downstream battery manufacturing. Competition authorities may therefore examine horizontal consolidation, exclusive supply arrangements, vertical foreclosure, technology licensing, information exchange, joint ventures, mergers and access discrimination.

The principal legal framework will depend on the jurisdiction, but the recurring competition-law concepts are:

• agreements restricting competition;
• cartelisation and coordination;
• abuse of dominance;
• exclusive dealing and foreclosure;
• tying and bundling;
• discriminatory access;
• refusal to deal;
• predatory or exclusionary pricing;
• merger/concentration control;
• essential-facility/access theories;
• information exchange and algorithmic coordination.

1. Relevant Markets in Battery Recycling

A battery-recycling plant can participate in several distinct relevant markets.

A. Collection of end-of-life batteries

Competition may occur for:

• EV batteries;
• consumer-electronics batteries;
• industrial batteries;
• stationary-storage batteries;
• manufacturing scrap.

If a dominant recycler obtains exclusive rights to collect batteries from automobile manufacturers or dealerships, rivals may have difficulty obtaining sufficient feedstock.

B. Battery transportation and logistics

Because damaged lithium-ion batteries can present safety risks, specialised transportation services may constitute a separate market.

Competition concerns can arise where a recycler controls or locks up specialised logistics capacity.

C. Battery dismantling and preprocessing

This includes:

• discharge;
• dismantling;
• shredding;
• sorting;
• black-mass production.

Control over proprietary preprocessing systems may create technological entry barriers.

D. Hydrometallurgical and pyrometallurgical recycling

Different technologies recover different materials and have different cost structures.

A dominant technology provider could potentially disadvantage competing recyclers through restrictive licensing or interoperability restrictions.

E. Recovered-material markets

Recycling plants may sell:

• lithium compounds;
• nickel;
• cobalt;
• manganese;
• copper;
• aluminium;
• graphite;
• black mass.

Long-term exclusive purchase agreements can potentially foreclose competing recyclers or downstream purchasers.

2. Horizontal Cartel Risks

Several recycling plants may compete for the same battery feedstock. Agreements among them concerning:

• purchase prices for spent batteries;
• processing charges;
• collection territories;
• customers;
• allocation of battery suppliers;
• output prices;
• production volumes

may constitute serious competition-law concerns.

For example, competing recyclers agreeing that each will purchase batteries from particular automobile manufacturers could amount to market allocation.

Similarly, exchanging commercially sensitive information about:

• scrap-battery prices;
• processing capacity;
• future plant expansions;
• customer contracts;
• black-mass inventories

may facilitate coordinated conduct.

3. Joint Ventures Between Battery Manufacturers and Recyclers

Battery manufacturers and recyclers may establish joint ventures to secure recycling capacity.

Such arrangements can generate legitimate efficiencies, including:

• secure feedstock;
• closed-loop material recovery;
• reduced waste;
• technological innovation;
• improved battery traceability.

However, competition authorities may examine whether the joint venture becomes a mechanism for excluding independent recyclers.

Particular scrutiny may arise where competing battery manufacturers jointly control the only significant recycling facility in a geographic market.

4. Exclusive Supply Agreements for Used Batteries

A major competition concern is exclusive feedstock acquisition.

Suppose a large recycler contracts with multiple EV manufacturers and requires them to send all end-of-life batteries to that recycler.

The arrangement may make it difficult for smaller recyclers to obtain sufficient volumes to operate efficiently.

The relevant factors include:

1. duration of exclusivity;
2. percentage of available feedstock covered;
3. market power of the recycler;
4. availability of alternative batteries;
5. switching costs;
6. ability of rivals to obtain feedstock elsewhere;
7. entry barriers;
8. efficiencies generated by the agreement.

Exclusivity is not automatically unlawful. Its competitive significance depends upon its actual or likely foreclosure effects.

5. Long-Term Contracts With Automobile Manufacturers

Large EV manufacturers may enter long-term contracts with recyclers.

These can produce substantial efficiencies because recycling plants require predictable feedstock to justify significant capital expenditure.

However, a contract covering most available batteries in a market could:

• prevent rival recyclers from obtaining feedstock;
• raise rivals' costs;
• protect an incumbent recycler;
• discourage entry.

Competition authorities may therefore examine foreclosure percentage and duration, rather than treating every long-term contract as inherently problematic.

6. Refusal to Provide Access to Battery Feedstock

A dominant recycler or collection network might control a critical source of recyclable batteries.

If it refuses to supply competing processors, the issue can resemble a refusal-to-deal or essential-facility problem.

The analysis would normally consider:

• whether the resource is genuinely indispensable;
• whether duplication is economically or technically feasible;
• whether refusal eliminates effective competition;
• whether objective justification exists;
• whether access would be practically possible.

The mere fact that access would help a competitor is insufficient by itself.

7. Dominance and Essential-Facility Concerns

Battery recycling may create bottlenecks involving:

• collection networks;
• specialised transportation;
• battery diagnostic systems;
• dismantling technology;
• black-mass processing;
• proprietary recycling technology;
• battery-identification databases.

If a firm possesses substantial market power over such a bottleneck, discriminatory or exclusionary access conditions may attract competition scrutiny.

8. Discriminatory Access to Battery Feedstock

A dominant recycling network might supply affiliated recyclers on favourable terms while imposing:

• higher collection fees;
• longer waiting periods;
• lower-quality feedstock;
• less favourable payment terms

on independent recyclers.

Such conduct may raise concerns where the discrimination lacks objective justification and disadvantages equally efficient competitors.

9. Predatory Pricing

A large recycling company might temporarily purchase used batteries at unusually high prices to deprive rivals of feedstock.

Alternatively, it could offer unusually low recycling prices to customers with the purpose or effect of excluding competitors.

Competition authorities would generally examine:

• cost benchmarks;
• duration;
• recoupment prospects where relevant;
• market power;
• evidence of exclusionary strategy;
• effects on competitors and customers.

Low prices are not inherently anti-competitive; they may reflect genuine efficiency.

10. Tying and Bundling

Battery manufacturers or recycling-system providers may bundle several services:

battery-management software + diagnostics + collection + recycling.

Competition concerns may arise if a dominant company makes access to one indispensable product conditional upon purchasing another.

For example, a dominant battery-management-system provider could potentially require vehicle manufacturers to use its affiliated recycling service as a condition for access to diagnostic software.

The relevant question is whether the arrangement restricts competitors without sufficient efficiency justification.

11. Technology Licensing

Battery recycling depends heavily on proprietary technologies.

A patent holder may license:

• hydrometallurgical processes;
• solvent extraction;
• direct recycling techniques;
• battery diagnostics;
• automated dismantling;
• black-mass separation.

Competition concerns can arise through:

• unreasonable licensing restrictions;
• discriminatory licensing;
• tying;
• territorial restrictions;
• grant-back requirements;
• restrictions on competing technologies.

Where several technologies are available, however, a patent holder ordinarily retains substantial freedom to exploit its intellectual property, subject to applicable competition rules.

12. Standard-Essential Technology and Interoperability

Battery passports, traceability systems and digital identification standards may become important infrastructure.

If competing recyclers need access to a common technical standard, discriminatory access could potentially impede competition.

Issues may include:

• interoperability;
• access to battery data;
• standard-setting;
• licensing terms;
• certification requirements;
• API access.

A dominant digital platform controlling battery information could therefore become an important competition-law concern.

13. Mergers and Acquisitions

Consolidation in battery recycling can occur through:

• acquisition of recycling plants;
• acquisition of collection companies;
• acquisition of battery diagnostic companies;
• acquisition of black-mass processors;
• acquisition of logistics companies;
• vertical acquisitions by battery manufacturers.

Authorities may examine both horizontal and vertical effects.

Horizontal concern

Two major recyclers merge and eliminate a significant competitor.

Vertical concern

A major battery manufacturer acquires the principal independent recycler.

The latter may create incentives to:

• divert batteries internally;
• deny feedstock to rival recyclers;
• disadvantage competing battery manufacturers;
• restrict access to recovered materials.

14. Geographic Market Issues

Battery recycling can have significant transportation costs.

Consequently, the relevant geographic market may be:

• local;
• regional;
• national;
• cross-border,

depending upon transportation economics and regulatory requirements.

Hazardous-material transportation rules can further restrict the practical geographic range of recycling facilities.

15. Environmental Regulation and Competition

Environmental regulation creates a distinctive issue.

Governments may require batteries to be:

• collected;
• transported safely;
• recycled at certified facilities;
• tracked throughout their lifecycle.

Such regulation can increase entry barriers.

A competition-law assessment should distinguish between:

Regulatory barriers — created by government rules; and

Strategic barriers — created by incumbent firms.

The existence of high regulatory costs does not itself establish anti-competitive conduct.

16. Competition Concerns From Producer Responsibility Schemes

Extended Producer Responsibility (EPR) systems can create collective arrangements among battery producers.

Manufacturers may jointly establish recycling organisations.

Potential benefits include:

• efficient collection;
• economies of scale;
• compliance with environmental obligations.

Potential competition concerns include:

• collective purchasing;
• exclusion of independent recyclers;
• coordinated recycling fees;
• exchange of competitively sensitive information;
• discriminatory tender conditions.

The competition analysis should therefore examine whether the environmental objective could be achieved through less restrictive means.

17. Bid Rigging in Recycling Contracts

Governments, municipalities and manufacturers may tender contracts for:

• battery collection;
• transportation;
• recycling;
• waste processing.

Competitors may attempt to coordinate:

• winning bidders;
• bid prices;
• territories;
• subcontracting arrangements;
• tender participation.

This is a classic cartel risk.

Particular warning signs include:

• identical pricing formulas;
• suspiciously complementary bids;
• repeated rotation of winners;
• competitors submitting bids despite having no realistic intention to win;
• unexplained subcontracting arrangements between bidders.

18. Subcontracting and Information Exchange

Subcontracting is not inherently problematic.

However, competitors participating in the same tender should be careful not to exchange unnecessary information about:

• future prices;
• capacity;
• bidding strategy;
• customer allocation;
• expected margins.

A legitimate subcontracting relationship can become problematic if it facilitates coordination between otherwise competing bidders.

19. Market Power Over Black Mass

Black mass is an intermediate product containing valuable battery materials.

If one or a few companies control substantial black-mass processing capacity, they may acquire bargaining power over upstream recyclers.

Potential concerns include:

• discriminatory purchasing;
• exclusive purchasing;
• margin squeezing;
• refusal to purchase;
• coordinated purchasing;
• tying processing services to material-sale agreements.

The competitive effects depend heavily upon the structure of the relevant upstream and downstream markets.

20. Buyer Power and Monopsony

Competition law is not concerned only with seller dominance.

A very large battery manufacturer could become a powerful buyer of recycled materials.

If several recycling plants depend on a small number of downstream purchasers, coordinated purchasing may create monopsony or buyer-power concerns.

Examples include agreements concerning:

• maximum prices paid for recovered lithium;
• allocation of suppliers;
• coordinated quality requirements;
• refusal to purchase from particular recyclers.

21. Information Sharing and Data Advantages

Modern recycling plants use large quantities of data concerning:

• battery chemistry;
• state of health;
• degradation;
• cell configuration;
• failure history;
• recycling yield;
• recovered-material quality.

A dominant company controlling this information may obtain a competitive advantage.

Competition concerns may arise if competitors are denied access to data that they legitimately require to compete, particularly where access is technically feasible and the data is not reasonably replicable.

22. Six Important Case Laws

The following cases are not all battery-recycling cases specifically. They are important competition-law precedents whose principles can be applied to battery-recycling markets.

1. United States v. Terminal Railroad Association of St. Louis, 224 U.S. 383 (1912)

The U.S. Supreme Court examined control over an essential transportation facility.

Relevance:
A dominant battery collection or logistics network could raise analogous access questions where rivals cannot realistically compete without access to the facility or network.

Principle:
Control over an indispensable infrastructure bottleneck can attract competition-law scrutiny where access is denied in a manner that substantially restricts competition.

2. United States v. Griffith, 334 U.S. 100 (1948)

The case concerned exclusionary conduct involving market power and customer relationships.

Relevance:
A dominant recycler using its position to lock customers or suppliers into exclusive arrangements could raise similar concerns.

Principle:
A firm possessing market power cannot necessarily use contractual arrangements to extend that power into competitive markets in an exclusionary manner.

3. Lorain Journal Co. v. United States, 342 U.S. 143 (1951)

A dominant local newspaper refused to deal with advertisers who also dealt with a competing radio station.

Relevance:
The case illustrates how a dominant firm may face antitrust liability where it uses control over an important commercial channel to exclude competing businesses.

Battery-recycling application:
A dominant recycler could face analogous scrutiny if it conditioned access to an important collection channel on customers' refusal to use rival recyclers.

4. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)

The U.S. Supreme Court considered a refusal to continue a prior cooperative arrangement involving competing ski operators.

Relevance:
The case is important for analysing exceptional refusal-to-deal situations.

Battery-recycling application:
A dominant recycling facility that historically supplied a rival and then abruptly terminated cooperation under circumstances lacking an apparent legitimate business justification could potentially raise analogous issues.

5. Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004)

The Supreme Court addressed refusal-to-deal allegations involving a telecommunications incumbent.

Relevance:
The decision cautions against automatically converting competition between vertically related firms into an antitrust duty to deal.

Battery-recycling application:
A recycler's refusal to provide services or feedstock should not automatically be characterised as unlawful. The legal threshold for intervention can be demanding, particularly where no prior cooperative relationship exists.

6. United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001)

The case involved exclusionary conduct by a dominant technology company, including contractual restrictions and conduct affecting competing technologies.

Relevance:
It is particularly useful for modern battery-recycling markets because recycling increasingly involves software, data, diagnostics and technological ecosystems.

Battery-recycling application:
A dominant battery-management or recycling-technology platform could attract scrutiny if it uses contractual or technical restrictions to exclude competing recycling technologies.

23. Additional Relevant Case Laws

7. European Commission v. United Brands Company, Case 27/76 (1978)

The Court examined dominance, market definition and exclusionary conduct.

Relevance:
Useful for analysing whether a major recycling company possesses a dominant position in a defined market.

8. Hoffmann-La Roche & Co. AG v Commission, Case 85/76 (1979)

The Court developed important principles concerning dominant firms and loyalty-inducing exclusivity.

Relevance:
Highly relevant to exclusive battery-supply agreements between recyclers and vehicle manufacturers.

9. Commercial Solvents Corp. v Commission, Joined Cases 6/73 and 7/73 (1974)

The case concerned exclusionary conduct by a dominant upstream supplier.

Relevance:
Useful where a dominant recycler controls an essential intermediate input or service needed by downstream competitors.

10. Bronner v Mediaprint, Case C-7/97 (1998)

The Court considered when access to infrastructure could be required under competition law.

Relevance:
Useful in analysing claims that a recycling network, processing facility or collection infrastructure constitutes an indispensable facility.

24. Application of the Cases to Battery Recycling

25. Compliance Measures for Battery Recycling Plants

Companies operating in this sector should establish competition-compliance procedures covering:

Feedstock procurement

• Avoid agreements allocating battery suppliers among competitors.
• Review exclusivity agreements.
• Establish objective procurement criteria.

Joint ventures

• Clearly define legitimate efficiencies.
• Restrict competitively sensitive information exchange.
• Assess whether the JV forecloses independent recyclers.

Tendering

• Maintain independent bidding decisions.
• Prohibit competitor discussions about prices and bids.
• Monitor subcontracting arrangements.

Technology

• Review licensing restrictions.
• Establish transparent access policies where appropriate.
• Avoid unnecessary interoperability restrictions.

Data

• Limit sharing of commercially sensitive information.
• Separate operational data from competitively sensitive strategic information.
• Establish internal data-access protocols.

Dominant firms

Where a company has substantial market power, additional precautions should apply to:

• refusals to deal;
• discriminatory pricing;
• exclusivity;
• tying;
• rebates;
• access restrictions;
• loyalty programmes.

26. Key Analytical Questions

A competition-law investigation involving a battery recycling plant should ask:

1. What is the relevant product market?
2. What is the relevant geographic market?
3. Who controls access to used batteries?
4. How much feedstock is contractually tied up?
5. Are competing recyclers able to obtain alternative supplies?
6. Does any firm possess substantial market power?
7. Are there exclusive-supply or exclusive-purchase arrangements?
8. Is there coordination between competing recyclers?
9. Does a merger eliminate an important competitor?
10. Is access to recycling technology being restricted?
11. Are battery manufacturers using vertical integration to foreclose independent recyclers?
12. Are environmental efficiencies sufficient to justify otherwise restrictive arrangements?

Conclusion

Battery recycling plants present a distinctive combination of environmental regulation, scarce feedstock, capital-intensive infrastructure, proprietary technology and rapidly developing downstream markets. Competition concerns can therefore arise both horizontally—through cartelisation, bid coordination and consolidation—and vertically—through exclusive battery-supply agreements, foreclosure, discriminatory access, tying and control over recovered materials.