A stick and carrot approach to cartels

Recycling in the European Union

By Cécile Manenti and Oliver Bretz

The European Commission (Commission) recently issued two press releases related to EU recycling: the first summarising a cartel fine decision¹ (the “stick”) and the second announcing a public consultation to foster industrial cooperation (the “carrot”).² The timing was not a coincidence, as the press releases followed hot on the heels of the publication of a Commission Communication on the Clean Industrial Deal³, a roadmap addressing the challenges of the climate crisis, competitiveness concerns and economic resilience. The latter suggests six action levers, including circularity and access to materials, that might be pulled to promote clean deal outcomes.

The circular economy is a production and consummation model based on sharing, leasing, reusing, refurbishing and recycling existing products and materials as long as possible⁴. According to the Commission Communication, it constitutes “the key to maximising the EU’s limited resources, reducing dependencies and enhancing resilience.

… The ambition of the Clean Industrial Deal is to make the EU the world leader on circular economy by 2030”.⁵ Whereas the earliest regulatory initiatives in recycling date back to the Waste Directive of 1975,⁶ aimed at protecting the environment and improving the quality of life,⁷ half a century later, the EU faces a slowing economic growth, rising tensions on the international stage and struggles to reduce its dependencies towards third countries.⁸

The EU’s reliance on third countries is particularly apparent when it comes to the supply of critical raw materials, ie non-energy, non-agricultural resources listed in Annex II of the Critical Raw Materials Act 2024. These are characterised by: (i) their importance for green and digital technologies, as well as for defence and aerospace applications; and

(ii) their “exposure to high supply risk, often caused by a high concentration of supply from a few third countries”.⁹ As of March 2025, China supplied 100 per cent of heavy rare earth elements, Turkey 98 per cent of boron and South Africa 71 per cent of platinum to the EU.¹⁰ Drawing lessons from the Draghi report and the Competitiveness Compass,¹¹ the Commission is exploring how best to strengthen the Single Market to reduce these dependencies and foster growth at the same time. The perceived synergy between the circular economy and competition rules was underlined (as well) by the appointment of Teresa Ribera as the Commission’s Executive Vice-President for a Clean, Just and Competitive Transition.¹²

So, what is the role of private undertakings and how should that be regulated? That is at the heart of the Commission’s stick and carrot approach. At one level, the prohibition in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) allows the Commission to sanction anticompetitive agreements, and it is on this basis that the Commission recently fined 15 car manufacturers in the field of end-of-life vehicles (ELVs). However, collaboration between competitors or supply agreements which contribute to improve the production or distribution of goods or the promotion of technical or economic progress may be lawful pursuant to Article 101(3) TFEU. The public consultation¹³ has to be seen within that framework, a measure with the specific purpose of enabling industrial cooperation opportunities for the production and recycling of critical raw materials – in a lawful way.

Towards EU strategic autonomy

Part 5 of the Clean Industrial Deal is devoted to the circular economy, which is (as it says) currently “hampered by the absence of scale and a single market for waste, secondary raw materials, reusable materials”. Both the public consultation and the cartel decision deal with this issue. The former pursues the same objective as the Critical Raw Materials Act – a Clean Industrial Deal priority – and the latter addresses ELVs in their role as highly recyclable products.

The Critical Raw Materials Act aims at ensuring a diversified, affordable, and sustainable supply of critical raw materials to the EU,¹⁴ with the stated objective of reaching a 25 per cent recycling target by 2030.¹⁵ Implementing the Critical Raw Materials Act is a Clean Industrial Deal priority since it helps address the three challenges mentioned above namely: (i) economic resilience; (ii) competitiveness; and (iii) climate goals. In relation to economic resilience, the Critical Raw Materials Act was proposed in 2023 and spurred on by “disruptions in the supply of essential goods during the Covid-19 crisis and the energy crisis sparked by Russia’s war of aggression against Ukraine”.¹⁶

Recycling constitutes an alternative source of critical raw materials and should reduce dependencies towards third countries, thereby enabling the European economy to better adapt to future crisis situations. The fear is that supply disruptions of critical raw materials will further impact the EU’s competitiveness.¹⁷ In 2008 the Commission Initiative on Raw Materials already stressed the importance of setting minimum standards and creating a transparent market to boost recycling a significant economies of scale.¹⁸ Indeed, the cooperation between critical raw materials customers, manufacturers of recyclable goods and recycling companies could generate efficiencies on the whole spectrum of the value chain. The 2025 public consultation seems to build on this integrated strategy but shifts away from “minimum standards” towards “cooperation projects”. Finally, addressing the climate goals, the very production of critical raw materials causes environmental impacts which can be mitigated through recycling. The “circular economy will reduce pressure on natural resources and will create sustainable growth and jobs”.¹⁹

Industrial policy to reduce recyclable scraps exports

In its Communication on Critical Raw Materials, the Commission pointed out that “… there are indications that a significant percentage of all EU waste shipments do not comply with the rules, … [t]his mainly concerns exports of end-of-life vehicles and electronic equipment, which leave Europe as reusable products but end up being dismantled abroad”.²⁰ To ensure circularity, critical raw materials and other secondary raw materials must be prevented from leaving the EU in the form of scrap only to be recycled in third countries – which could then sell them back to the EU in the form of processed products at prices higher than the actual cost of recycling them. In response, a Circular Economy Act is expected by the fourth quarter of 2026 and will ensure waste circulation and incentives within the EU.

A recent cartel fine concerned ELVs, which are cars no longer fit for use and intended to be dismantled and processed. Their recycling is a primary source of secondary raw materials²¹ and automotive car batteries constitute the most recycled consumer product in the EU.²² Indeed, eight critical raw materials can be found in the composition of car batteries: antimony, cobalt, copper, graphite, lithium, manganese, nickel and silicon metal.²³ China is the lead supplier of cobalt, nickel and natural graphite, key materials for the production of lithium-ion batteries.²⁴ These batteries are expected to remain the dominant technology deployed in the next five years and represent therefore a product with significant economic stakes.²⁵ The recycling of ELVs and their batteries is regulated by the ELV Directive adopted in 2000, whose objectives are in line with those of the 1975 Waste Directive, namely, to preserve the environment and improve the quality of life.

Both the ELV Directive and the Waste Directive intend to remove distortions of competition and ensure the smooth functioning of the internal market through the minimal harmonisation of the member states’ legislations. However, ELV provisions, unlike those of a regulation, are not directly enforceable against car manufacturers and need to be transposed in domestic law. Such is the case of Article 5(4), al.2 on the expectation that manufacturers will cover at least a significant part of the recycling costs. Attempts at circumventing such costs have been sanctioned under the EU antitrust laws.

Cartel prohibition against recycling policy circumventions

Efforts to keep critical raw materials and other raw materials within the EU are meaningless if their recycling is then somehow cartelised by private undertakings. On 15 March 2022, the Commission carried out unannounced investigations in the automotive sector in relation to ELVs,²⁶ which ultimately led to a €458 million fine on 15 car makers and the European Automobiles Manufacturer’s Association. The infringement concerned: (i) not paying car dismantlers for processing ELVs (the Buyers’ cartel); and (ii) not promoting how much of an ELV can be recycled, recovered and reused or how much recycled material is used in new cars (the Advertising cartel).²⁷

The Buyers’ cartel was an attempt by the companies to reduce their costs, thereby directly breaching the duty imposed by the Directive. The Advertising cartel was aimed at reducing the pressure to go beyond legal requirements for advertising the most sustainable car by preventing consumers from taking recycling information into account in the purchasing decision. This was directly contrary to a right conferred on consumers in the ELV Directive, namely to be informed of the recycling performance of new cars.

It is also worth mentioning that the press release mentions the ELV Directive and refers to a set of three links related to the EU recycling policy.²⁸ It serves as a reminder that competition between undertakings operates within a legal framework and that this legal framework may both create a new competitive ground (the recyclability of the vehicles) and an incentive to circumvent it (through the cartel). As time of writing, the ELV cartel decision is yet to be published. This decision should provide more information on the assessment conducted by the Commission and how industrial policy considerations may have been integrated into it.²⁹

Call for input on access to critical raw materials With the Clean Industrial Deal Communication, the Commission has opened a public consultation on how European companies procure and recycle certain critical raw materials – and therefore how their conduct will interact with EU competition law.

The 2023 horizontal guidelines dedicate a whole chapter to sustainable agreements contributing to “the ability of society to consume and use the resources available today without compromising the ability of future generations to meet their own needs”.³⁰30 However, these provisions are not specifically tailored to recycling critical raw materials – the burden of proof remains with the undertakings themselves and the remaining legal uncertainties could seriously hamper EU recycling rates. There is no doubt, however, that by-object restrictive agreements will remain unlawful. The guidelines provide the example of a buyers’ cartel composed of recycling undertakings enjoying a 12 per cent market share and coordinating their conduct in negotiations they separately pursue with collectors of used mobile phones.³¹

According to the Clean Industrial Deal Communication, the public consultation may result in the provision of informal guidance, but other outcomes are not excluded.³² Through this initiative, the Commission has sent a clear message to the European market: critical raw materials recycling represents an opportunity for business development, and companies will benefit from a favourable environment, provided they orient their activities in this direction. The Critical Raw Materials Act will also introduce joint purchasing opportunities involving member states and undertakings,

thereby working towards a more integrated Single Market.³³

A European path to sustainable economic growth The carrot and stick approach attest to a determination to put competition law at the service of the European industrial strategy. This approach, driven by the aim of EU strategic autonomy, was first seen in the application of the EU state aid rules. Those rules prevent member states from subsidising selected undertakings by granting them competitive advantages outside the realm of normal market conditions (Article 107(1) of the TFEU). The Commission relied on two factors to justify integrating industrial policy considerations into the competitive assessment: First, Important Projects of Common European Interest³⁴ contributing to the circular economy where the public investment was necessary granted individual exemption. This trend is likely to continue as the Clean Industrial Deal seeks to “speed-up the design of new IPCEs”.³⁵ Second, the use of regulatory measures adopted in times of crisis (Temporary Crisis and Transition Framework, the TCTF, later extended (Clean Industrial State Aid Framework). These measures allowed Germany, for example, to adopt a financial aid scheme in 2024 for the construction of an electric vehicle battery plant as a necessary step towards the transition towards a decarbonised economy.³⁶

As asserted by Joan Canton, head of the Commission’s Energy Intensive Industries and Raw Materials unit, “ultimately it’s about private investment”.³⁷ In the midst of every crisis, lies a great opportunity and the EU has lived through several of them. This gives the Commission the legitimation to issue a Clean Industrial Deal in line with the rationale of strategic autonomy. Recycling can contribute to the proposition of a strengthened Single Market not only by removing barriers and expecting a natural development of interdependencies but also by shaping the common voice of a more “European” economic identity. Instead of finding an equilibrium between the diverging interests of sustainability and competitiveness they are presented as mutually reinforcing.

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1. Commission press release, “Commission fines car manufacturers and association €458 million over end-of-life vehicles recycling cartel”, 1 April 2025, https://ec.europa.eu/ commission/presscorner/detail/en/ip_25_881. ↩︎
2. Commission press release “Commission launches consultation to promote industry cooperation to procure and recycle critical raw materials in line with EU competition rules”, 1 April 2025, https://ec.europa.eu/commission/ presscorner/detail/en/ip_25_911. ↩︎
3. Commission, Communication of 26 February 2025, “The Clean Industrial Deal: A Joint roadmap for competitiveness and decarbonization”, COM(2025) 85 final. ↩︎
4. European Parliament, 24 May 2025, “Circular economy: definition, importance and benefits”, https://www.europarl. europa.eu/topics/en/article/20151201STO05603/circular- economy-definition-importance-and-benefits. ↩︎
5. Supra note 3, p 2. ↩︎
6. Council Directive 75/442/EEC of 15 July 1975 on waste, OJ L 194, 25.7.1975, p. 39–41 (EN, FR), ELI: http://data.europa.eu/ eli/dir/1975/442/oj. ↩︎
7. Ibid, recital 2. ↩︎
8. Supra note 3, p 2. ↩︎
9. Regulation (EU) 2024/1252 of the European Parliament and of the Council of 11 April 2024 establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) No 168/2013, (EU) 2018/858, (EU) 2018/1724 and (EU) 2019/1020 (Text with EEA relevance), PE/78/2023/REV/1 OJ L, 2024/1252, 3.5.2024, ELI: http://data.europa.eu/eli/reg/2024/1252/oj, see recital 1. ↩︎
10. European Council, “An EU critical raw materials act for the future of EU supply chains”, 21 March 2025, https://www. consilium.europa.eu/en/infographics/critical-raw-materials/. ↩︎
11. Supra note 3, p 1. ↩︎
12. Commission, “Teresa Ribera”, https://commission.europa.eu/ about/organisation/college-commissioners/teresa-ribera_en. ↩︎
13. Supra note 2. ↩︎
14. Commission press release, “EU secures access to diversified, affordable and sustainable supply of critical raw materials”, 23 May 2024, https://ec.europa.eu/commission/presscorner/ detail/en/ip_24_2748. ↩︎
15. Commission, “Questions and Answers on the Strategic Projects under the Critical Raw Materials Act”, 25 March 2025, https://ec.europa.eu/commission/presscorner/detail/ en/qanda_25_865. ↩︎
16. Proposal for a Regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020, COM/2023/160 final, https://eur-lex.europa. eu/legal-content/EN/TXT/?uri=CELEX%3A52023PC0160. ↩︎
17. Commission, Communication of 2008, “The raw materials initiative : meeting our critical needs for growth and jobs in Europe”, {SEC(2008) 2741}/* COM/2008/0699 final */, https://eur- lex.europa.eu/legal-content/EN/TXT/?uri=celex:52008DC0699. ↩︎
18. Ibid. ↩︎
19. Commission, “Circular economy action plan”, https:// environment.ec.europa.eu/strategy/circular-economy- action-plan_en. ↩︎
20. Supra note 17. ↩︎
21. Ibid, see footnote 26. ↩︎
22. Commissioner Vestager, Statement of 8 February 2017, “Commission decision fining companies €68 million for car battery recycling cartel”, consulted on April 30, 2025, https://ec.europa.eu/commission/presscorner/detail/en/ STATEMENT_17_247. ↩︎
23. Raw Materials Information System, “Raw Materials in the Battery Value Chain, https://rmis.jrc.ec.europa.eu/bvc#/. ↩︎
24. Ibid. ↩︎
25. Boon-Brett, L, Lebedeva, N and Di Persio, F, “Lithium ion battery value chain and related opportunities for Europe”, Publications Office, 2016, https://data.europa.eu/ doi/10.2760/6060, p 63. ↩︎
26. Commission press release, “Antitrust: Commission carries out unannounced inspections in the automotive sector”, 15 March 2022, https://ec.europa.eu/commission/ presscorner/detail/en/ip_22_1765. ↩︎
27. Supra note 1. ↩︎
28. Three Commission initiatives: (i) proposition for “a flexibility measure to help manufacturers comply with their CO₂ emission targets between 2025 and 2027 for new cars and vans”; (ii) proposition “as part of the EU’s cohesion policy mid-term review, funding incentives for the deployment of recharging infrastructure”; (iii) the public consultation. ↩︎
29. A parallel investigation was conducted by the UK’s Competition and Markets Authority. It led to a £77 million settlement decision. Two trade associations were found to have played a role into hindering the recycling of ELVs. They chaired or participated in meetings and also intervened when manufacturers strayed outside of the terms of the unlawful agreement. ↩︎
30. Communication from the Commission – Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co- operation agreements, C/2023/4752, OJ C 259, 21.7.2023, pp 1–125 https://eur-lex.europa.eu/legal-content/EN/ ALL/?uri=celex:52023XC0721(01), see paragraph 517. ↩︎
31. Ibid, see paragraph 310. ↩︎
32. Supra note 3, see p 13. ↩︎
33. Commission 26 March 2023, “Questions and Answers on the European Critical Raw Materials Act”, https://ec.europa.eu/ commission/presscorner/detail/cs/qanda_23_1662. ↩︎
34. Commission, “Important Projects of Common European Interest (IPCEI)”, https://competition-policy.ec.europa.eu/ state-aid/ipcei_en. ↩︎
35. Supra note 3, see p 12. ↩︎
36. Commission, “Staff working paper document accompanying the report on Competition Policy 2024”, 25 April 2025, see page 85, SWD(2025) 102 final. ↩︎
37. Politico Europe, replay published on 10 December 2024, “Competitive and green: can the Clean Industrial Deal ensure Europe has it all?”, Sustainable future week, https:// www.youtube.com/watch?v=j6AIamDJdLo; hear at 42’41”. ↩︎