German compromise fails to convince Commission

Hopes that a compromise thrashed out last month over Germany's controversial deposit scheme for one-way packaging would satisfy the European Commission were dashed yesterday when the latter announced an inquiry into whether the scheme contravened regulations on the free movement of goods.

Germany is the biggest recycler of packaging in the EU, and its so-called green dot system has been in place for many years, with recycling points across the country making it easy for consumers to do their bit for the environment.

The new system, introduced in January this year, focuses on one-way packaging (recyclable but non-reusable), a move designed, Germany says, to reduce the amount of non-reusable packing in circulation and thus reduce the risk to the environment.

But despite these best of intentions, the scheme has been something of a fiasco, with the lack of collection points for one-way containers forcing consumers to return them to the point of purchase to reclaim a deposit of €0.25-€0.50 (depending on the volume of the product) charged when the product was bought.

Not only has this proven to be annoying and time consuming for consumers, it has also incensed the country's powerful retail trade, which has had to handle all the returned packaging.

Most supermarkets reacted by simply destocking all products in one-way containers - a move which had devastating effects on the country's beer and soft drinks industries, the main users of such packaging.

But the Commission's concerns about the scheme were not based on the additional burden on consumers or retailers but rather about the implications for free trade between Member States.

According to Brussels, the German scheme makes it harder for non-German companies to sell their products there. After years of coping with the green dot system, German manufacturers widely use reusable packaging, far more so than their counterparts in other EU countries, and this gives them an unfair advantage, the Commission argues.

The Berlin authorities had hoped to head off legal action from the Commission by making the scheme simpler to use - for example, allowing one-way containers to be returned to any store rather than the place they were bought, a move which did nothing to appease the retail trade - but the Commission said that this pledge had not been met.

Retailers, it said, were only required to accept the return of packaging of the exact type, shape and size they had in their own stock, and could refuse to take back other types of empty packaging.

"In the absence of a properly functioning nationwide return system, customers are less likely to buy beverages in one-way packaging and retailers tend to no longer stock drinks sold in this type packaging on their shelves,"​ the Commission said in a statement.

Increased costs​

The Commission is particularly concerned that the new deposit system might constitute a barrier to trade for imported drinks, since "for reasons mainly related to long distance deliveries, some 95 per cent of imported drinks are in one-way packaging"​.

But the Commission said it also had concerns about the obligations imposed on the retail trade because of the lack of collection system. "The current system encourages the development of specific packaging, as some retailers try to reduce the scope of their legal obligation to take back used packaging and refund deposits.​

They will push their suppliers to provide them with products using a specific type of packaging not available to other retailers. In this way, these retailers limit their financial obligations, by only taking back and refunding the packaging of products they themselves have sold."​

This, the Commission said, led to increased manufacturing costs and could have a restrictive effect on imports from other Member States, as manufacturers had to set up separate production/packaging lines for some parts of the German market. It could also lead to higher prices.

Germany now has two months to respond to the Commission's formal request for information about the scheme, but if the Brussels authorities are not satisfied with the response, Germany would be obliged to change the system or face being dragged before the European Court of Justice.

Internal market commissioner Frits Bolkestein said the action had been prompted by an ever-increasing number of complaints about the system.

"We have received many complaints that retailers in Germany are taking beverages imported from other EU countries off their shelves because of the mandatory deposit on one-way packaging combined with the absence of an effective return system. Customers cannot get their deposits back on empty packaging and retailers are reluctant to have to stockpile empty cans and bottles.​

If EU beverage manufacturers were effectively excluded from the German market, this would reduce choice for German consumers and could constitute a serious violation of Community law."​

Good intentions​

Recognising the good intentions behind the scheme, Bolkestein said that the Commission was not contesting the principle of setting up a deposit and return system per se, as such schemes had been shown to be beneficial for environmental protection objectives.

"Such systems exist in other Member States and function in full conformity with EU law. But the Commission does have to investigate whether the deposit and return systems in Germany are fully compatible with EU law and are not inflicting disproportionate damage on the EU's manufacturing sector."​

"The Commission has held detailed talks with the German authorities over this matter for several months. However, since no properly functioning nationwide return system appears to be in place, I believe we now have no choice but to commence a formal infringement procedure. I remain hopeful that the matter can still be resolved quickly in co-operation with the German authorities and without the intervention of the European Court of Justice."​