19 April 2021

‘Online marketplaces in the EPR consultation’

In this opinion piece Nigel Harvey, CEO of lighting industry compliance scheme Recolight, examines proposals relating to online marketplaces contained within the recently published consultation on extended producer responsibility (EPR).


OPINION: The waste packaging consultation includes detailed proposals to capture the activities on online marketplaces (OMPs). That is excellent news – for too long, research has shown that there is large scale avoidance of producer responsibility obligations through OMPs.

The key principle that must be applied was elegantly captured in the Environmental Audit Committee (EAC) report last year, that “producers should be required to pay exactly the same producer responsibility fees and follow the same rules selling online as they do offline”.

Nigel Harvey is chief executive of the WEEE sector producer compliance scheme Recolight

So how do the proposals shape up? And to what extent do they meet the EAC requirement?

Positives

Many of the proposals should be warmly welcomed as a significant step in the right direction:

The consultation is clear that OMPs must report packaging for all products sold via their platforms. And, they must also report any additional packaging added to a product, for example for shipping. At a stroke that will prevent a huge level of packaging compliance avoidance taking place in the UK .

The consultation also includes an obligation to report unfilled packaging supplied by OMPs to UK businesses.

Government say they are considering broadening the OMP definition to capture fulfilment houses. That is essential – without this extension, there is a real risk that OMPs could simply change the way they contract with producers based outside the UK to avoid their producer responsibility obligations.

Government does not propose to include packaged products from UK-based businesses in the OMP obligation. That makes sense – those businesses should register in the same way, whether or not they sell through OMPs.

OMPs will have a duty, like other producers, to finance national comms programmes. That is fair.

Room for improvement

However, there are a number of areas where change is needed to close loopholes, to establish a level playing field with other producers, and to ensure that the EAC principle is properly applied.

Under the proposals, online marketplaces will have to report any additional packaging added to a product, for example for shipping (picture: Shutterstock)

Perhaps the biggest issue concerns the regulator fees and charges to be paid by OMPs. The proposal suggests that the charges may need to be higher for OMPs than for equivalent sized producers. That is true – they need to be higher. The OMP registration fees should be exactly equivalent to the aggregate registration fees that would have been paid by the individual producers selling via OMPs, had those producers registered separately. To do anything else would mean that selling via an OMP could be much lower cost than selling direct. That would be very damaging to the competitive landscape. It would result in a further significant transfer of market power to OMPs.

Definition

The proposed definition of an OMP refers only to UK based businesses. That is dangerous. By their nature, OMPs are multi-nationals, with legal entities based in many countries. For tax reasons, many already use non-UK based entities to contract with British purchasers. The OMP definition therefore needs to be extended to remove the option for OMPs to simply change contracting entity to avoid their obligations.

The consultation states that OMPs may exempt producers whose packaging is already declared and compliant. That is fine for producers based in the UK – but there is a real risk that producers based elsewhere will register, and then under declare, in the confident knowledge that they will not be audited. OMPs might even encourage this.

Data

“The proposals include suggestions that OMPs may use methodologies to estimate the weight of packaging where they cannot provide actual data. This is far from ideal”

The proposals include suggestions that OMPs may use methodologies to estimate the weight of packaging where they cannot provide actual data. This is far from ideal – all other producers must declare actuals. Furthermore, the potential multiple methodologies to be developed by Online Marketplaces could add to the risk of inconsistency and unfair advantage. So if OMPs are allowed to use estimates, there should be a strong incentive to move quickly towards actuals. That would be best achieved by “modulating” the obligation associated with estimates. The greater the proportion of estimated data, the higher the obligation to the OMP. For example, if the OMP includes 10% data estimates, the modulation should add 10% to the obligation – the higher the percentage of estimated data, the higher the OMP obligation. That would help drive a level playing field with compliant producers.

Conventional producers will be required to report seven material categories, whereas OMPs may use an eighth, “Other”, in recognition of the data collection challenges they face. To avoid abuse, the obligations associated with data in the “Other” category should be set at the same level as the most costly of the seven categories.

There does not appear to be any explicit statement in the consultation to suggest that products placed on the market by non-UK sellers via online platforms should be subject to the mandatory labelling requirements. This may just be a reading or drafting issue, but the anomaly should be addressed to avoid unfair competition.

‘A clear signal’

To conclude, the proposals are a clear signal that government is seeking to close the multiple online marketplace loopholes that exist. Provided that some of the shortcomings identified are addressed, we will, at long last, see extended producer responsibility that no longer allows unfair advantage to online marketplaces.

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