Chapter 3
Discussion of key issues
3.1
The committee found that there is both support for and opposition to
container deposit schemes. Environmental and community organisations believed
that the schemes are effective at keeping containers out of the litter stream
and encouraging recycling.[1]
For example, Keep South Australia Beautiful (KESAB) submitted that:
Beverage container recycling rates in South Australia
outstrip all Australian jurisdictions...receive a very high level of community
support...and achieves the lowest beverage container litter rate.[2]
3.2
Beverage manufacturers and representatives of the food and beverages
industry submitted their opposition to the scheme, arguing that it is an
out-dated and costly method of recycling.[3]
For example, the Australian Beverages Council stated:
It is the Beverages Council's concern that a [container
deposit scheme]...that addresses just beverage containers is an antiquated
approach to litter reduction and recycling, and believe that in 2012 and
beyond, a more integrated and broader approach to these issues is possible.[4]
3.3
Whilst noting submitters' general comments about the merits of container
deposit schemes, the committee's inquiry has focused on the matters dealt with
in its terms of reference. More specifically the committee has examined the
cost structure of container deposit schemes, issues surrounding unredeemed
deposits and rates of return, issues of transparency to ensure unreasonable
costs involved in operating the schemes are not passed on to consumers and one
other related matter concerning small containers.
The pricing of beverages in container deposit schemes
3.4
Boomerang Alliance, a collective of environmental groups committed to
achieving zero waste in Australia, submitted that it had concerns that beverage
manufacturers could use container deposit schemes as a means to overcharge for
products sold in states that operate container deposit schemes.[5]
3.5
Boomerang Alliance argued that beverage manufacturers may be increasing
the price of their products sold in South Australia and the Northern Territory
above what is needed to fund the container deposit schemes.[6]
3.6
The cost of operating container deposit schemes in South Australia and
the Northern Territory involve:
- a 10 cent deposit paid to consumers on return of containers;
- a handling fee paid to collection depots for handling containers;
- a fee paid to super collectors for administering the scheme and
transporting containers from collection depots.[7]
3.7
Handling costs may be offset by the sale of recovered scrap materials
(such as aluminium, PET and HDPE).
Claims made by Boomerang Alliance
3.8
Boomerang Alliance submitted that it believed the current costs involved
in operating the South Australian scheme are 60 cents per dozen containers paid
as a 'handling fee' and 0.05 cents per dozen containers paid as an administration
and transportation fee.[8]
These costs are offset by the sale of recovered scrap materials of
approximately 2 cents per container. According to Boomerang Alliance, 'at a
current recycling rate of 80% this represents a total net cost per container
sold (i.e. where the CDS cost is passed into the price) of 10.72 cents per
container'.[9]
3.9
Boomerang Alliance therefore asserted that:
This means prices could increase by a maximum of 11 cents per
container and the net impact on consumers is 1 cent (net of deposit) when they
return their containers.[10]
Boomerang Alliance's estimation of
the South Australian container deposit scheme costs per container[11]
3.10
In the Northern Territory, Boomerang Alliance used regular data reporting
provided by beverage manufacturers and super collectors to the Northern
Territory government on the container deposit scheme to estimate that the cost
of the scheme at 3.8 cents per container:
From January to June 2012, 70.4 million beverage containers
were sold in the NT and depots collected a total of 20.1 million containers.
This means bottlers paid out a total of $2.01 million in refunds and no more
than $684,000 in handling fees—a total cost of $2.694 million. Spread across
sales of 70.4 million this represents a cost (including deposits refunded) of
3.8 cents per container.[12]
3.11
Following on from its estimation of the cost per container of operating the
container deposit schemes, Boomerang Alliance submitted that it conducted an
analysis of the price of beverage items sold by a major supermarket retailer in
the central business districts of Adelaide, Darwin, Perth and Sydney.[13]
The purpose of this study was to identify cost increases in beverages in those
cities that operated the container deposit schemes (Adelaide and Darwin) as
compared to those cities without the schemes (Sydney and Perth).
3.12
For each city, Boomerang Alliance viewed the price of beverages via the
supermarket's online shopping system and its shopping catalogue.[14]
Five products that did not attract a deposit were also checked for price
variations to determine if there was a general variation in price across
cities.[15]
3.13
In examining prices of beverages in South Australia and the Northern
Territory, Boomerang Alliance stated that they were motivated by claims made by
the Australian Food and Grocery Council (AFGC) that beverage prices in South
Australia and the Northern Territory were high due to the container deposit
schemes.[16]
3.14
According to its analysis, Boomerang Alliance found that prices in
Adelaide are 9.7 cents higher than in cities without container deposit schemes
and prices in Darwin are 12.8 cents higher.[17]
Boomerang Alliance also believed that three major bottlers in South Australia
and the Northern Territory 'had increased prices across most of their brands
and were charging customers more than 100 per cent over the costs they
incurred'.[18]
This is in contrast to the rest of Boomerang Alliance's findings that 'most
leading beverage brands have absorbed some of the cost or are passing on (at
most) the deposit cost'.[19]
3.15
In presenting its argument to the committee, Boomerang Alliance
highlighted that its research indicates how container deposit schemes could be
exploited and highlights the concerns of community groups regarding the schemes,
while acknowledging the limitations of their research:
...to use our evidence on the basis of whether there is
misconduct, negligence and profiteering we do not think is reasonable. It is
not the community sector's job to do that sort of investigation into this
matter; it is our job to act as a representative of the community and highlight
issues which are of concern to us.[20]
Beverage industry response to
claims made by Boomerang Alliance
3.16
The beverage and grocery industry strongly refuted the claims made by
Boomerang Alliance that container deposit schemes provide an opportunity for
beverage manufacturers to increase prices above what is required to operate the
scheme.[21]
3.17
The AFGC submitted that it believes the claims made by Boomerang
Alliance to be 'ill-founded and without substance'.[22]
The AFGC argued that beverage companies do not set retail prices—retailers do:
When, and if, the container deposit and handling fees are
added to the wholesale price of containers sold into markets in the Northern
Territory and South Australia by beverage containers, local retailers will then
apply their retail margin plus GST.[23]
3.18
The AFGC was also concerned that the Boomerang Alliance methodology did
not take into account the fact that regular retailer discounting and product
promotions occur constantly.[24]
As such, the AFGC argued that a substantial survey of beverage prices in South
Australia and the Northern Territory would need to be monitored over a long
period of time and across a broad range of retailers.[25]
3.19
The AFGC also provided the committee with a report it commissioned into
the claims made by Boomerang Alliance.[26]
The commissioned report, conducted by ACIL Tasman, found that the Boomerang
Alliance report was based on 'a flawed premise and the data used are inadequate
to support meaningful analysis'.[27]
3.20
The report also went on to state that there are many factors that
contribute to rises in beverage prices, including local factors and retail
competition:
...there is no reason to assume that retailer and wholesale
prices will automatically move in parallel with one another, with retailers
simply passing on changes in wholesale price to their customers.
Retail pricing is a complex process. Retailers routinely
'fine tune' prices with regard to local demographics and a range of factors including
competition from other retailers.
The result is that the retail price of the same product can
vary across relatively small distances within the same supplier. This has been
shown by the ACCC in Australia and is documented in economic literature in other
countries.[28]
3.21
In summarising its analysis of the Boomerang Alliance claims, the AFGC
contended that it:
...fails on all counts: firstly, by failing to take account of
local factors and retailer promotions, which the ACCC found to have the
greatest influence on retail grocery prices; secondly, by its inadequate data
sample and inconsistencies in the data that is presented; and thirdly, by their
lack of understanding of how the retail sector works. If prices are increased
at the wholesale level, retailer margin and GST will increase those prices,
forever, in most instances...[29]
3.22
However the AFGC did concede that their study to counter the claims made
by Boomerang Alliance was based on a similar methodology to that used by
Boomerang Alliance and only examined prices at a 'snapshot of time'.[30]
According to the AFGC, it conducted '...some very quick analysis, certainly not
for the purposes of demonstrating anything other than that prices had risen'.[31]
3.23
Beverage manufacturers Coca-Cola Amatil and Lion also raised objections
to the argument put forward by Boomerang Alliance. Coca-Cola Amatil stated that
its approach to pricing is to 'recover the costs of regulation from the region
covered by that regulation'.[32]
Coca-Cola Amatil highlighted that beverage manufacturers have additional costs
above and beyond the payment of handling fees to super collectors in order to
participate in container deposit schemes, such as the printing of separate
labels for South Australia and the Northern Territory, holding additional stock
units with loss of warehouse capacity, additional line changing time and loss
of production efficiencies, cost impacts of small volume runs and additional
administrative and accounting work.[33]
3.24
Further Coca-Cola Amatil informed the committee that competitive market
forces prevent beverage manufacturers from charging excessive prices for
products as consumers can choose not to purchase products that are too
expensive. Coca-Cola Amatil stated:
In terms of the financial underpinnings of the scheme, or
pricing, regulators and legislators have taken a view that we do not have
prices justification tribunals anymore. There is a belief in the market
operating to keep prices regulated. Should legislation be changed to bring in
that sort of prices justification mechanism, if people are advocating that, we
would comply with any regulations as such. Our view as a corporation is that
that is not necessary where you have adequate operation of competitive markets.[34]
3.25
Lion refuted Boomerang Alliance's argument 'on the basis of scant facts
and incorrect assumptions'.[35]
Lion informed the committee that:
In both South Australia and the Northern Territory,
[container deposit loop] CDL systems are market based. Robust competition
exists at each point in the supply chain, from beverage manufacturers and
wholesalers, to retailers, container collectors (ie: depot operators), waste
contractors and materials coordinators.
While the deposit amount in both jurisdictions is set by regulation,
the handling fee and other system costs are determined by the market.[36]
3.26
Lion further stressed that 'Australian food and beverage manufacturers
are operating in a highly competitive domestic market, with an increasingly
concentrated retail sector in which manufacturers' margins are experiencing
unprecedented squeeze'.[37]
According to Lion, pricing is a critical value driver and is approached
carefully and strategically by the company.[38]
Lion stated that 'pricing is reviewed periodically to drive our brand and
business objectives, within the context of a highly competitive and
price-sensitive market'.[39]
3.27
Also of concern to Lion was what they perceived as Boomerang Alliance's
lack of understating of the beverage supply chain. Lion submitted that in many
jurisdictions, particularly in the Northern Territory, there is an additional
party in the beverage value chain—a wholesaler—to whom Lion sells its products
for on-selling to retailers.[40]
Accordingly, each party in the value chain determines its own pricing which
involves a range of factors.[41]
3.28
Both the beverage industry groups and beverage manufacturers highlighted
to the committee that the Australian Competition and Consumer Commission (ACCC)
has investigated claims of overcharging in the grocery sector and found that,
overall, there are myriad reasons why prices will vary from retailer to
retailer, place to place and over time.[42]
3.29
Boomerang Alliance suggested that where legislation, such as that
covering container deposit schemes, could have an impact on the price of
products, special provisions be inserted to ensure that unreasonable charges
are not passed on to consumers. Boomerang Alliance proposed:
Where it is a priority of the government to introduce
legislation that has impacts on consumers—and the two most obvious examples are
the goods and services tax [GST] and the carbon tax—it is common practice to
put provisions on what is and what is not reasonable to charge a consumer and
mechanisms to investigate that. The problem we have is that that does not extend
into a variety of waste schemes.[43]
Committee comment
3.30
The committee acknowledges that a debate about the price impacts of
imposing a container deposit scheme is inevitable.
3.31
The argument presented by Boomerang Alliance is reliant upon very basic
and rudimentary price surveys that the organisation has undertaken. Beyond the
deposit refund, handling fees and recycling material rebate, their data fails
to separate out other factors that may contribute to the cost of container
deposit schemes such as local conditions, promotional pricing and the cost of
manufacturing containers intended for the container deposit scheme markets let
alone other reasons for possible price rises or differentials.
3.32
Similarly, the AFGC's claims of price rises due to container deposits
made in various examples of media commentary highlighted by Boomerang Alliance
appear to be based upon similarly weak methodology and poor data.
3.33
The committee was not presented with any compelling evidence to support
the argument put forward by Boomerang Alliance—that beverage manufacturers may
be increasing their prices above what is needed to operate the container
deposit schemes. The committee also stresses that the ACCC is the appropriate
regulator to deal with matters of overcharging and price collusion and that if
there is evidence of such claims, that evidence should be provided directly to
the ACCC.
3.34
It is clear that there is a cost impact above and beyond the cost of the
10 cent container deposit, although the evidence as to the extent of that
impact is varied. Where market conditions allow, companies have taken the
decision to pass on those cost impacts to consumers. The committee acknowledges
the competitive environment that manufacturers operate in and the role played
in retail pricing by wholesalers and retailers too.
3.35
Nonetheless, the committee believes that if another state or territory
was to adopt a container deposit scheme, or if a national container deposit
scheme was to be adopted, there would be understandable consumer interest in
ensuring that—as was the case with the GST and the carbon price—the imposition
of such a container deposit scheme was not used as justification for price
rises beyond those warranted by the scheme. While in no way suggesting this has
been the case in South Australia or the Northern Territory, the committee
believes it would be preferable to address such concerns up front, in the
initial design of any further schemes.
Recommendation 1
3.36
The committee recommends that should a national container deposit scheme
be agreed to and implemented through the COAG process, steps similar to those
used during the GST and carbon pricing policies be taken to ensure it is not
used as a justification for price rises beyond those warranted by the scheme.
Recommendation 2
3.37
The committee recommends that should any other state implement a
container deposit scheme, they be mindful of taking steps to ensure it is not
used as a justification for price rises beyond those warranted by the scheme.
Super collectors and pricing structures
3.38
The committee's inquiry had a particular focus on the transparency of
the container deposit schemes and, in particular, on the role of super
collectors in the setting of price structures and determining rates of return.[44]
Questions were also raised over what occurs with deposits collected on
unredeemed containers.[45]
3.39
In the South Australian and Northern Territory container deposit
schemes, beverage manufacturers are required to have in place a waste
management agreement with a major recycler (the super collector) before their
products are able to be sold.
3.40
The waste management agreement is established between beverage manufacturers
and the super collectors, which in turn have contractual arrangements with
smaller collection depots. The super collectors obtain funds from the beverage manufacturer
to cover the refund value and handling fees, and reimburse collection depots
for refunds paid to people who take containers to the depots. The super
collectors subsequently seek end markets for the aggregated containers
recovered from depots.[46]
3.41
The waste management agreements take into account the refund value plus
a service and handling fee to cover collection depot and super collector costs
and profit margins.[47]
The agreements also consider recovery rates of the various container types.
3.42
Waste management agreements are determined by the market under
commercial terms and the content of individual agreements can vary, as does the
handling fee for various container types.[48]
Indeed two super collectors suggested to the committee that their businesses
are not charities but are intent on 'providing the best possible service at the
most competitive cost'.[49]
3.43
In South Australia there are three approved super collectors: Marine
Stores (owned by Coca-Cola Amatil), Statewide Recycling (owned by Lion and
Coopers Brewery), and Flagcan Distributors.
3.44
In the Northern Territory there are five approved super collectors (also
known as container deposit scheme coordinators): NT Coordinators, Statewide
Recycling, Envirobank NT, NT Recycling Services and Marine Stores.[50]
3.45
One of the super collectors, Marine Stores, informed the committee that
the pricing structures used to refund and recycle beverage containers on behalf
of manufacturers and importers has a number of variables.[51]
In both the South Australian and Northern Territory schemes there are a number
of uncertainties, such as the rates of return of containers and the value of
recyclable materials.[52]
Marine Stores explained the price structure involved in calculating their waste
management agreements:
In general, the South Australian system is mature and
predictable, allowing Marine Stores to set pricing annually with a high level
of confidence. The cost components in our South Australian business include the
deposits redeemed based on actual return rates, the handling fees negotiated
with the RSA—or Recyclers of South Australia—the scrap value of recyclable
materials, and Marine Stores' freight costs, infrastructure and overheads...
The Northern Territory scheme is not as mature, with
inadequate infrastructure, conflicting legislative arrangements and
still-emerging risks and costs, including increasing, although inconsistent,
return rates. While handling fees paid to collectors are similar to those paid
in South Australia we are incurring significantly higher risks and costs in the
Northern Territory, which have necessitated pricing adjustments to make
provision for these additional exposures.[53]
Calculating rates of return
3.46
In calculating fees for their services to the manufacturers, Marine
Stores indicated that they make an estimate of the rate of return of containers
which are then measured against actual return rates.[54]
The clients of the super collectors are then able to be charged for the correct
amount of refunds of their product that is returned.
3.47
Marine Stores informed the committee that if beverage manufacturers have
been incorrectly charged on their rates of return a credit is returned to them.
Marine Stores stated:
...if we underestimate the return rates or the value of the
material then the brand-owners need to compensate Marine Stores; similarly, if
it goes the other way then a credit could be applied to the manufacturers.
However, in the case of the Northern Territory, the prudent position has been
taken that provisions have been made for the likely increase in costs going
forward, and the fact that more material will come back.[55]
3.48
In order for super collectors to calculate the rate of return,
containers need to be sorted, or 'split', into different products and brands.
The Recyclers of South Australia, an association representing collection
depots, informed the committee of the process to sort containers:
...the responsibility under the [Environment Protection] Act of
an approved depot is to take back the label-approved products. That is the
legislative part of it. The super collector is interested in the products they
control and need to manage, so how they are handled and sorted and how the
audit check is conducted are all matters [conducted] for the super collector
and usually relates to a combination of count by declaration and/or a weight
check and variation on weights.[56]
3.49
The Recyclers of South Australia went on to state that the methodology
for calculating return rates are specified in contracts and rates are based on
a manual audit.[57]
The Recyclers of South Australia stated:
...there is a methodology in the contracts. How that should
evolve is currently up for debate. Essentially, there is a manual audit
conducted. Plastic is probably the most sensitive. Cans are pretty well
uniform—there are some different sizes but they are much more uniform, so less
sensitive. PET bottles, which is a large slice of the market, vary from the
200-millilitre to two-litre size, and bigger with some containers. So there is
a need to work out averages per kilogram in three different size groups:
smalls, mediums and large. They are sorted into those sizes and then they are
manually counted to come up with an average per kilogram so that depots can be
paid that amount of money, whereas the act requires us to count and pay on
individual items not by weight, so there is always that little bit of conflict
between what we pay out and what those averages are.[58]
3.50
The committee heard evidence that in South Australia the number of
splits required in processing returned containers is much less than occurs in
the Northern Territory.[59]
The Recyclers of South Australia argued that the fewer number of splits in
South Australia is the result of their association 'negotiating and
using...contractual arrangements to make sure that we get efficiencies with our
negotiations with super collectors'.[60]
3.51
The committee considered evidence which suggested the number of
different co-ordinators in the Northern Territory ensures that it has a higher
number of splits. Mr Stewart Pritchard stated:
With the recognition of each [c]o-ordinator a whole new set
of “splits” has been created. With each co-ordinator requiring separation of
clear, green and brown glass, aluminium, liquid paper board, clear and coloured
P.E.T. and H.D.P.E....with only a token effort to “bulk” product we have the
totally ridiculous situation of separating the 8 different containers for the 5
different Co-ordinators. [61]
3.52
It was suggested that improvements in technology could help in the
processing of returned containers and reduce the need for manual splits to
occur. KESAB suggested that:
Clearly the number of splits that are required is an impost
on the recycling depots when it comes to the physical handling of product.
...
I would have thought that in this day and age with technology
and with companies working to a common system, the [container deposit loop] CDL
system, it would not be that difficult for them to work through a cost centre
to amortise their product volume that goes out into the retail market and that
is returned based on a percentage and would not necessarily require the splits
into brands...when you could just collect five million bottles. Amortised at five
per cent based on market share would be one brand, seven per cent another
brand, and then there would not be the requirement for splits. The glass is,
after all, palleted and sent off to be remade, the aluminium is blocked and
sent overseas or sent to a factory for reuse, and PET the same.[62]
3.53
Marine Stores told the committee that the current system in South
Australia of sorting products is manually intensive, but introducing technology
to assist with sorting would be expensive.[63]
Unredeemed deposits
3.54
Concerns were also raised about whether additional deposits were collected
by beverage manufacturers on containers that were not returned.[64]
The South Australian Environment Protection Authority (EPA) outlined the issue
of unredeemed containers:
There are two potential situations here with unredeemed
deposits...
If a beverage supplier comes to a super collector and the
arrangement struck is that they will pay 100 per cent of their sales to that
super collector to pass on, back through the system, to the collection depots
and to the consumers, and then only 80 per cent of those goods on the
right-hand side get returned to the collection depots, in that case the super collector
would theoretically have kept 20 per cent of all the costs negotiated with that
contract. So that is the handling fee, and the deposit...
On the other hand, as we have heard today from submissions,
if the beverage manufacturers are paying on returns but passing on the deposit
and the handling fee on 100 per cent, let us say, on all their sales, then
indeed the beverage manufacturer would be collecting a tidy sum of 20 per cent
of all those costs. We have said in our submission that if you assume that
unredeemed deposits are occurring in the marketplace, then in South Australia
alone it is probably about a $20 million gain that one of these parties is
making.[65]
3.55
The Boomerang Alliance, in particular, was concerned with the potential
for unredeemed deposits.[66]
It is the opinion of Boomerang Alliance that a lack of transparency around the
price structure of the container deposit scheme could allow either super
collectors or beverage manufacturers to make profits above what is needed to
operate the scheme. Boomerang Alliance contended:
That money, in every container deposit scheme around the
world—except for South Australia and the Northern Territory—is clearly
identified as a deposit. It is money held in trust, not money owned by the
bottlers.[67]
3.56
Boomerang Alliance was concerned that if there are any unredeemed
deposits being held, who holds those deposits.[68]
Boomerang Alliance stated that the unredeemed deposits could be sitting with
the beverage manufacturer or the super collector.[69]
Boomerang Alliance further contended that:
[the unredeemed deposit] is sitting in the hands of the
bottler or the bottler's coordinator. We believe it is in hands of the bottler.
Having read the submissions that have been made, it is as clear as mud exactly
where that flows through, because the super collectors are owned by bottlers in
the majority of instances. We would contend that making 4c cents on a bottle on
that pricing scenario is somewhat outrageous.[70]
3.57
The EPA informed the committee that it does not know if there is 'such a
concept as unredeemed deposits or not'.[71]
The EPA stated:
We do not have any evidence—we do not sight the commercial
contracts, in terms of what arrangements have been struck between the beverage
manufacturers and the super collectors, and neither do we know how the cost
arrangements occur on the pricing side between the wholesalers and the
retailers. As we have seen, those prices fluctuate. They discount; they
amortise costs across the country—or have done so, historically; perhaps that
is not the case anymore. It is quite a difficult thing, and our economists are
continually scratching their heads to figure out what they can assume, what
sense they can make and whether the unredeemed deposits are actually occurring
or not.[72]
3.58
The EPA further stated that it believes that 'these concerns are
currently subject to dispute between beverage container approval holders and
super collectors, and can only be resolved by these parties without direct
intervention by the EPA'.[73]
3.59
Coca-Cola Amatil countered these claims in stating that it is not making
profits from unredeemed containers.[74]
Coca-Cola Amatil argued that the contracts that they negotiate with super
collectors for the refunding and handling of containers are long-term
agreements that take into account the projected rates of return for recycling
containers. Coca-Cola explained that the refund they pay collectors:
...is not a set deposit, for a start. For instance, if the
collection rate were 50 per cent and that were confident over a long period of
time, then in fact we would collect 5c, not 10c...because we would only collect
what we were going to pay out. If the deposit is 10c and half of it is being
collected, we will only ever pay out the equivalent of 5c for every bottle we
sell.[75]
3.60
Coca-Cola Amatil further pointed out that if claims that beverage
manufacturers were pocketing substantial profits from unredeemed containers
were true, it would be 'surprising that we would not be advocating the
extension of that national scheme so that we could then pocket $150 million
additional profit nationally'.[76]
3.61
Similarly Marine Stores stated that there is a readjustment of charges
made by the super collectors depending upon the return rate of containers.[77]
Transparency
3.62
Boomerang Alliance suggested that the container deposit schemes could be
more efficient and remove the need for splits if there was more transparency in
the pricing structure. According to Boomerang Alliance, if the money paid by
consumers as the deposit for the container was itemised on their receipt and
held by one independent body, there would not be the need for splitting the
returned containers. Boomerang Alliance remarked that:
...the deposit is not transparent and is not levied. In every
[container deposit] scheme around the world, once again, when you get a receipt
the deposit is an item and any handling is an item on your grocery bill, which
means the money is independently managed...What is inherently inefficient in
South Australia and the Northern Territory is this idea that says, 'Each
bottler will make their own arrangement.'...
In effect, that means that, if these containers are being
recovered, they have to be managed by a brand, which means that the split or
the sorting is magnified by every coordinator. The optimum is seven splits. In
the Northern Territory, at the moment, they are managing 28 splits. That is
about a 40 per cent loading on handling fees. It also means transport is
duplicated.[78]
3.63
In contrast to Boomerang Alliance's demands for more transparency in the
setting of super collector costs, Coca-Cola Amatil (owner of super collector
Statewide) argued to the committee that an adequate amount of transparency
already exists in the container deposit schemes. Coca-Cola explained:
We have absolute transparency in what we charge an individual
customer. A customer who is doing business with us clearly has transparency at
the price we are charging. They can compare that price from alternate
suppliers. In some cases that can be for an alternate brand of a similar
product. In some cases it can be for the same brand through an alternate
source—say, through a wholesaler, distributor or, in some cases of small
businesses, through a supermarket as an alternate source. In that sense they
have the transparency of knowing what they pay for.[79]
3.64
Coca-Cola Amatil, on behalf of Statewide, also argued that for true
competition to occur amongst super collectors, requiring further transparency
may have the unintended effect of stifling competition:
We have no problems with transparency of regulatory schemes,
absolutely. We think they definitely should be there...However where the
regulators of the legislation decide to operate a competitive market, the need
for transparency and accountability needs to be balanced against the benefits
of competition. One of the very elements of competition is commercial
confidentiality. In fact, if you are going to prevent cartel and collusive
behaviour, you cannot have as much transparency. So in terms of the South
Australian model and the Northern Territory model, they are both competitive
models. You have a number of competitors actually vying for business and if you
were to have open transparency of their cost structures et cetera, you could
not operate a commercial operation.
So as a listed company, we are subject to accountability in
terms of financial reporting and in terms of competition practices through the
ACCC, and we welcome all of those accountabilities. But in terms of where you
run an environmental scheme in a competitive way, I think people need to
realise that there is a trade-off between the transparency and accountability
and the commercial reality of operating that sort of scheme.[80]
Committee comment
3.65
The committee acknowledges that there are many complexities involved
with the operation of the container deposit scheme and how the pricing
structures are set. The waste management agreements that are made between
beverage manufacturers and super collectors are conducted in an open and
competitive market. As with any commercial operation, the super collectors are
exposed to risks and market forces and as such will seek to make a profit when participating
in the container deposit schemes.
3.66
There are complexities involved in super collectors determining price
structures which are driven by a range of uncertainties, such as the return
rates of containers and the value of recyclable material. It is important that
the beverage manufacturers, and in particular the smaller manufacturers, have
confidence in the cost models applied by the super collectors regarding rates
of return. This is particularly important in light of a number of super
collectors owned by fellow beverage manufacturers. It is vital that transparency
is shown in the vertical integration of beverage manufacturers and super
collectors to ensure that the public and small manufacturers have faith in the
container deposit schemes.
3.67
The committee recognises that resolving some the issues raised by
submitters in relation to increasing transparency and using technology to
better improve the container deposit schemes would need to be correctly
balanced. For example, while the implementation of technology to assist with
the sorting of containers could increase efficiency, it could also increase the
cost of processing containers in the short term.
3.68
In relation to unredeemed deposits and estimations of the rates of
return, the committee acknowledges the evidence given by super collectors that
credits are provided should overcharging occur. All super collectors indicated
that the rate they charge manufacturers varies based on the experienced rates
of return. Accordingly, the committee has seen no evidence that profiteering
via unreturned containers is occurring as alleged.
3.69
The committee however has concerns that some manufacturers remain
unhappy with the level of transparency surrounding the calculation of return
rates and feel that they could be subsidising other manufacturers as a result.
On the evidence available the committee feels that methods to address those
concerns and provide transparency to such manufacturers may be inadequate.
3.70
The committee therefore recommends that should another state or
territory adopt a container deposit scheme, or if a national container deposit
scheme is to be adopted, there should be appropriate measures to ensure
transparency in estimating and reporting return rates for various products and
appropriate measures to assist in dispute resolution between any beverage
manufacturers and super collectors.
3.71
The committee also recommends that the South Australian and Northern
Territory governments should review their schemes to ensure confidence in
estimating and reporting return rates for various products and that appropriate
measures are in place to assist in dispute resolution between any beverage
manufacturers and super collectors.
Recommendation 3
3.72
The committee recommends that should a national container deposit scheme
be agreed to and implemented through the COAG processes, there should be
appropriate measures to ensure transparency in estimating and reporting return
rates for various products and appropriate measures to assist in dispute
resolution between any beverage manufacturers and super collectors.
Recommendation 4
3.73
The committee recommends that should any other state implement a
container deposit scheme, they be mindful of implementing appropriate measures
to ensure transparency in estimating and reporting return rates for various
products and appropriate measures to assist in dispute resolution between any
beverage manufacturers and super collectors.
Recommendation 5
3.74
The committee recommends that the South Australian and Northern
Territory governments should review their schemes to ensure confidence in
estimating and reporting return rates for various products and that appropriate
measures are in place to assist in dispute resolution between any beverage
manufacturers and super collectors.
Other related matters
3.75
As part of its inquiry the committee became aware that fermented milk
products in containers less than 100 millilitres are included in the container
deposit schemes. These products are intended for dietary health and must be
refrigerated up until consumption.
3.76
Under the current South Australian and Northern Territory regulations,
such containers must be included in the container deposit schemes with a 10
cent deposit.
3.77
The current South Australian regulations on the container deposit scheme
do however exempt health tonics that are supplied with a label specifying that
the tonic is for medical purposes and is a recommended maximum dosage.[81]
Similarly the current regulations also exempt containers containing milk from
the container deposit scheme as they are almost always consumed in the home and
do not contribute to the public litter stream.
Committee comment
3.78
The committee also notes that small fermented milk products are
overwhelmingly consumed in the home and as such would be recycled via existing
kerbside recycling schemes and their contribution to the litter stream would be
negligible. The inclusion of such products in container deposit schemes is
likely to provide a marginal benefit to reducing litter or increasing recycling
rates at best.
3.79
The committee therefore recommends that the South Australian and
Northern Territory governments give consideration to removing products that are
sold in containers less than 100 millilitres and that need to be kept
refrigerated from being included in their container deposit schemes.
Recommendation 6
3.80
The committee recommends that the South Australian and Northern
Territory governments give consideration to removing products that are sold in
containers less than 100 millilitres and that need to be kept refrigerated from
being included in their container deposit schemes.
Senator Simon Birmingham
Chair
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