Update on German Packaging Act and resulting obligations for online retailers
Germany’s new packaging law, the German Packaging Act (GPA), has been in effect since 1 January 2019. One of the primary goals of this law is to ensure the use of less packaging or at least packaging that is more environmentally friendly. This goal is to be achieved based on the principle of “product responsibility”, i.e. the party that places the sales packaging on the market must also pay for its disposal or recycling.
The Central Office of the Packaging Registry (COPR) has conducted a preliminary study and confirmed that the GPA is having the intended positive effect, reporting that the number of companies that properly fulfil their product responsibility has tripled. However, the COPR also reports that the large number of inquiries it receives indicates that many companies are still in the dark as to what the requirements are. The COPR has announced that it intends to consistently take action against companies that do not fulfil their obligations under the GPA. This update is to provide you with information about the obligations arising from the GPA for digital retailers:
Relevance to online retailers
Online commerce always involves (shipping) packaging. Depending on the structure of a particular business concept, various players are affected by the GPA in various ways. The decisive factor is how the goods are distributed, i.e. if a retailer sells directly or via a platform, with or without a fulfilment centre, by involving a drop-shipping service provider or by importing goods from a different country and/or who receives each product. Depending on the business model they use, online retailers may be required to fulfil the obligations under the GPA described below.
First, it must be emphasised that obligations under packaging law apply regardless of whether an economic operator is domiciled in Germany, a different Member State of the European Union or even a country outside the EU. The only decisive factor is that goods are sent to Germany.
a) Compulsory participation in the system – “old wine in new wineskins”
The main element of product responsibility for packaging is compulsory participation in the system. This is by no means new – on the lawbooks for 25 years, product responsibility has now merely gained a new cover. Compulsory participation in the system means that retailers do not see to it themselves that their packaging is returned, disposed of or recycled, but instead must participate (financially) in a dual system. The dual systems – private companies – are then responsible for collecting packaging waste near households and salvaging it in ways that conserve resources.
A retailer must enter into a contract with a dual system if it is the “manufacturer” of packaging that becomes waste after delivery to a consumer.
- In this context, the entity that commercially places packaged goods on the market for the first time or imports packaged goods into Germany (importer) is considered the “manufacturer”. Particularly with platforms such as eBay, a common problem is determining when a sale is still “private” and when it becomes “commercial”.
- In this context, “private consumers” are not only private households but also places where waste accumulates that are comparable to private households as regards the type of packaging that usually becomes waste there such as freelancers’ places of business, gastronomy retailers, hospitals, etc. Depending on the amount of packaging to be disposed of, such entities, like private households, can dispose of their packaging waste in collection containers; for example, they can place their plastic packaging in the “yellow bin”. For example, entities that – for example based on the product itself or due to minimum order quantities – only ship to industrial companies at which commercial packaging waste accumulates and that use packaging that reflects this are not subject to compulsory participation in the system.
b) Registration and reporting obligations towards the Central Office and publication in the packaging register LUCID
An important new aspect of the GPA is that it establishes a “Central Office”. The Central Office is a foundation funded by companies that manufacture, use or sell packaging and their interest groups. Specific sovereign functions have been entrusted to the Central Office, which means that it acts in a manner similar to a government authority. The Central Office centralises registration and data collection, replacing the former hodgepodge of local authorities.
The GPA regulates the obligations towards the Central Office of entities that are “manufacturers” of packaging that triggers compulsory participation in the system:
- First, such “manufacturers” have a registration obligation according to section 9 GPA. In particular, online retailers must be careful to keep their registration data up to date.
- They also have a data reporting obligation, i.e. retailers must provide the Central Office with information such as the name of the dual system in which they fulfil their obligation to participate, the type of material and the amount of packaging that they have placed on the market that is subject to compulsory participation.
- Last but not least, if a specific annual threshold amount is exceeded, an annual declaration of completeness must be submitted regarding the type, material and amount of packaging placed on the market. This declaration must be examined and confirmed by a registered expert or a registered auditor, tax consultant or chartered public accountant.
An important factor that is significant for the economic operators involved is that packaging that is subject to compulsory system participation placed on the market by the “manufacturers” registered with the Central Office is published in the packaging register LUCID. Legislators are relying on transparency and public opinion to counteract a previous tendency towards “free rides” by some companies that faced little or no consequences when they simply did not comply with their obligation to participate in a system. Thanks to the LUCID register, not only consumers but particularly competitors can easily find out if others in their line of business are complying with their participation obligation.
c) Information and other obligations for online retailers
Last but not least, the GPA also regulates what information is required of online retailers. For example, online retailers that sell not-returnable packaging which is subject to the deposit and return obligations found in section 31 GPA must always indicate with the clearly visible and readable word ‘EINWEG’ in all capital letters that such packaging cannot be reused after being returned. Likewise, reusable drink packaging must indicate with the clearly visible and readable word ‘MEHRWEG’ in all capital letters that such packaging is reusable.
Online retailers must also be aware of and comply with other obligations that may affect them such as an obligation to accept return of or label sales packaging for contents containing hazardous materials or packaging that is incompatible with the system. A lack of clarity often remains here in recognising and dealing with sales packaging for contents containing hazardous materials or packaging that is incompatible with the system, which are excluded from participation in the system.
Violations of the GPA are punishable as an administrative offence by a fine of up to EUR 200,000 and a sales ban.
In addition, violations now entail the risk of a warning from a competitor or association that no longer wishes to acquiesce to a competitive advantage for companies that fail to comply with their system participation obligation. This was already highly relevant in practice in 2019.
Consequences for online retailers
In summary, online retailers need to remember:
- Legal responsibility for shipping packaging is always a possibility for online retailers; conversely, the manufacturer is always responsible for the packaging of goods sold by an online retailer. However, other requirements may apply, especially in white labelling situations or to imported goods.
- An online retailer that packages goods in shipping packaging is subject to the obligations found in the GPA as regards this packaging. This applies regardless of what platform is used for the purchase contract.
- If an online retailer uses a fulfilment centre or a drop-shipping provider, a distinction must always be made as to whether the shipper that packages the goods is acting on behalf of the online distributor selling the goods and whether the shipper is indicated on the shipping packaging as the packing company. If the latter is not the case, the online retailer itself is responsible. This must already be taken into consideration when negotiating and drafting contracts with the logistics providers.
- Online retailers domiciled in countries other than Germany that sell goods to private consumers in Germany are responsible not only for the shipping packaging but also for the sales packaging of the goods. One particular difficulty here is that the regulations requiring system participation and the corresponding registration are specifically German regulations. There are currently no Europewide standardisations or minimum standards. Despite possible language barriers, online retailers domiciled outside of Germany must comply with their registration and data reporting obligations themselves, i.e. in person. Service providers can only provide support. The GPA does not provide for comprehensive compliance with obligations by an agent as is permitted, for example, under the German Electrical and Electronic Device Act.
Despite the above guidelines, due to varying distribution structures, online retailers should always check their legal packaging obligations on a case-by-case basis or have them checked. Inquiries at the COPR and numerous unresolved interpretation issues related to the still-young GPA indicate that there is still a strong need for legal advice here.
Any questions? Please contact: Hendrik Schlutt and Kristin Kohser
Practice Group: Digital Business, Regulatory & Governmental Affairs and Commerce & Trade