The Bundeskartellamt will examine in formal proceedings whether the contract system of “Der Grüne Punkt – Duales System Deutschland AG” (DSD, “The Green Dot”) is compatible with the Act Against Restraints of Competition (ARC).

With a total turnover of approx. 1.9 billion Euro in 2001 DSD is the sole nation-wide system for the take-back and disposal of sales packaging. DSD does not itself operate waste disposal services but for this purpose concludes service contracts with waste disposal firms.   DSD takes on the take-back and disposal obligations of manufacturers and dealers under the Packaging Ordinance against payment of a so-called license fee (contracts governing the use of the DSD trademark).

In spite of competition law concerns, the Bundeskartellamt has so far tolerated DSD’s contract systems within its discretion to take up a case. However, as part of the 6th amendment of the ARC the lawmaker introduced a new exemption into Section 7 of the ARC which relates expressly to cooperations for the purpose of meeting take-back and disposal obligations under the law on the protection of the environment. Accordingly, agreements and decisions which contribute to improving the taking back or disposal of goods, while allowing consumers a fair share of the resulting benefit, may be exempted from the prohibition under Section 1 of the ARC provided the improvement cannot be achieved otherwise by the participating undertakings and is of sufficient importance when compared with the restraint of competition connected with it, and the restraint of competition does not result in the creation or strengthening of a dominant position.

The President of the Bundeskartellamt, Ulf Böge, stated: “Permanent toleration of restraints of competition outside this legal provision should no longer be possible. DSD has meanwhile filed an application under Section 7 of the ARC. In view of the fact that new service contracts with terms of three years will be awarded in the middle of next year the Bundeskartellamt will continue its toleration practice until the end of 2006.”

Disposal firms will be faced with far-reaching investment decisions when DSD puts its service contracts out to tender.  An examination whether DSD’s contract system is compatible with competition law seems necessary at this point in order to give the companies a clear signal as to the framework conditions to be expected.

DSD’s contract system (DSD’s articles of associations, contracts between licensees and DSD governing the use of its trademark, service agreements between DSD and disposal companies) leads to an appreciable restriction of competition since it bundles the demand for disposal services by companies which are obligated under the Packaging Ordinance to take back and recyle sales packaging. It therefore as a rule violates the prohibition of competition-restraining agreements (Section 1 of the ARC), as far as the conditions for exemption under Section 7 of the ARC are not fulfilled.

Firstly, this bundling has resulted in DSD today being the dominant provider of a system for the take-back and disposal of waste which exempts companies from their individual obligations. Secondly, DSD has become the dominant purchaser of take-back and disposal services in relation to the disposal firms.

The liberalisation of the market for disposal services the EU Commission strives for has not been achieved. The possibilities for competition from self-management solutions and alternative dual systems are limited. The Bundeskartellamt thus had to initiate boycott proceedings against DSD at the end of this July. According to the latest stage of investigation, DSD and several associations have induced a boycott against alternative suppliers in order to protect DSD from competition.