IT system house faces distribution ban, profit skimming and fine for failure to comply with system participation obligation: Packaging register publishes report

In a case report released on 21 September 2020, the German Foundation Central Agency Packaging Register (ZSVR) describes the case involving an IT system house. Evidently a large group of affiliated IT trading companies with their own direct (IT system house) sales organisation has failed to meet its product responsibility for packaging and has been violating its obligations under packaging law for years now. The ZSVR has notified the competent state enforcement authority that there are concrete indications of regulatory offences having been committed. Possible consequence of such administrative offences include the imposition of fines, profit skimming, as well as monitoring the obligation to participate in the system retroactively for past periods. To the extent that registration and system participation per company is not yet fully in place, a distribution ban on packaging subject to system participation likewise applies by law.

In a case report released on 21 September 2020, the German Foundation Central Agency Packaging Register (ZSVR) describes the case involving an IT system house.

Evidently a large group of affiliated IT trading companies with their own direct (IT system house) sales organisation has failed to meet its product responsibility for packaging and has been violating its obligations under packaging law for years now. The companies are manufacturers of a substantial volume of packaging subject to mandatory system participation. They fill their packaging items with goods and place them on the market. The companies in question thus are manufacturers/first distributors under the Packaging Act for the relevant sales, repackaging and, in particular, packaging for shipment. By failing to participate in the system, the companies have gained unjustified competitive advantages over competitors who have behaved in conformity with the law.

The group of companies has evidently been practising this for years despite having its own legal department, compliance officer and, contrary to the appearance of product responsibility being created by publishing a number of sustainability reports. Sales-, repackaging and shipment packaging of information technology equipment (e.g. screens, keyboards, mouse-like pointing devices, printers, notebook computers, desktop PCs, servers, storage units such as hard disks, memory cards, USB sticks) is predominantly collected by far from private end consumers comparable sources (such as administrations, public authorities and offices of large commercial enterprises) as contemplated by Section 3 (11) of the German Packaging Act. Accordingly, they are almost without exception obliged to participate in the system provided under the Packaging Act.

As manufacturers within the meaning of the Packaging Act, the companies only registered in the LUCID packaging register after the ZSVR notified them of their unlawful omission. In response to the notice by the ZSVR, the companies have subsequently registered in the LUCID packaging register. However, manufacturers of packaging subject to mandatory system participation must register before placing such articles on the market; cf. Section 9 of the Packaging Act.

For years, the companies have not participated in one or more systems for their packaging quantities, thus violating Sections 6 respectively 7 of the Packaging Act. There are concrete indications of administrative offences having been committed. These can be punished for each offence with a fine of up to 100,000 euros under the Packaging Ordinance or 200,000 euros under the Packaging Act.

Failing system participation regarding the quantities of packaging, and since 2019 also failing registration, the companies should not have placed their packaging on the market; cf. Section 6 (1), sentence 3 of the Packaging Ordinance as well as Section 7 (1), sentence 4 and Section 9 (5) sentence 1 of the Packaging Act. There are concrete indications of administrative offences having been committed. These may be punished for each offence with a fine of up to 100,000 euros.

The ZSVR has notified the competent state enforcement authority that there are concrete indications of regulatory offences having been committed. Possible consequence of such administrative offences provide for the imposition of fines including profit skimming as well as the monitoring of mandatory system participation for past periods. To the extent that registration and system participation per company is not yet fully in place, a distribution ban on packaging subject to system participation likewise applies by law. The ZVSR will examine whether the registered companies comply with their further obligations regarding system participation and data reporting and, if applicable, the depositing of declarations of completeness. The ZSVR or the competent federal state authority may also demand at any time that a declaration of completeness be deposited in the LUCID packaging register, even if the values fall below the defined thresholds.

The full report is available for download here (in German language only).

If you have any questions on the Packaging Act as well as mandatory system participation, please do not hesitate to contact the take-e-way consultants by calling +49/40/750687-0 or sending an e-mail to beratung@take-e-way.de.

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