A Deposit Return Scheme for Scotland: Final Business Regulatory Impact Assessment

6. Consumer Assessment

158. It is important to consider the impact of the introduction of a DRS on the consumer, taking into account consumers of specific industries, firm types and businesses of different sizes. As per guidance, consumer impact is assessed against the questions.

Q1. Does the policy affect the quality, availability or price of any goods or services in a market?

159. The policy will apply a 20p deposit on eligible drinks containers. This deposit will be reimbursed once the consumer returns the container to a return point. The impact of this deposit is assessed in the DRS Fairer Scotland Impact Assessment.

160. A number of businesses throughout the supply chain have highlighted the additional production, warehousing and distribution costs that would arise as a result of the introduction of a DRS in Scotland in advance of the rest of the UK. These costs are linked to the introduction of distinct Scottish labelling as a fraud-prevention measure for the scheme.

161. Producers in particular have indicated that these increased costs could influence the number of product ranges supplied to the Scottish market, with lower-volume products likely to be most at risk. The scheme design seeks to mitigate this risk by introducing a degree of flexibility around the fraud- prevention measures to be adopted by producers. Distinct Scottish labelling on products is not mandated and it will be left to producers (working with the scheme administrator) to identify the most effective and efficient combination of fraud-prevention measures for the purposes of the scheme.

162. In the Full BRIA a commitment was made to consider any potential pass- through of increased costs on producers to consumers in the Final BRIA. As outlined at paragraph 74, it is the expectation that DRS will be funded by revenue generated from the sale of materials, with unredeemed deposits being fed back into the system, and a balancing payment made by producers to make up any shortfall. The producer fee (or fees) will likely be set by a single scheme administrator and will be charged to producers on a per-container basis. Zero Waste Scotland has given detailed consideration to the extent to which such fees are likely to be passed on the consumers. While evidence gathered from other international schemes suggests that a proportion of these costs is generally passed on, it is not clear how the Scottish market is likely to respond to the scheme's introduction. The competitive nature of that market also suggests there is significant scope for a divergence in approach amongst producers (see Annex E for more details).

Q2. Does the policy affect the essential services market, such as energy or water?

163. No.

Q3. Does the policy involve storage or increased use of consumer data?

164. The methods of payment for the returned deposit to consumers are yet to be confirmed. However one option is to return the deposit via an online payment system, such as PayPal. This would require the consumer to register their personal details, resulting in the storage of consumer data either via a third-party platform or via a directly managed system. In this instance, it would be the responsibility of the scheme administrator to ensure that consumer data were stored appropriately and securely as per regulations.

Q4. Does the policy increase opportunities for unscrupulous suppliers to target consumers?

165. Unscrupulous suppliers could place drinks on the Scottish marketplace without paying a deposit into the scheme. If consumers paid a deposit, they would lose this when the container was not accepted by automated or manual return points.

166. The Regulations to establish the scheme provide for wide-ranging criminal penalties (on summary conviction a fine not exceeding the statutory maximum of £10,000, or on indictment and conviction an unlimited fine) where it is established that a producer has failed to comply with their legal obligations. They also provide SEPA with extensive examination and investigative powers, the ability to access premises and to require the provision of documents and records to support enforcement activity. These tools have been used effectively by SEPA in other contexts.

167. A scheme administered centrally (i.e. by a single scheme administrator), which requires producers to report the number of containers they place on the market and monitors the number of deposits reclaimed, will be able to determine where deposit returns are higher than the number of items sold. This will be a good indicator that fraud is occurring and will allow targeted action to be taken.

168. It is then open to industry to identify what further measures should be taken to reduce the potential for fraud to occur. This will include consideration being given to the merits of adopting distinct labelling as a means of identifying those drinks containers which have attracted a deposit. This would serve as a strong deterrent to fraud but would involve a level of cost for industry. Labelling is a common feature of other European schemes although it should be noted that this approach is often one of a suite of measures adopted by producers.

169. Following passage of the Regulations industry has raised the possibility of a 'grey market' operator sourcing products not intended for the Scottish market (and therefore not paying the deposit) and selling them to Scottish retailers, fraudulently charging the deposit. In cases where a distinct label is not adopted, this could pose a risk to the finances of the scheme as well as undercutting honest wholesalers. To address this risk we are amending the Regulations to require any person who sells (to a person other than a consumer) an article not intended for sale in Scotland to communicate to the purchaser that it is not a scheme article and cannot be redeemed for a deposit. This will allow SEPA as regulator for DRS to investigate and take appropriate action.

Q5. Does the policy impact the information available to consumers on either goods or services, or their rights in relation to these?

170. No.

Q6. Does the policy affect routes for consumers to seek advice or raise complaints on consumer issues?

171. No.