TED Case Studies

          CASE NUMBER:          19 
          CASE MNEMONIC:      DANISH
          CASE NAME:          Denmark Bottle Recycling

A.        IDENTIFICATION

1.        The Issue

     Denmark implemented a new recycling system requirement in
1981 that limited the types of containers that could be used to
bottle beverages.  The requirement was necessary in order to
improve the efficiency and success rate of the new recycling
system.  While manufacturers in Denmark supported the legislation
because they had already begun to adapt their products to the new
requirements, manufacturers outside of Denmark, particularly
Germany, complained that the new requirements would unfairly
force them out of the Danish market.  After a period of
negotiations, the case was brought before the European Court of
Justice.  The Court found that the Danish law did not unjustly
discriminate between foreign and domestic manufacturers and was
thus affirmed as a legal requirement.

2.        Description

     Denmark's voluntary recycling system for beer and soft drink
containers had been in operation for decades and was initially
very successful.  The containers possessed a refund value and
were returned to the manufacturer to be recycled.  This system
permitted a high rate of return, it reduced the amount of waste,
and promoted the efficient use of raw materials.  However, in the
middle 1970s, Danish beer manufacturers began to use cans and
different shaped bottles, and the system began to disintegrate. 
Consumers could no longer return every container to any retailer. 
Instead, they were forced to return it to the place of purchase,
often more difficult, causing the return of rate to decrease.  To
ensure that the system was not destroyed, the government
implemented Order 297 on June 8, 1978.  This policy limited the
types of material used for beer and soft drink containers and
prohibited the use of metals and plastics. 

     On July 2, 1981, the government decided to implement a more
aggressive system that went further than recycling to establish
a system to reuse beer and soft drink containers (Order number
397). Article 1(2) of this legislation stated that manufacturers
could only use bottles marked in "returnable containers" that
would be collected and refilled for re-use.  

     A limited number of container types was crucial for the
success of the re-utilization system.  The government estimated
that only thirty different containers could enter the market. 
These could only be made of glass because technology did not make
the re-use of plastic or metal economically efficient. 
Furthermore, to ensure that the containers met these standards,
Article 2(2) ordered that the returnable containers must meet
formal approval of the National Agency for the Protection of the
Environment.  This Agency had the right to reject the
applications if the manufacturers did not re-use a large
percentage of their containers or if a bottle type of equal
capacity was already approved, available and suitable.      

     When the re-use legislation was introduced, the Danish
manufacturers supported it because it did not increase their
production costs.  However, this policy was viewed less kindly
outside of Denmark.  Although the Danish import market was small,
foreign suppliers, particularly German brewers, complained that
the cost of collecting and re-using containers would prohibit
foreign firms from entering their market.  Many EC countries
complained to the European Commission and forced Denmark to enter
into negotiations.  The Danish government chose not to
restructure their re-use legislation, but amended it to include
an exception clause.  On March 16, 1984, the government passed
Order number 95, allowing foreign companies to test the Danish
market by importing up to 3,000 hectoliters in non-approved
bottles per year. 

     The EC countries were still not satisfied, claiming Denmark
had implemented this legislation to protect the soft drink and
beer industries.  They stated that this legislation would be
valid only if it applied to all containers, including milk, wine,
vinegar table oil and spirit containers.  When negotiations
broke down, the Commission brought an action against Denmark
before the European Court of Justice.  

3.        Related Cases

     ONTARIO case
     PISCO case
     ITALYBAG case
     DUTCHWD case
     GERMBEER case

     Keyword Clusters         

     (1): Trade Product            = BEER
     (2): Bio-geography            = FOOD
     (3): Environmental Problem    = Waste Land [WASL]

4.        Draft Author:  Nina Joshi

B.        LEGAL Filters

5.        Discourse and Status:  DISagreement and COMPlete

     In 1981 the EC Court found that the Danish bottle
legislation did not distinguish between domestic or imported
goods and in the process did not discriminate against them.  The
law required the same approved bottle collection and reuse system
for every beer and soft drink whether foreign or domestic.  The
court also determined that the Danish legislation fulfilled a
mandatory requirement of EC law, and referred to the judgement of
January 7, 1985.   Here, the court found that the protection of
the environment was "one of the Communities essential
objectives".  Article 130 confirmed this position providing
that: "The protection measures....shall not prevent any Member
State from maintaining or introducing more stringent protection
measures compatible with this treaty."

     The court next determined if the Danish legislation was 
necessary and proportional. In other words, were all the
restriction for the deposit-and-return-system necessary to 
achieve Denmark's objective, and if so, did this system restrict
trade as little as possible?  The court found that the mandatory
collection and return system was an essential element to ensure
the re-use of containers.  Under the previous voluntary system
the return rate was relatively low.  On the other hand, the re-
use legislation was very effective.  Ninety-nine percent of the
approved bottles were returned and some of them were re-used up
to 30 times.  The Danish Government decided that the success and
the benefits of this environmental standards exceeded the costs
incurred by the foreign beer and soft drink companies.

     The court then determined if the approval system was
necessary and proportional.  Under the Danish legislation, the
National Agency for the Protection of the Environment could
refuse to approve any application, even if the manufacturer was
prepared to ensure that the containers were collected and re-
used.  In this case, the producer would have to purchase already
approved containers which would involve substantial costs, making
importation difficult.  Therefore, the court concluded that if a
foreign manufacturer could comply with the Danish re-use policy
by establishing its own system, the approval system was not
necessary and violated the EC principle of free trade. 

6.        Forum and Scope:  EURCOM and REGION

     Article 30 of the Treaty of Rome, as amended by the Single
European Act (SEA), stated that "quantitative restrictions on
imports and all measures having equivalent effect shall...be
prohibited between member states."  However, Article 36 of the
Treaty of Rome also stated that:
     "The provision of Articles 30 to 34 shall not preclude
     prohibitions or restrictions on imports, exports or
     goods in transit justified on grounds of public
     morality, public policy or public security; the
     protection of health and life of humans, animals
     plants...Such prohibitions or restrictions shall not,
     however, constitute a means of arbitrary discrimination
     or a disguised restriction on trade between Member
     States..."

     Due to the discrepancy between Articles 30 and 36, the court
examined European case law and other legislation. It determined
that the community must accept obstacles to free trade resulting
from the disparity of national laws: (1) if the national law did
not distinguish between domestic and imported products or (2) if
the order was necessary to fulfill a mandatory requirement
recognized by community law.

7.        Decision Breadth:  12

     With EC nations implementing their own environmental
protection policies, trade in the EC has become more restrictive.
This decrease could dramatically disrupt the trading
relationships, especially between the northern and the southern
EC countries.  Northern countries are more environmentally
conscious and implement more stringent environmental policies. 
If the industries in southern countries do not incorporate these
same policies, their products will not meet northern standards
and their goods will be banned. 

8.        Legal Standing:  TREATY

     This ruling pertains to The Treaty of Rome.

C.        GEOGRAPHIC Filters

9.        Geographic Locations

     a.   Geographic Domain : EUROPE
     b.   Geographic Site   : Northern Europe [NEUR]
     c.   Geographic Impact : Denmark [DENMK]

10.       Sub-National Factors:  NO

11.       Type of Habitat:  TEMPerate

D.        TRADE Filters

12.       Type of Measure: Regulatory Standard
          [REGSTD]

13.       Direct vs. Indirect Impacts:  INDirect

14.       Relation of Measure to Environmental Impact

     a.   Directly Related to Product   : Yes BEER
     b.   Indirectly Related to Product : Yes CONTainers
     c.   Not Related to Product        : No
     d.   Related to Process            : Yes Waste Land [WASL]

15.       Trade Product:  Beer/Soft Drink Containers [BEER]

16.       Economic Data

     The court's decision to allow Denmark to maintain its re-
collection and re-use system will only have a limited economic
effect on foreign beer and soft drink producers. Denmark has
always had a high on-license price, and therefore, Danish
companies have always controlled this market.  In fact, in 1991
United Brewers controlled 70 percent of the Danish beer market
and a large proportion of the soft drink market.  With the
establishment of the re-use legislation, foreign producers may be
reluctant to continue or begin exporting beer and soft drinks,
but the small size of the Danish market makes the loss only
minimal. 

17.       Degree of Competitive Impact: BAN

18.       Industry Sector:  FOOD

19.       Exporter and Importer:  GERMany and DENMK

E.        ENVIRONMENT Filters

20.       Environmental Problem Type:  Waste Land [WASL]

     The Danish government claims that the return rate under the
mandatory re-use legislation is 99 percent.  The impact can be
understood by looking at another case.  Here, one can compare two
similar programs implemented by the Blitz-Weinhard Brewing
Company located in Portland and the Rainier Brewing Company
located in Seattle.

     The Blitz-Weinhard Brewing Company has reused 28 million
bottles, saving enough landfill space to fill Portland's Memorial
Coliseum 20 feet deep and enough energy to serve 2,007 homes a
year.  The Rainier Brewing company has refilled 20 million
bottles which equals 16,000 cubic yards of landfill space and
power used annually by 1,434 homes.  If the 16,000 cubic yards
of bottles saved by Rainier are added to Blitz-Weinhard's 22,440
cubic yards, Memorial Coliseum would be filled to a depth of 35
feet.  In addition, the inspection, sterilization and refilling
costs save 84 percent of the energy required to make new bottles.

     Using these statistics, one can infer that the Danish re-use
legislation is even more successful than the Blitz-Weinhard
program.  With a 99 percent return rate, Denmark probably exceeds
the 28 million bottles collected by Weinhard.  In addition,
Denmark re-uses it's bottles up to 30 times as opposed to the
Weinhard program which reuses them approximately ten times.  

     The re-use legislation was more environmentally sound than
the previous voluntary recycling program for a number of reasons. 
First, the return rate under this system was much lower.  Second,
re-using bottles is more environmentally beneficial than
recycling. With recycling, manufacturers can only use a certain
percentage of old glass -- known as cullet -- in the bottle
making process.  As a result, the surplus of cullet has piled
up, decreasing the price and the number of companies that are
willing to recycle. 

21.       Name, Type and Diversity of Species

     Name:          NA
     Type:          NA
     Diversity:     335 higher plants per 10,000 km/sq (Canada)

22.       Resource Impact and Effect:  LOW and REGULatory

     Denmark's and Europe's sites for landfill are rapidly being
filled, but the problem is not yet critical.

23.       Urgency of Problem and Lifetime:  LOW and NA

     As a result of the court's affirmative decision, other EC
countries that were previously hesitant to introduce
environmental legislation are now implementing these regulations. 
First, the German parliament implemented a mandatory deposit
system on plastic bottles in 1988.  In 1991, the Parliament
decided to expand this legislation to include a packaging
ordinance (see GERMPACK and ITALYBAG cases).  This is the most
ambitious environmental legislation ever implemented and requires
all retailers to take back packaging from customers,
manufacturers to retrieve it from retailers, and packaging
companies to reclaim it from manufacturers by 1993.  Once the
system is in place, package companies will have to collect 80
percent of all packaging, and of that percentage, 90 percent of
glass, tin and aluminum and 80 percent of other packaging must be
separated and recycled.  Germany is drafting legislation to
expand its recycling program to include electrical appliances and
cars (see GERMAUTO case).

     Other countries are also beginning to implement their own
environmental legislation.  Italy has set recycling targets of 50
percent for glass and metal drink containers and 40 percent for
plastic ones by 1993. In addition, Austria is setting a target
for refilling or recycling 90 percent of its drinking containers
by 1992.  Germany has adopted many of the Danish laws.  American
brewers now complain about being discriminated against in Germany
because of their use of cans and the United States has retaliated
against Canada for a tax on aluminum beer cans (see ONTARIO
case).

24.       Substitutes:  RECYCling

     The issue pertains to the recycling of certain bottles and
their re-useability.

VI.       OTHER Factors

25.       Culture:  NO

26.       Trans-Border:  NO

     This particular case does not have a trans-border element,
but the filling of landfill sites is a problem throughout Europe.

27.       Rights:  NO

28.       Relevant Literature

Cairncross, Frances.  "How Europe's Companies Reposition to 
     Recycle."  Harvard Business Review (March/April 1992):
     34-44. 
"Danes Rush to German Border, Stock up with Cheap Beer."  
     The Reuter Library Report 18 (March 1991): 33-34.
Doyle, Julian and Susan May. "Europe Readies Environmental 
     Standards: Includes Related Management Strategy."
     Information Access Company: Financial Executive
     Institute (September 1991): 53-61. 
Environmental Defense Fund. "EC Trade Dispute Over Danish Bottle
     Regulation."  n.p., n.d.: 1-6.
"Free Movement: Commission Opens Infringement Proceedings Over 
     German Plastic Bottle Deposit Scheme." European Report
     1578 (April 12, 1990): 3-5.
Gardner, David. "Green Germany Drags Brussels into Environmental
     Arena." Financial Times (January 24, 1992).
Hrdina-Dubsky, Dawn L.  "Regional Tactics the Key to European
     Beer Industry."  Food Engineering (October 1990): 19-
     24. 
The London Business School.  "The Danish Bottles Case.  "London:
     n.p. (1991): 1-16.
"Refill of Landfill?  Blitz-Weinhard's Bottle Refilling Saves
     22,400 Cubic Yards, Enough Energy to Serve 2,007
     Homes." PR Newswire (April 16, 1991): 28-30.
Rotterdam, John Hunt. "World Business Community Fears `Green' 
     Dumping." The Financial Times (April 12, 1991): 5-7.

                          References