January 31, 2005

Consumers' group files class action suit over use of beverage container deposits

The Consumers' Association of Canada (CAC) has filed a class action lawsuit in the British Columbia Supreme Court against the beverage industry, retailers and Encorp Pacific, the authorized steward under BC's Beverage Container Stewardship Program regulation. The central claim of the lawsuit is the illegal use of consumer deposits collected under the regulation. It alleges that Encorp Pacific committed unlawful acts and breach of trust with regard to the use of unredeemed deposits and recycling fees on beverage containers.

"The BC beverage container regulation is very clear," said CAC president Bruce Cran. "Deposits collected from consumers can only be used for one purpose--paying refunds to consumers when containers are returned. Since 1998 the industry has collected and used over $70 million in consumer deposits for purposes that are not authorized under the regulation."

For example, the CAC claims that consumer deposits were used to pay damages awarded as a result of a lawsuit against the beverage container agency for improper conduct in the operation of its stewardship plan.

Not only were consumer deposits used for purposes not authorized by the regulation, the industry also imposed an additional unauthorized recycling fee on top of the deposit, says the CAC, adding that since 1999, the beverage industry has collected about $60 million from its Container Recycling Fee without having any legislative authority for this levy. "Simply stated, it's an illegal fee," said Mr. Cran.

For its part, Encorp maintains that its use of unredeemed deposits and fees charged to the brand owners is lawful, reasonable and transparent, and was approved by the BC government when it accepted Encorp's Stewardship Plan. The corporation has been publishing independently audited financial statements of its activities since 2000. These annual reports, detailing how the Encorp system is financed and operated, are publicly available on its Web site, www.encorp.ca.

As of 2003 (the most recent figures available) just over half (54%) of the BC system's revenues were derived from the sale of collected materials (which can vary widely, depending on the material) and unredeemed deposits. Revenues from service provider contracts made up 29% of the total, with container recycling fees (CRFs) accounting for only 17%. CRFs are levied on specific container types when revenues from material sale and unredeemed deposits are insufficient to cover the costs of recovering and recycling that particular container type.

Encorp Pacific (Canada) is a federally incorporated, not-for-profit, product stewardship corporation, based in Burnaby. As the designated agency responsible for implementing and managing a stewardship plan for used beverage containers covered by the provincial recycling regulation, Encorp contracts with a network of independently-owned depot operators who, in return for an exclusive contract, collect containers on its behalf.

More information is available from Malcolm Harvey at Encorp Pacific, 1-800-330-9767.

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