What Scottish legal challenge means for wider DRS rollout

convenience store owner Abdul Majid – whose legal challenge is threatening to scupper CSL’s pledge – had a different take: “I want to participate. I want to save the planet, but I don’t want to go out of business doing it.”

So how could the challenge affect the rollout of DRS in Scotland? And might it extend across the rest of the UK, too?

Last week Majid’s 2,500 sq ft store in Bellshill, North Lanarkshire became the unlikely epicentre of a battle that could emulate the challenge to minimum unit pricing, which was delayed for years by industry legal challenges.

Majid is raising judicial review proceedings in the Court of Session against scheme administrator Circularity Scotland. He is backed by the Scottish Grocers’ Federation, which The Grocer exclusively revealed in March was planning legal action.

Majid tells The Grocer the handling fees for smaller retailers announced by Circularity Scotland – of 2.69p per container for manual takebacks or, if using reverse vending machines, 3.55p for the first 8,000 containers received and 1.35p for each additional container – would risk crippling his business.

“I cannot get it to work,” he says. “I need to take that business model to a bank and say the money that I will be refunded will pay for the machine. If I can’t get that model to work, on what basis will the bank lend to me?”

Majid and the SGF claim Circularity Scotland’s figures – based on a PwC review of estimated retail costs and charges of 46 other DRS schemes already operating in other countries – massively underplay the cost of installing, maintaining, and cleaning the machines.

“We reckon it’s going to take at least an hour per day in terms of cleaning. That’s just cleaning the machines and dealing with spillages,” he says.

“The bigger you are the more labour-intensive it is. I estimate I’m going to lose just over £1,000 per week.

“I want them to justify how they can make out that is cost-neutral, as has been promised. And that’s why I’m going to court.”

SGF CEO Pete Cheema says the handling fees are based on “pie in sky figures”.

“Lorna Slater [Scottish Green minister] has stood at parliament and said the scheme should be cost-neutral for retailers,” he says. “The first minister has said the same.

“It’s not cost-neutral. We were the ones who provided the figures to enable Circularity Scotland to work this out. They employed Pricewaterhouse Coopers, who charged CSL £600,000 to do that work.

“Then they turned round to us and said they would not provide the calculations.

“They cannot be so arrogant that they say here is a figure, take it or leave it.

“Are CSL deliberately just trying to put the convenience sector out of the frame so it’s just big retailers?”

‘Crazy’ fees

Yet other sources claim the SGF has been demanding “crazy” handling fees for its members, which are unrealistic given the huge cost pressures facing producers.

“At one point they were asking for a handling fee of 18p per item, which is frankly ludicrous,” says one source. “It’s true some of the small retailers do have challenges with space and costs like cleaning. But it’s not an 18p per item challenge.”

Asked by The Grocer, CSL refused to elaborate on the calculation of costs to retailers, saying they were based on “confidential discussions”.

But it stressed they considered data from schemes across the world, including Norway, Finland, Denmark, Lithuania, Estonia and Croatia, comparable in size and scope to Scotland.

It said the manual handling fees proposed for Scotland were “considerably higher” than any of those schemes, while the RVM handling fee was also higher than comparative schemes, the highest being 2.8p per container.

“We’ve spent a huge amount of time over the past six months working out what the fee should be and when we set the company up – and the SGF was part of that setting up process. Everyone agreed to asking external experts independently to carry out the calculation,” says director Donald McCalman.

“We’ve worked with retailers to come up with a fair and reasonable fee.”

Despite two delays already to the scheme, originally due to come into force in 2021, he claims there is now a “groundswell” of momentum among retailers.

Legal experts believe it is unlikely the legal challenge to DRS could prove as much of a barrier to its rollout as the huge delays caused when the Scotch Whisky Association took on minimum unit pricing.

However, Laura Thornton, associate director at law firm Osborne Clarke, says there are legitimate questions over how thoroughly the issue of retailer fees have been considered.

“It looks like there is at least a possibility this will get through the initial phase of a judicial review, which is getting permission for the case to be heard.

“The timing, if it does get through, means a substantive hearing should be held within 12 weeks, so we are looking at three months away.”

If a second hearing finds in favour of Majid, CSL could be ordered to re-run some or all of its consultation on the rollout, which would put the August timeline at “serious risk”, she adds. With the UK government still to publish details of its finalised plans for DRS, all eyes will be on what happens in the Scottish courts.

Joined-up approach

GS1 CEO Anne Godfrey says the dispute is yet more reason why it would make sense to delay the rollout of DRS in Scotland and for the four nations to work together on a joined-up approach. “It was always inevitable there would be a challenge to the Scottish system,” she says. “We are unsure how this review will go but we continue to ask the Scottish government to slow down. Recent research shows businesses aren’t ready and consumers aren’t aware.

“If industry is not ready and consumers don’t know about it, how the scheme can possibly launch in August and be successful I just don’t know.”

Meanwhile, as The Grocer revealed this week, the legal challenge is not the only question over the future of DRS in Scotland or across the UK.

Sources claim Green minister Lorna Slater is considering allowing thousands of smaller retailers to be exempt from DRS.That suggests a DRS system of some sort will go ahead in August. But who takes part and who is picking up the hefty bill is still anybody’s guess.