Online marketplaces such as Amazon and eBay have changed the face of retail: bringing multiple buyers and sellers together on easy-to-use platforms. But should such platforms, which do not have extended producer responsibility (EPR) obligations if they are acting as a portal for other sellers, ensure that their sellers are compliant?
Concerns have been raised that many such online sellers, particularly those from abroad selling into the UK, are ‘free-riding’ by not paying towards the treatment and disposal of goods they place on the market, as legally required.
This means that compliant businesses are shouldering all the cost. It also means that the number of products placed on the market is under-estimated and the associated recycling rates are over-estimated. Such sellers from abroad often have no physical or legal entity in the UK, and it is not easy or worthwhile for UK enforcement agencies to pursue them because they have no jurisdiction overseas.
The Organisation for Economic Co-operation and Development (OECD) recently commissioned a report into the issue. It focused on electrical and electronic equipment (EEE) sold online but recognised the impact on packaging and batteries as well.
With no hard data available, a ‘speculative’ estimate in the report was that 460,000-920,000 tonnes of EEE put on the market was non-compliant and effectively unrecognised.
Mark Hilton, the report’s author from consultancy Eunomia, said a key focus was on large-scale multi-seller platforms.
“When these guys are digital experts in the way they do business, how difficult is it to check the producer responsibility registrations of e-sellers?”
“The platforms are neither importers nor sellers; they establish themselves as just fulfilment houses,” he said. ‘They see themselves as being the landlords of the building, if you like, not the actual retailer, which strictly speaking is true.
“But, clearly, you could argue that they should have a responsibility to at least make sure the sellers that use their platforms are made fully aware of their EPR obligations – and, if they don’t meet those obligations, should not be allowed to sell from those platforms.”
Nigel Harvey, chief executive of Recolight, a UK waste electrical and electronic equipment (WEEE) compliance scheme for the lighting industry, has asked Amazon to block sellers that are not complying with the WEEE regulations. “The huge growth of product sales through online marketplaces that avoids compliance with WEEE and other EPR regimes must be addressed,” he said.
Recolight and EucoLight, the voice of European WEEE compliance schemes for lighting, have welcomed the OECD report and its recognition of the issue. Online WEEE non-compliance particularly affects small devices such as LED lamps and therefore Recolight members. The report has set out a long list of suggestions for dealing with the issue.
Key Suggested Actions
To raise awareness
- E-commerce codes of practice; display producer responsibility organisation (PRO) registration details, logo showing EPR compliance.
- Multi-seller platforms inform sellers proactively of EPR, remove those with no PRO registration.
- PROs to do awareness raising overseas.
- Link EPR registration with other regulatory measures such as VAT.
- Explore blockchain technologies to facilitate compliance.
- Smart contracts with partially or fully self-executing clauses.
To strengthen enforcement
- Simple mechanism to report suspected free-riders.
- Co-ordinate enforcement actions at national/supra-national levels.
- Customs, tax and trading standards officials to work with environmental authorities.
- Additional enforcement powers to prevent illegal online selling.
- Simplification and harmonisation of EPR regulation.
- Legal requirement on multi-seller platforms to notify EEE sellers of EPR registration; exclude sellers that do not conform.
- Define multi-seller platforms with a fulfilment house as a ‘producer’.
Harvey, who is also EucoLight vice-president, said: “There is an urgent need for regulatory change. The VAT system has been amended to make online fulfilment houses jointly liable for VAT payments for any product they hold in stock in the UK. A similar approach is now needed for WEEE.”
While there is likely to be some deliberate avoidance, for the majority of overseas sellers it is thought that they are simply not aware of the regulations. As Hilton commented: “If you are a small manufacturer in China making LED lamps that you sell on a platform such as Amazon or eBay, how are you going to know even about the existence of WEEE EPR regulation, let alone specific obligations across 28 EU member states?”
MRW went through the process of setting up a business selling account on eBay and Amazon to see if EPR compliance was mentioned. eBay stated that sellers were “responsible for complying with all laws and regulations applicable to international sales.”
You are a producer of EEE in the UK if you:
- Manufacture and sell EEE under your own brand in the UK.
- Resell equipment made by someone else under your own brand (if the maker’s brand appears on the equipment, it is the producer).
- Import EEE on a commercial basis into the UK.
- Are established outside the UK and supply EEE directly to the UK market by distance selling (for example online, mail order, by phone).
Amazon stated: “We encourage you to familiarise yourself with all applicable local laws including product compliance.” It mentions “environmental or health and safety requirements (eg REACH, CLP, WEEE, RoHS, batteries and packaging)” and links to UK Government guidance.
Hilton said: “One level is for the platforms to make their e-sellers aware of the need to be compliant with the [local] law, and that these things need checking. Another level is checking whether those people are doing so. In a digital age, when these guys are digital experts in the way they do business, how difficult is it to check the producer responsibility registration of e-sellers?”
Tech UK has members including EEE producers, eBay, Amazon, big retailers and businesses that sell direct to consumers. Susanne Baker, its head of programme for environment and compliance, said the OECD report was “a good first step in articulating the problem with distance sellers and EPR”.
But she added: “More work is needed to substantiate some of the estimates in the report and understand what the problem actually is for the UK.”
She refers to the recent National Audit Office report which was critical of the limited enforcement activity around producer responsibility and free-riding for packaging: “We have similar concerns – we don’t have a sense of how much enforcement is actually being carried out by the Environment Agency (EA) for WEEE.”
Baker said that more clarity from the EA on how much work it does on free-riding and “whether it has sufficient resources to police the system” would be welcomed. “Work on free-riding needs to be in the round, not just focused on online,” she added.
The EA told MRW it had set up a national free-rider team to focus solely on the identification and investigation of potential free-riders. It has “a new and improved process for investigating free-riders across the batteries, packaging and WEEE regimes, with local and national teams working together to bring obligated producers into compliance”.
A spokesperson said: “The EA takes all free-riding seriously, irrespective of whether a business operates online or has a physical bricks and mortar presence. A risk-based approach is always taken when investigating free-riders to ensure that our activities and resources target those companies that have the potential to have the largest obligation or are in the greatest public interest to bring into compliance.”
Baker believes there needs to be a debate “on the tools that the regulators need” for the new retail environment. For example, should there be digital roadshows or advice to sellers in multiple languages? She believes that educating the sellers is key.
Defra has convened roundtables with the large-scale platforms to highlight the issue and ask what can be done to get overseas sellers into compliance. Baker said the platforms are now talking internally: “I think the preference is, first of all, to look at how we can work with the regulator to highlight to the companies their responsibilities, and try to work with the producers to get them to comply.”
Further down the line, solutions could include the platforms using smart contracts with sellers, which automatically build in compliance requirements.
Mark Burrows Smith, chief executive officer at WEEE compliance scheme Repic, said that “a combined approach confirming product safety, the correct application and payment of taxes, and the correct registration with producer compliance obligations would be ideal”, but acknowledged the complexity.
He added: “Different solutions are needed to address each outlet. However, the first step in tackling the issue, and most urgent one, would be for regulators to investigate the issue fully because initial results suggest it may be necessary to amend current WEEE regulations to ensure this activity is addressed.”