B-199375,L/M JUL 28, 1980

B-199375,L/M: Jul 28, 1980

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WE ARE PROVIDING COMMENTS ON H.R. 7128. THERE ARE TWO GENERAL COMMENTS WE WISH TO MAKE AND TWO ANCILLARY POINTS. MONITORING THE BILL'S EFFECTS THE GENERAL ACCOUNTING OFFICE IS IN AGREEMENT WITH THE CONCEPT OF PERIODIC MONITORING OF THE EFFECTS OF FEDERAL GOVERNMENT PROGRAMS AND ACTIONS. WE BELIEVE THAT THIS TYPE OF REVIEW IS AN INTEGRAL PART OF EFFECTIVE GOVERNMENT. THE CONGRESS CAN BE INFORMED OF THE INTENDED AND UNINTENDED EFFECTS OF THE LAW THAT ARE OCCURRING. WE HAVE NOT DISCUSSED THE PROVISIONS OF H.R. 7128 WITH EPA OFFICIALS. WE ALSO FOUND THAT INDUSTRY COSTS WILL INCREASE IN SOME AREAS AND DECREASE IN OTHERS. COMPARING THE BENEFITS JUST FOR THE SOFT DRINK INDUSTRY TO THE COSTS IS DIFFICULT WITHOUT ADDITIONAL ANALYSIS.

B-199375,L/M JUL 28, 1980

PRECIS-UNAVAILABLE

HARLEY O. STAGGERS, HOUSE OF REPRESENTATIVES:

AS YOU REQUESTED ON MAY 6, 1980, WE ARE PROVIDING COMMENTS ON H.R. 7128. THERE ARE TWO GENERAL COMMENTS WE WISH TO MAKE AND TWO ANCILLARY POINTS. THE FIRST DEALS WITH SECTION 3.(A), WHICH REQUIRES THE GENERAL ACCOUNTING OFFICE (GAO) TO MONITOR THE EFFECTS OF THE BILL ON COMPETITION, RESOURCE RECOVERY, AND THE U. S. ECONOMY. THE SECOND DEALS WITH THE REQUIREMENT IN SECTION 2.(A)(3), THAT SOFT DRINK FRANCHISES SELL THEIR PACKAGED BEVERAGES IN CONTAINERS WITH REFUNDS IN ORDER TO MAINTAIN THEIR EXCLUSIVE GEOGRAPHICAL FRANCHISE.

MONITORING THE BILL'S EFFECTS

THE GENERAL ACCOUNTING OFFICE IS IN AGREEMENT WITH THE CONCEPT OF PERIODIC MONITORING OF THE EFFECTS OF FEDERAL GOVERNMENT PROGRAMS AND ACTIONS. WE BELIEVE THAT THIS TYPE OF REVIEW IS AN INTEGRAL PART OF EFFECTIVE GOVERNMENT. WITH REVIEW, THE CONGRESS CAN BE INFORMED OF THE INTENDED AND UNINTENDED EFFECTS OF THE LAW THAT ARE OCCURRING. H.R. 7128 REQUIRES GAO TO MONITOR THE EFFECTS OF THE BILL. WE WOULD PREFER, HOWEVER, TO BE GIVEN THE LATITUDE TO REVIEW PROGRAM EFFECTS AS A PART OF THE CONGRESSIONAL OVERSIGHT PROCESS OR AS A PART OF GAO'S ONGOING EVALUATION EFFORTS.

WE SUGGEST THAT THE MONITORING FUNCTION ENVISIONED FOR THIS PROGRAM BE ASSIGNED TO THE U. S. ENVIRONMENTAL PROTECTION AGENCY (EPA). THAT AGENCY HAS BEEN INVOLVED IN RESOURCE RECOVERY ISSUES FOR MANY YEARS. EPA HAS EVALUATED THE DEPARTMENT OF DEFENSE'S REFUNDABLE BEVERAGE CONTAINER EXPERIMENT AS WELL AS ANALYZED THE BEVERAGE-CONTAINER-DEPOSIT LAW ISSUE IN GENERAL. WE HAVE NOT DISCUSSED THE PROVISIONS OF H.R. 7128 WITH EPA OFFICIALS; HOWEVER, EPA DOES APPEAR TO BE MOST SUITED FOR THE MONITORING FUNCTIONS.

REFUNDABLE CONTAINERS AND ANTI-TRUST EXEMPTION

THERE HAS BEEN CONGRESSIONAL DEBATE SINCE 1970 CONCERNING LEGISLATION WHICH WOULD REQUIRE THAT ALL BEER AND SOFT DRINK CONTAINERS BEAR A REFUNDABLE DEPOSIT. GAO PUBLISHED A REPORT FN1 WHICH ESTIMATED THE NATIONAL EFFECTS OF SUCH A LAW. WE FOUND THE LAW'S EXPECTED BENEFITS TO BE LESS LITTER AND SOLID WASTE PRODUCTION AND LESS ENERGY AND RAW MATERIALS USAGE. WE ALSO FOUND THAT INDUSTRY COSTS WILL INCREASE IN SOME AREAS AND DECREASE IN OTHERS.

THE PRACTICAL EFFECT OF REQUIRING FRANCHISES TO MARKET THEIR PACKAGED BEVERAGES IN CONTAINERS BEARING A REFUND VALUE WOULD BE TO BRING THE SOFT DRINK INDUSTRY UNDER A MANDATORY DEPOSIT SYSTEM. COMPARING THE BENEFITS JUST FOR THE SOFT DRINK INDUSTRY TO THE COSTS IS DIFFICULT WITHOUT ADDITIONAL ANALYSIS. IN OUR 1977 REPORT (A COPY IS ENCLOSED), WE DID NOT SEPARATE THE ENVIRONMENTAL AND NATURAL RESOURCE BENEFITS ACCORDING TO BEER AND SOFT DRINKS. THERE WOULD BE BEVERAGE CONTAINER LITTER AND SOLID WASTE REDUCTIONS BECAUSE OF REFUNDS ON ALL SOFT DRINKS, AS WELL AS ENERGY AND RAW MATERIAL SAVINGS. THE POTENTIAL FOR SUCH BENEFITS IS NOT AS HIGH IN THE BEER INDUSTRY BECAUSE ABOUT 35 PERCENT OF THE SOFT DRINK VOLUME SOLD IN CONTAINERS IS ALREADY IN REFILLABLE CONTAINERS, COMPARED TO 10 PERCENT FOR THE BEER INDUSTRY. THIS ALSO MEANS THAT CHANGEOVER COSTS WOULD BE LESS. (SEE CHAPTER 4 OF REFERENCED GAO REPORT.)

ANCILLARY POINTS

THE FEDERAL TRADE COMMISSION'S RULING THAT TERRITORIAL FRANCHISES BE INVALIDATED TO RESTORE COMPETITION IN THE SOFT DRINK INDUSTRY WOULD HAVE SEVERAL EFFECTS WHICH ARE GERMANE TO THE REQUIREMENT IN H.R. 7128 THAT THE SOFT DRINK CONTAINERS ALL BE REFUNDABLE. THE FIRST IS THAT IF THE SOFT DRINK FRANCHISE LOSES TERRITORIAL EXCLUSIVITY, THERE IS A GOOD CHANCE THAT CONSOLIDATION WOULD OCCUR AMONG THE 2,000 SOFT DRINK BOTTLING PLANTS. WITH CENTRALIZATION AND CONSOLIDATION WOULD PROBABLY COME A MARKED DECREASE IN THE SHARE OF REFILLABLE SOFT DRINK CONTAINERS.

THIS REDUCED REFILLABLE SHARE WOULD PROBABLY INCREASE SOFT DRINK CONTAINER LITTER AND POST-CONSUMER SOLID WASTE, AS WELL AS INCREASE ENERGY AND RAW MATERIAL USAGE FOR THE SOFT DRINK SYSTEM.

A SECOND POINT IS THAT IF A BILL, SUCH AS H.R. 7128, SUCCEEDS IN EFFECTIVELY BRINGING THE SOFT DRINK INDUSTRY UNDER A BEVERAGE CONTAINER REFUND LAW, THERE COULD BE CONTINUED PRESSURE TO ENACT A MANDATORY REFUND (DEPOSIT) LAW FOR THE BEER INDUSTRY. THE BEER INDUSTRY AND THE SOFT DRINK INDUSTRY ARE USUALLY PAIRED IN THE LEGISLATION SPECIFICALLY TARGETED AT THE BEVERAGE CONTAINER ISSUE.

IF YOU WOULD LIKE ANY FURTHER ELABORATION ON THESE POINTS, WE WOULD BE HAPPY TO DISCUSS THEM WITH YOU. ALSO, I AM SENDING A COPY OF THIS LETTER TO THE CHAIRMAN OF THE SUBCOMMITTEE ON CONSUMER PROTECTION AND FINANCE.

FN1 "POTENTIAL EFFECTS OF A MANDATORY DEPOSIT ON BEVERAGE CONTAINERS" (PAD-78-19, DEC. 7, 1977).