The Northern Territory's cash for containers recycling scheme runs counter to federal law by restricting drink sales, counsel for three beverage companies have told the Federal Court.
The companies oppose the scheme which involves a 10 cent deposit on drink purchases, refundable when the container is returned to a designated recycling agent.
Bret Walker, for the for the three drinks giants, told the court on Tuesday the scheme ran counter to the national Mutual Recognition Scheme governing the sale of goods between states and territories.
He said the scheme covered the packaging and labelling of goods and this was relevant to the need to specially label cans and bottles in the NT with a refund message.
Mr Walker said the Mutual Recognition Scheme aimed to avoid state or territory government laws that would "prevent or restrict the sale of goods" from another state or territory.
"There's a case that there's a prohibition, or a conditional prohibition ... it's a restriction of the sale of goods in the territory," he said.
Coca-Cola had to increase its drink prices in the territory when the scheme was introduced a year ago, and has said prices would be dropped if it won the court case.
The NT's Solicitor-General, Michael Grant QC, told the court the territory's scheme did not seek to prevent or restrict the sale of goods but only to limit environmental pollution and waste.
"It's a law regulating the sale of beverages in only one particular aspect ... concerned not with whether beverages can be sold but how they can be sold."
Mr Grant said the scheme did not impose any prohibition on the sale of beverages.
He said an aim of the Mutual Recognition Scheme was to ensure local and imported goods were treated equally within states and territories and that was the case in the NT's recycling scheme.
The hearing before Justice John Griffiths continues.