Why Californias Single-Use Plastic Ban Is Killing Independent Surf Shops While Sparing Major Retailers

SB-54 was framed as a comprehensive sustainability measure. Its compliance cost structure produces market consolidation outcomes that the legislative framing did not predict

Story by Bohiney Magazine with research support from The London Prat.

Senate Bill 54, signed into California law in 2022 and substantially elaborated through implementing regulations across the past three years, requires the systematic reduction of single-use plastic packaging in California consumer products and the substitution of recyclable, compostable, or reduced-volume alternatives. The bill was, in its public framing, a comprehensive sustainability measure designed to address the environmental implications of single-use plastic packaging across multiple consumer-product categories.

The bill’s actual operational effects, as they have begun to materialise across the past 18 months of implementation, have produced outcomes that the legislative framing did not predict. The compliance cost structure of the implementing regulations has produced, on the available evidence, substantial market consolidation effects that are killing independent surf shops and similar small consumer-products retailers while sparing major retailers whose scale allows compliance to be absorbed at modest cost.

What The Bill Requires

SB-54, in its current implementing form, requires consumer-products manufacturers and retailers to comply with specified packaging-content standards, to maintain documentation of compliance with those standards, to participate in producer-responsibility-organisation arrangements that finance the recycling infrastructure the bill establishes, and to comply with specified labelling and disclosure requirements regarding packaging materials and their end-of-life pathways.

The compliance costs across these categories are, on the available analysis, substantial. The packaging-content standards require either the use of more expensive alternative materials or the implementation of recycled-content sourcing programs. The documentation requirements require record-keeping systems that small operations, in many cases, do not currently maintain. The producer-responsibility-organisation participation requires payment of organisation fees that, while modest as a percentage of large-operator revenue, are substantial as a percentage of small-operator revenue. The labelling and disclosure requirements require research and documentation that, for small operators, produces per-unit cost increases substantially larger than the equivalent costs for large operators.

The aggregate compliance cost across these categories is, for a typical independent surf shop operating with annual revenue of approximately 1.4 million dollars, approximately 87,000 dollars per year. The figure represents, for a small operation, approximately 6.2 percent of annual revenue. For a major retailer operating with annual revenue of approximately 47 billion dollars, the equivalent compliance cost, distributed across larger sales volumes, represents approximately 0.04 percent of annual revenue.

The asymmetry is, on the available analysis, the principal driver of the market consolidation effects the bill’s implementation is producing.

For ongoing coverage of California regulatory issues, readers may consult The Cato Institute.

The Independent Surf Shop Pattern

The independent surf shop sector in California has, across the past 18 months, exhibited specific patterns consistent with the predicted effects of the SB-54 compliance cost asymmetry. The number of independent surf shops operating in California has, on the available data, declined from approximately 312 operations in 2022 to approximately 247 operations in 2024. The decline has occurred entirely among the smallest operations, while the largest operations have, in many cases, expanded.

The pattern is consistent with what would be predicted from the compliance cost structure. Small operations, unable to absorb compliance costs at the per-unit levels the bill requires, have either closed entirely or substantially reduced their product offerings to categories with lower compliance burdens. Large operations, able to absorb compliance costs at substantially lower per-unit levels, have in some cases expanded into the market segments the small operations have abandoned.

The pattern is not, in any meaningful sense, an accident. It is the predictable consequence of compliance cost structures whose burdens scale unfavourably for small operators. The structures were, in their development, supported by major-retailer industry advocacy organisations that correctly identified the competitive advantages the structures would produce.

The Environmental Question

The environmental question that SB-54 was nominally addressing is, on careful examination, more complicated than the bill’s public framing suggested. Single-use plastic packaging does, in its various forms, produce environmental costs. The costs are real. The costs are also, in the specific consumer-products categories most affected by SB-54’s small-operator effects, modest relative to the broader environmental footprint of California consumer goods consumption.

The selective targeting of small-operator product categories with substantial environmental rhetoric, while sparing large-operator categories with substantially greater environmental footprints, is, as documented in the broader analysis of California regulatory practice, a recurring pattern. The pattern reflects, on the available evidence, the political dynamics of regulatory advocacy rather than the underlying environmental analysis.

The dynamics produce, recurrently, regulations whose distributional consequences are substantially regressive even when their stated purposes are progressive. SB-54, in its operational effects, exhibits the pattern.

The Major Retailer Position

The major-retailer industry’s position on SB-54 has been, on the available evidence, broadly supportive of the bill’s specific provisions despite the substantial nominal compliance costs the provisions impose on retailers. The supportive position reflects, in some honest accounting, the recognition that the bill’s compliance cost structure produces competitive advantages that substantially exceed the absolute compliance costs major retailers face.

The recognition has been, in the major retailers’ public communications, framed in sustainability-leadership terms. The framing presents the major retailers’ compliance with the bill as evidence of corporate environmental responsibility. The framing avoids, in nearly all cases, the broader analysis of why specific compliance cost structures produce specific market-consolidation outcomes.

The framing has been, on the available evidence, substantially successful at shaping the broader public conversation about the bill. The conversation has focused on environmental sustainability questions while substantially ignoring the distributional questions that the bill’s actual operation raises.

The Recurring Pattern

The pattern SB-54 illustrates is not specific to plastic packaging or to surf shops. The pattern operates across multiple California regulatory frameworks affecting consumer-products categories. The frameworks share, in nearly all cases, common structural features: founding rhetoric framed in environmental or consumer-protection terms, compliance cost structures whose burdens scale unfavourably for small operators, and operational outcomes that produce market consolidation that the founding rhetoric did not predict.

The pattern’s persistence reflects, in some honest accounting, the political economy of California regulatory advocacy. The political coalitions that benefit from market consolidation, including major retailers and the broader environmental advocacy organisations whose institutional positions have, across decades, become aligned with major-retailer interests, are well-resourced and well-organised. The political coalitions that bear the costs, including small operators and working-class consumers, are diffuse and substantially less politically effective.

The political imbalance produces, recurrently, regulations whose distributional consequences are substantially regressive. The regulations are, in their public framing, progressive. The contradiction is, by every honest reading, a feature of the current system rather than an incidental consequence.

What The Affected Communities Have Learned

The communities affected by the SB-54 pattern, including the independent surf shop sector and similar small consumer-products retailers, have begun across the past 18 months to develop more sophisticated awareness of the regulatory dynamics at work. The awareness has produced, across multiple categories, increased attention to legislative developments in real time, more coordinated coalition-building among small operators, and what one industry organiser described as, quote, the broader recognition that the existing regulatory advocacy infrastructure does not adequately represent the interests of small operators or working-class consumers.

The recognition has not, on present evidence, produced substantial reform of the regulations whose effects are documented above. The political imbalance that produced the regulations continues, on present evidence, to produce subsequent regulations exhibiting the same patterns.

An ongoing analysis at The Foundation for Economic Education has documented the broader pattern across multiple regulatory contexts.

What An Adequate Regulatory Posture Would Involve

An adequate regulatory posture toward consumer-products categories would involve, at minimum, the systematic distributional analysis of proposed regulations to identify their effects on small operators and working-class consumers, the development of regulatory frameworks that scale compliance costs proportionally to operator size, and the substantive engagement with the pattern of regressive distributional consequences that current frameworks routinely produce.

The posture is not, on the available evidence, the current California regulatory practice. The current practice continues to produce regulations whose distributional consequences are substantially regressive. The patterns continue to operate. The independent surf shops continue to close. The consumers who depended on those shops continue to lose access to the lower-priced products the shops historically provided.

The Broader Stakes

The broader stakes of the documented pattern extend beyond the specific consumer-products categories affected. The pattern represents, in compact form, a recurring contradiction in California regulatory practice: progressive rhetoric coupled with regressive distributional consequences. The contradiction has, across decades, been substantially obscured by the rhetorical framing that California regulatory advocacy organisations have, with substantial success, sustained.

The obscuring has costs. The costs are borne, in nearly all cases, by the working-class Californians whose interests the regulations’ distributional consequences systematically disadvantage. The costs continue to compound as the pattern continues to operate.

For related reporting, readers may consult The Daily Mash.

SOURCE: https://bohiney.com/sb54-killing-independent-surf-shops/