The appeal decision, which ends a six-year dispute, allows Germany's manufacturers to continue to contract with other packaging waste collectors, helping to lower the cost of following the law.
The appeal was made by the Duales System Deutschland (DSD), a company that created the "Green Dot" trademark in Germany to identify packaging that can be recycled.
The trademark identifies packging that can be collected and recycled, a powerful selling tool on the German market.
In April 2001 the European Commission ruled in two decisions that one provision of DSD's trademark agreement restricted competition in the market.
DSD appealed and last week the EU court ruled in favour of the Commission's decision.
The decision relates to DSD's practice of charging manufacturers the full licence fee for use of the "Green Dot" even if they had contracted other collectors to pick up their packaging waste.
The licence fee requirement means that customers have no realistic economic possibility of contracting with competitors of DSD, the EU Court of First Instance ruled on 24 May.
"Whilst paying for the service provided by DSD's competitors, these customers would have to either pay an additional fee to DSD, or they would have to organise separate packaging, distribution and merchandising lines, packaging with and without the Green Dot," the court stated .
The Commission noted that its 2001 decisions allowed competing systems to enter the market and challenge DSD's monopoly.
Prices for collection and recycling services fell appreciably lower after the decisions, the Commission noted.
The Commission's decisions relate to the German Packaging Ordinance, which came into force in 1991, and EU Directive 94/62 on packaging and packaging waste.
The law and the directive requires that manufacturers and distributors take back, free of charge, used sales packaging from consumers at or near the point of sale.
DSD undertook to organise such collection on behalf of Germany's industry.
The Commission exempts manufacturers and distributors that sign up to such comprehensive collection systems like DSD from the obligation.
To be able to take part in the DSD system, manufacturers and distributors have to sign a contract with the company granting them the right to use the "Green Dot" logo.
In return, the manufacturers and distributors pay a royalty to DSD.
The Commission ruled that DSD was restricting competition by abusing its dominant position in the market for organising the collection and recycling of sales packaging in Germany.
The Commission found that, in certain cases, the payment system used by DSD disadvantages its manufacturers and retailers and prevents the entry of competitors in the market.
DSM does not allow the companies it contracts to collect other packaging waste not marked with the "Green Dot" trade mark.
The Court of First Instance agreed with the Commission that the exclusivity clause, which is part of the service agreements with collection companies, serves to prevent other agencies from offering their services to DSD.
DSD collects about 80 per cent of packaging waste in the German market.
The Court of First Instance backed the Commission's decision and rejected all of DSD's arguments.
"The Commission's decision does therefore not adversely affect the proper functioning of the DSD system," the court ruled on 24 May.
"The CFI accepts that selective marking as required by DSD has the effect of dissuading manufacturers and distributors of packaging from using competing systems."