Solid waste oligopoly
The Gambino and Genovese families may no longer be in the picture, but the big players in the waste management area know how to cut corners. Three companies, Waste Management, Allied Waste, and Republic Services form a nation-dominating trash disposal oligopoly in the US. The three companies own between them over 66% of all US landfills.
Why are landfills so important? According to an article in the Arizona Republic ("Allied Waste talks trash", 2/4/08)
Landfills are valuable because it gets harder every year to open a new landfill because of public opposition and the expense of finding a location and then building it to federal standards. It takes an average of 10 years to open a new one. The trend is to expand them out or up when possible.
The concentration in landfills leads to a concentration in trash haulers. Small start-ups have no access to landfills, so the big companies have much more control over hauling and can set hauling costs.
In addition, the companies are leaders in recycling. In part this has been mandated by state and local governments. In part, it's a growing response to the rise in the cost of diesel fuel and the closing of local, near-city landfills. It's starting to become much cheaper to separate out recyclable garbage than to haul it to a far-away landfill.
Waste Management was started in 1968 and, through a series of over 100 acquisitions plus a 1998 merger with key rival USA Waste, grew from a local trash hauler to the international leader in all kinds of waste haulage and recycling. Founded in 1992, Allied Waste grew by has acquired over n 300 companies. The biggest deal was the 1999 buyout of Browning-Ferris Industries, a $9.4 billion acquisition.
These companies have been the subject of a number of antitrust suits over the years. Those lawsuits have tapered off, but then again so have many antitrust actions with the current administration. Nevertheless, in 2004, Republic Services was fined $1.5 as a settlement for earlier violating antitrust agreements, abased on collusion with Allied.
Both Waste Management and Allied Waste have had financial scandals as well, with Waste Management having been convicted of illegal accounting practices and Allied now being sued for securities fraud through misrepresentations.
And of course, all of these companies have been accused and convicted of environmental violations. These companies do not have a sterling record of public responsibility.
In 2006, the Office of Fair Trade, a UK government antitrust group, concluded that, in that country, the temptation to collusion was overwhelming and that municipalities were paying more due to lack of competition.
The … report concluded that competition within the MSW [municipal solid waste] sector was limited because there were too few suppliers in the market, there was an over-reliance on regional presence to succeed with bids, and the lack of a systematic and clear procurement policy amongst procuring authorities.
The same could be emphatically said in the US.
