RACHEL's Hazardous Waste News #141

=======================Electronic Edition========================

RACHEL’S HAZARDOUS WASTE NEWS #141
—August 8, 1989—
News and resources for environmental justice.
——
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: erf@igc.apc.org
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GSX, WASTE MANAGEMENT CONVICTED OF
PRICE-FIXING CONSPIRACY IN CALIFORNIA.

The “largest criminal antitrust case in California history” broke
open in the spring of 1989 and gave the public a rare glimpse
inside the garbage hauling industry, thanks to aggressive
detective work by the district attorney’s office in Los Angeles
County.

It all started back in 1985 when the DA received a letter from a
small waste hauler (Carry All Disposal) complaining of harassment
from competitors. Carry All said its trucks were being followed
by GSX Corp., a major competitor. Once GSX learned their names,
GSX “blitzed” Carry All’s customers, offering belowmarket prices
for waste hauling–an offer they couldn’t refuse. Pretty soon
Carry All started receiving cancellations from customers.

The DA had tried to investigate the trash hauling business a few
years earlier but hadn’t gotten to first base because it’s a
clannish industry, interwoven with family connections.
Nevertheless, an investigator was assigned to look into Carry
All’s allegations. The investigator quickly discovered a
goldmine–a Carry All employee who used to be sales manager for
GSX. Armed with specific inside information and a search warrant,
the DA found eight to 10 boxes of internal memos and expense
vouchers. With the help of the former GSX employee, the DA
deciphered the documents, many of which were only cryptic or
partial notes.

They found telephone receptionist notes spelling out the firm’s
illegal contacts with competitors. Among the memos were some from
GSX competitors asking, “Why are you talking to my clients?”

“It’s rare to find the smoking gun,” says assistant DA Tom
Papageorge. “The challenge of these cases is having to prove a
conspiracy when agreements are mostly verbal.”

What the documents showed was that GSX and their competitors
often met surreptitiously to eliminate competition and control
prices. The conspiracy included agreements not to take away each
other’s customers. The firms often used “blitzes,” or below-cost
sales pitches, to take customers from haulers who insisted on
trying to compete.

When a commercial customer sought to change haulers, the current
and the prospective hauler often

would get together and have the latter offer a “highball” price
to the customer. Then the two firms would divide the profits,
often with payoffs from one hauler to the other as high as
$10,000. In the meantime, customers who did not change haulers
were “stung” regularly with annual price hikes of 15 to 20%.
There was open competition only when a new customer, such as a
new mini-mall, came into being. “The standing rule was
non-competition,” says Assistant DA Papageorge.

The solid waste industry in Los Angeles County was highly
competitive with 400 small haulers making a living providing
service to local businesses and residents. But about 10 years
ago, BFI, Waste Management, Inc., and Laidlaw discovered that
environmental laws favor bigness. You have to have enormous
resources (money in the bank, or borrowing power) to build a
double-lined landfill or a solid waste incinerator. (Ironically,
these expensive technologies don’t protect the environment any
better than the older technologies–they simply make it too
costly for the little person to compete anymore.) So the big
firms have muscled their way into city after city, pushing little
people aside. And the big firms have created their own kind of
stability: the basic idea is to divide up the market for waste
hauling services among a few competitors, and to fix prices for
those services among competitors, eliminating competition. The
waste firms operate secret cartels, dividing up commercial
accounts so they can charge any price without fear of
competition. “The crime here amounts to a theft from the public
which uses the myriad of businesses which are paying artificially
high fees to have their trash hauled away,” says District
Attorney Ira Reiner. “The high prices ultimately are passed on to
the public.”

When it became clear to GSX that the DA had the goods on them,
they offered a deal–they would rat on their friends in return
for leniency in court. GSX ultimately paid a $236,500 fine in
1989 but in return for this light penalty, they implicated three
other companies in antitrust (price-fixing) crimes. GSX is a
subsidiary of Laidlaw, a Canadian firm that is the third largest
waste hauler in the world, after Waste Management and BFI.

GSX turned states evidence and nailed their friends, who then
pleaded no contest, resulting, in March, 1989, in a record fine
of $1 million for California Waste Management–the Los Angeles
subsidiary of the nation’s largest waste hauler ($4 billion per
year), Waste Management of Oak Brook, IL. Western Waste
Industries, a large ($50 million per year) local hauler, paid a
$900,000 fine in the antitrust case and another $100,000 for
hiding hazardous wastes under household trash, dumping them
illegally in three Los Angeles landfills. The Western Waste sales
manager got 45 days in jail for his part in the antitrust
conspiracy. A third firm, Angelus-Hudson paid a $75,000 fine. A
plea of “no contest” amounts to saying “I am not admitting guilt
but I don’t think I can beat the rap, so convict me–I accept the
consequences.”

In an earlier (Jan., 1989) case, federal authorities fined GSX
$500,000 for “blitzing” competitors’ customers; in addition, GSX
and unnamed others were accused of conspiracy, quoting inflated
prices to each other’s customers to mislead them into believing
they were getting good deals.

Three years earlier, in 1986, a GSX employee was charged with
laundering $1500 in political contributions to two Orange County,
CA, supervisors.

Thus we can see that GSX Corp., like Waste Management and BFI, is
basically a parasitic firm, preying on the public while claiming
to provide a needed service. The basic problems are the same with
all these large haulers: they learned their business practices by
observing organized crime, which has dominated portions of the
waste hauling industry for years. (See RHWN #40.) They use their
economic power to destroy small businesses in a targeted area;
then they establish an “understanding” between themselves and the
other giant firms, avoiding competition and bleeding their
customers by charging inflated rates, which the public ultimately
pays. The net effect is to eliminate one more underpinning of
community life, to remove from local control one more essential
community service, to reduce opportunities for local business
people, to inflate the cost of waste disposal, and to reinforce
the sense that there is no justice for the little person. The
centralization of the garbage industry into the hands of a few
enormous, unscrupulous firms is not yet an accomplished fact in
many areas, but the published plans of the giant haulers indicate
that their goal is nothing short of complete control, coast to
coast. It is a trend that should be resisted vigorously at the
local and state levels by every means possible. Now that the huge
predatory haulers have formed alliances with the purveyors of
mass burn incinerators, the importance of stopping this industry
has grown. The titans of trash are now in a position not only to
squeeze the small waste hauler, but also to put a deadly bear hug
on the general public. What’s at stake is not only the quality of
community life, but also the health and safety of the American
people, and the long-term stability of the planet.

WHO HOLDS THE GARBAGE CONTRACTS IN YOUR COMMUNITY? DO YOU KNOW?

See: Paul Feldman, “Reiner Sees Pervasive Cartel Conspiracy by
Trash Hauling Firms,” LOS ANGELES TIMES, June 10, 1987, pg. 6;
John Spano, “Firm Admits to Price Fixing in Trash Business,” LOS
ANGELES TIMES, Orange County Edition, Jan. 24, 1989, pg. 1; and
Edwin Chen, “Waste Hauler Fined $1 Million in PriceFixing Case,”
LOS ANGELES TIMES Mar. 14, 1989, pg. 1.

Rachel search terms: antitrust; price fixing; bid rigging;
criminal conspiracies; fines; jail; felonies; prosecution;
enforcement; investigations; california; ca; los angeles; la; gsx
corp; wmi; waste management, inc; solid waste industry;
competition; trials; laidlaw; canada; cn; msw; organized crime;
illegal dumping.
–Peter Montague, Ph.D.

Descriptor terms: antitrust; price fixing; bid rigging; criminal
conspiracies; fines; jail; felonies; prosecution; enforcement;
investigations; california; ca; los angeles; la; gsx corp; wmi;
waste management, inc; solid waste industry; competition; trials;
laidlaw; canada; cn; msw; organized crime; illegal dumping;

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