New Investigation Exposes Stealth Pricing, Dubious Practices in Solid Waste Industry

November 20, 2008

(Washington, D.C.) – The National Association of Consumer Advocates (NACA), Consumer Action and the Teamsters Union are calling on federal and state regulators to protect consumers from stealth pricing and other questionable practices by the trash industry in a new investigative report released today. The findings in this report warn of the inherent danger to consumers when massive trash companies employ strategies and tactics to gain market control and increase prices.

The report, “Trashing Consumers: Mergers, Monopolies and Stealth Pricing in the Waste Industry,” comes at a crucial time as two of the largest national garbage companies, Republic Services and Allied Waste, prepare to finalize a merger that could negatively affect competition within the solid waste service industry. The report recommends that regulators take steps to curb or bar questionable practices such as dubious surcharges and abusive evergreen contracts to protect consumers. 

“The stagnating economy is already hurting hardworking families,” said Teamsters General President Jim Hoffa. “We need to crack down on price gouging and tightly regulate the trash industry’s pricing strategies.”

“The report is another wake up call for regulators to take real action to curb the trash giants’ excessive market power,” said Ira Rheingold, Executive Director and General Counsel of NACA. “This, unfortunately, is yet another example of what happens to consumers when our governments fail to appropriately regulate big corporations and our economic marketplace.”

Linda Sherry, the Director of the National Priorities division of Consumer Action, warned of the consequences of further industry consolidation and called for public review of any merger that could have a negative impact on the community.

“Mergers must give the public the opportunity to make sure companies fully disclose pricing and business practices,” Sherry said. “Without all the facts, regulators and the public can’t accurately analyze future impacts on consumers, workers, neighborhoods and the environment.”

The National Consumers League also expressed concern over the further consolidation of the waste management industry.

“The concentration of the waste industry appears to be giving the companies who control the majority of this industry free reign to set unreasonably high prices and terms for their customers,” said Sally Greenberg, the Executive Director of the National Consumers League. “That could very well translate into higher prices for all consumers, something that should be of concern to government antitrust officials and Congress.“

Key findings:

• The mega firms have deliberately instituted questionable practices to drive up prices. These troubling practices include evergreen clauses that make it very onerous for customers to terminate a contract and stealth pricing tactics, such as so-called environmental surcharges that are not tied to any specific cost.
• A case study of what happened when Ohio’s Department of Administrative Services put out a bid for a new solid waste contract illustrates the limited choices available as a result of the consolidation. For example, 70 out of 77 county contracts went to only three companies.
• The three largest solid waste companies exert tremendous market power through their control over landfill space. Landfills are extremely costly to develop and set a very expensive bar for new competitors to enter a market. Evergreen contracts further cement market power by the mega trash companies.

The report concludes that regulators need to impose strict conditions on any approval of the a merger between Republic Services and Allied Waste to diminish any opportunities for monopolistic pricing practices. 

For a copy of the report, please go to http://www.teamster.org/trashingconsumers.

Founded in 1903, the International Brotherhood of Teamsters represents more than 1.4 million hardworking men and women in the United States, Canada and Puerto Rico.