Firm Admits to Price-Fixing in Trash Business
A major trash-hauling firm has confessed to involvement in a criminal price-fixing scheme in Orange County and agreed to cooperate in a widening grand jury investigation of bid-rigging in Southern California, federal officials said Monday.
GSX Corp. has admitted conspiring with other as-yet-unnamed firms to obtain $3.6 million in commercial and industrial trash-hauling business through illegal bid-rigging in 1986. The company has agreed to plead guilty to violating federal antitrust laws and pay a $500,000 fine.
Although federal officials refused to disclose details, a government source said that GSX and the other firms were accused of “blitzing” competitors by systematically undercutting their prices.
In addition, the source said, GSX and the others are accused of quoting inflated prices to each other’s customers to mislead them into believing that they were getting good deals. Prosecutors would not name the companies that were allegedly cheated in this way.
GSX is a wholly owned subsidiary of Laidlaw Waste Systems Inc., whose general counsel, Thomas Fowler of Dallas, said Monday that his firm had purchased GSX 6 months after the price-fixing conspiracy ended.
“Laidlaw has never been involved in anything, has never had any kind of criminal offense filed against them,” Fowler said. “When Laidlaw bought GSX, we had to take both the good and the bad.”
Laidlaw, which is controlled by a Canadian firm and reported more than $1.1 billion in revenues last year, purchased GSX in October, 1986, Fowler said. Prosecutors confirmed that the price-fixing scheme had ended six months earlier.
Laidlaw has agreed to cooperate and provide the testimony of any employee needed by federal prosecutors, Fowler said.
GSX and others collected “artificially high prices” by agreeing to divide commercial trash-hauling business and submitting “collusive, noncompetitive and rigged bids,” according to charges filed by federal prosecutors.
Trade Restrained
The conspirators restrained trade and “denied the benefits of free and open competition” to Orange County customers, the charges continued.
Federal antitrust officials refused to say whether the investigation involves fixing prices for residential service as well as commercial and industrial work, or whether county and local government contracts were involved.
In all, GSX is believed to have obtained $3.6 million in trash-hauling contracts as a result of the bid-rigging. But Prosecutor Barbara J. Nelson, with the U.S. Justice Department’s regional antitrust division office in San Francisco, declined to estimate the amount of actual economic loss suffered by the public.
“It really is impossible to say,” said Nelson, who is in charge of the investigation by the Los Angeles-based federal grand jury. “The problem is that refuse hauling depends on how far waste must be hauled, landfill charges and whether you have other routes in the same area.”
More Charges Seen
The on-going investigation covers Southern California south of Santa Barbara, and more charges are expected, federal officials said.
The highly regulated trash-hauling business has been the target of investigations both in Orange County and nationwide in recent years.
Three years ago, a GSX employee was charged with laundering $1,500 in political contributions to two Orange County supervisors.
In 1987, another Laidlaw subsidiary agreed to pay $236,000 in civil penalties in a price-fixing case in Los Angeles, and employees of the firm are expected to testify in a separate price-fixing case against three other haulers--Waste Management of California Inc., Western Waste Industries and Angelus Hudson Inc.--at a preliminary hearing next month.
Michael J. Delaney, chief of the consumer protection division of the Los Angeles County district attorney’s office, estimated that businesses served by the firms accused in this case had lost “millions” of dollars.
Higher Prices Quoted
A prime element of the price-fixing scheme, Delaney said, involved price quotations. When one of the firms was contacted by another’s customer, it would check and make certain to quote a price at least 20% higher, Delaney said.
“The customers got stung,” Delaney charged. “They (customers) would call around for competitive quotes and get higher prices. They didn’t know those higher quotes were the product of collusion.”
To protect their share of the market, conspirators would also “blitz” any legitimate competitor who took business away. The competitor would be followed and a list of customers assembled, Delaney said. Then, salesmen would engage in “predatory pricing” by undercutting the competitor’s prices. They would also allegedly attempt to force the legitimate competitor into the scheme.
The scheme was used for at least 4 years, ending in 1986, Delaney said. In this case, too, Laidlaw bought the subsidiary after the price-fixing had ended, according to Fowler.
The price-fixing allegations come at a time of greater scrutiny of the waste-hauling industry nationwide.
Last fall, a consumers group alleged that the nation’s top two firms conspired nationwide to fix prices. Last August, both of the firms, Waste Management Inc. and Browning-Ferris Industries Inc., were ordered by a federal judge to pay $350,000 each for conspiring to corner the trash-hauling market in Toledo, Ohio.
