A court case resonates with many
A Nevada Supreme Court appeal seeks to curb the power of Waste Management, Inc. in the city’s economy.
The case began when Nevada Recycling and Salvage Ltd.—which operates under the name Rubbish Runners—sued WMI to try to break the monopoly on trash collection it has in Reno.
Nevada Recycling’s case was dismissed by the late Nevada District Judge Patrick Flanagan, who ruled that as a matter of law there was nothing to litigate because the monopoly granted by the Reno City Council to WMI was legal. Flanagan quoted U.S. Supreme Court Justice Hugo Black, who distinguished between when “a restraint upon trade or monopolization is the result of valid government action, as opposed to private action.” In effect, it meant that monopolies created privately are illegal, but some monopolies created by government can be legal—and Flanagan found that the monopoly in Reno trash collection “entered into by the City of Reno and Reno Disposal [a corporate name acquired by WMI when the chain purchased the local company] in this case is valid, unambiguous and enforceable.”
That happened on Sept. 19, 2016. The matter is now before the Supreme Court of Nevada, and it grows more heated with each passing week.
On Oct. 19, Mark McKinnon, who owns a Reno tattoo company, posted this message on Facebook:
“I’m just going to throw this out here because I think there needs to be some awareness of what’s going on in our city. I own a small business [that] is being threatened with legal action. Why? Because we chose to go with a more earth-friendly, recycling-conscious trash company, Green Solutions Recycling. [WMI] is threatening us with a lawsuit if we do not comply by switching back to them as our trash provider. Here’s the kicker. City of Reno Government is in contract with Waste Management for all trash service in the city. Last time I checked, that was called a monopoly. We are being threatened with fines if we do not comply. I would definitely like to hear from City of Reno government to explain how this is OK. I never agreed to have one choice for trash service, I like that there are options. Green Solutions recycles everything. If you allow a monopoly to happen like this, the company who benefits from it gets slack. This is unacceptable.”
He asked readers to spread the word to local media and officials. McKinnon plainly struck a nerve. Hundreds of responses to his message were posted, and he got news coverage from KRNV/KRXI and This is Reno.
Not that this changed anything. Exclusive franchises have been common in municipalities for generations, and they make money, reducing pressure for higher taxes. Nor do they happen only in trash collection.
But McKinnon’s action is just the latest in a long line of grievances that prompted the Nevada Legislature to take a serious look at curbing local monopolies this year. Senate Bill 315, sponsored by Clark County Sens. Patricia Farley—one of three female senators currently being targeted by Republican recall efforts—and Moises Denis, actually passed the Senate on a 16-to-five vote before running out of time in the other house. The Farley/Denis bill did not offer a full exploration of issues, since it focused on distinguishing commercial from residential disposal and particularly construction and demolition, plus the unusual situation in Washoe and Clark counties of trash collection corporations owning their own landfills. But it did show there is an appetite in the legislature to do something about the problem.
As McKinnon wrote, uncontrolled power tends to become abusive, and WMI has acted fairly high-handed on occasion. There have been cases where WMI started service on the say-so of a landlord without ever telling the tenant, who discovered the service when s/he got a bill.
When Dean Barnett, a California resident, inherited his mother’s house in the Spanish Springs Valley, he had the house put into order and made pristine, then installed an alarm system. Eventually, when he decided to sell it, he discovered WMI had put a lien on it because he had not paid the trash collection bill for the time the building had stood empty.
It is a common practice for governments that grant monopolies to insist on ways for the public to be protected, such as ratesetting and an appeal process. In Microeconomics for Today, Irvin Tucker wrote that for a century, “Privately held utility companies obtained the right to operate a monopoly in exchange for government regulations that set rates and capped profits.”
Local governments in the Truckee Meadows have not done that. They left consumers at the mercy of an unregulated utility. Barnett had no appeals process to turn to. He had to keep battering away at WMI until they realized he was not going to give up, so they lifted the lien. In the interim, he had lost at least one sale of the house.
“The free market is based on competition,” said economist Glen Atkinson at the time (“Unappealing,” RN&R, July 17, 2014). “If government removes competition, it needs to create regulation to protect consumers.”
At the legislature this year, WMI’s Greg Martinelli said, “A state-mandated price control seems to be counterintuitive to the desire for an open and competitive marketplace. The cities and counties know what works best in their communities, and they should be the ones making the decisions on whom and what they franchise in their communities.”
He did not address himself to appeals of other matters since the bill did not deal with such matters. If the city or county issues a citation on WMI’s behalf, the customer can appeal it—but must pay $50 for the appeal, plus whatever other costs are associated with it.
At the time of the Barnett case, we reported that we had heard the sentence “We are not required to inform you when we provide you with service” used at WMI’s office, and the tone of voice and rote delivery suggested the sentence had been spoken many times.
What would probably surprise readers even more is that they are not only legally required to use WMI, but that local governments have enacted ordinances to prevent them from getting around the monopoly. Those measures define terms and then regulate behavior—not the behavior of the corporation, but of the customer. In Sparks, for instance, the law defines types of trash and, to prevent people from providing their own service, prohibits residents from transporting it to landfills, so that only WMI can do it.
Garbage is defined as “animal and vegetable waste resulting from the handling, storage, preparation, cooking, sale and serving of food and beverage … offal, swill, kitchen and table waste, and other organic animal or vegetable waste … bottles, cans, cups, plates, utensils, containers, and/or covering of any construction or material that has been in intimate contact with food, confection and/or beverage … any component used in the preparation or manufacture of matter intended for animal or human consumption, and … such matter and/or materials listed in subsections C(2) and C(3) of this section that have been discarded without first being sanitized.” Residents are not permitted to transport it.
WMI is currently working under an agreement with the City of Reno that grants its monopoly for a whopping 17 years. Among other things, this means that the issue has been taken entirely out of the hands of the current council. It was approved by a previous city council and will expire after the term limits on current councilmembers have run out. This contract basically leaps over the current councilmembers, giving them little to say about the issue. Councilmember Jenny Brekhus said the best the council can do is give the next council “the best situation” it can to deal with.
“I think that there are a number of things that I would have done different,” she said. “The term length is one. Requiring minimum staffing levels and fleet standards would have been another. I think that I would have tackled the recyclables differently also. I am not so sure that it is structured to be most cost efficient to the ratepayers or a best practice in sustainability. However, I am not sure that there is an off-the-shelf model for recycling programs that can be borrowed from another city. When the next round of negotiations come up, I hope that there is a ’third generation’ of recycling franchise agreements that could be more advantageous to both the city and the franchisee.”
As for those who would like to break up the monopoly altogether, their only hope at this point is the case in the Nevada Supreme Court.