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Monopolies are only bad if the government doesn’t like em

June 21, 2011

Picking Up the City’s Garbage Is a Sweet Deal, and a Monopoly –

Ahh, gotta love government.  They got so many rules for us little folk, you know, us dumb people to stupid to understand too much salt is bad for us, or how to properly choose sunscreen (can’t call it sunblock anymore).  They also have rules to protect us from the evil corporations whose only purpose in life is to apparently kill off their customers, one of the biggest ones involves anti-trust legislation – laws enacted to ensure competition in the marketplace.  There is one problem though, they have no problem propping up monopolies they like.

Exhibit A, the San Francisco waste company Recology, who has had a no-bid monopoly on the waste collection and disposal of that cities garbage for the last 80 years.  And as is the case when a lack of free-market competition exists, prices are through the roof.  According to the article, San Franciscans are paying through the nose:

Recology has “the only such monopoly among 29 jurisdictions in the Bay Area,” said Quentin Kopp, the former judge, state senator and city supervisor. A few days ago, a group led by Mr. Kopp submitted a ballot initiative that would mandate the garbage contract’s being put out for competitive bid. Mr. Kopp said the monopoly had cost San Francisco hundreds of millions of dollars in inflated rates and forgone franchise fees over the years.

Wanna talk about cushy contracts, check out this little fact:

Recology is a private company that releases little in the way of financial information. It collected $220 million from San Francisco customers in the fiscal year ending in June 2010, and the city guarantees a profit of about 9.5 percent. [emphasis added]

Wow, guaranteed profits!  Man, I need to get in on some of that action.  And check this out:

As an employee stock ownership company, or ESOP, Recology avoids most corporate income taxes.

Little to no corporate income taxes, damn Recology has a nice gig.  But let me say, this is not an indictment on the company itself, they are running their business in the best way they know how (with a bit of cronyism from advisers who serve in office), this is a total indictment of the government that is allowing a company to fleece it’s governed.

And fleeced they are, as the CEO of the company tacitly admits:

Not surprisingly, Mr. Sangiacomo, who said he owned less than 1 percent of the company but was its largest single shareholder, would prefer the status quo to competitive bidding. “Why would I want to put this company at risk and go through that headache?” Mr. Sangiacomo asked. He added that his company “could be out of business” if forced to compete for the contract.

First off, for those with a penchant for names, yeah, he’s Italian (just saying).  And to be fair, perhaps he isn’t truly admitting his company is overcharging for its services, he could be just cogitating on a transcendental possibility, that if he had to compete there is always a chance they could lose.  But then we get to the next paragraph:

Larger companies like Waste Management Inc. “would love to be in San Francisco,” he said. “You never know what kind of pricing someone is going to use. If it is all about price, there’s no guarantee we can withstand a lowball bid.”

In most service-based companies, it is rarely “all about price”, but then there is garbage collection.  What can a garbage company do to increase its value to a customer allowing a premium for said service?  Designer garbage cans?  So, in this regard, I would say it is most definitely “all about price”.  And why shouldn’t they be able to compete?  They have had 80 years to get their processes down to the most efficient and cost-effective methods possible….or, because they have a monopoly, they didn’t give a s**t since they are guaranteed a 9.5% profit.

Considering San Francisco is the poster-child for progressive planning, I think its obvious who is at fault for the government endorsed fleecing of the citizens of the city.  Evil rich republicans, and George Bush!

6 Comments leave one →
  1. June 21, 2011 9:57 am

    You have to wonder how the kick-backs are distributed. Cronyism, no matter the party, is vile.

    • June 22, 2011 9:37 am

      I just love how the progressive mantra in regards to business and central planning is “guaranteeing competition”. Yeah, obviously. =P

  2. June 21, 2011 1:37 pm

    Great post! Keep in mind that garbage collection is also about controlling behavior, though, I suppose it’s mandated by the government which “encourages” to recycle by limiting garbage bin space.

    • June 22, 2011 9:38 am

      Well, the local government can always dictate guidelines for the operation of garbage collection companies, as opposed to allowing a single company a monopoly.

  3. June 22, 2011 5:40 am

    When will we be free of the schackles of the Bush administration! 🙂
    This is a perfect example of one of the biggest problems in government today and this is just one company, how many are there out there benefiting from sweet deal because of who they know?

    • June 22, 2011 9:40 am

      Oh man, the list of those companies would be impossible to collate. GE, GM, Chrysler, the stupid Solar Company Obama loves so much…and those are just in the last 2 years. What about all the others from past administrations?

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