Clement Contracts

A solid waste company that dominates the market in small container services for commercial customers must renegotiate its overly restrictive waste collection contracts to enhance competition, according to a formal settlement between the company and the state of Vermont.

Casella Waste Systems, based in Rutland, Vt., offers solid waste hauling services throughout the state. A large segment of its business serves commercial customers that use 2-cubic-yard to 10-cubic-yard containers. Casella required these customers to sign standard-form contracts, which confined the customer for an initial term of three years. Then, unless the customer notified Casella more than 60 days before the end of the contract's term, it automatically renewed the arrangement for successive three-year periods. If the customer wanted to cancel the contract at any other time, it was obliged to pay Casella a predetermined amount up to six months' charges.

Vermont Attorney General William H. Sorrell conducted an investigation of small container solid waste hauling markets in the state. He found that Casella dominates these markets by using contracts that (a) make it “difficult and costly for customers to switch to a competitor,” (b) “significantly rais[e] the cost and time required by a new entrant or small incumbent firm to build its customer base and obtain efficient scale and route density,” and (c) make it difficult for competing firms to enter the market.

When the state confronted Casella with these findings, the company denied that it had significant market power and that its practices created barriers for would-be competitors. Nevertheless, Casella agreed to change its contracts with commercial customers in several ways.

Except in limited circumstances, the company will offer initial terms no longer than two years and renewal terms no longer than one year. Customers can terminate as late as 30 days prior to contract expiration, and can do so through regular mail or fax. Liquidated damages are limited to three months' charges for cancellation in the initial term, and two months' charges in a renewal term. Additionally, Casella will no longer insist that it be (a) allowed to match any offer by another solid waste hauling firm before the customer can contract with the new hauler and (b) given a first option to haul a waste customer's recyclables.

Casella also agreed to notify the attorney general if it proposes to acquire another solid waste company in Vermont valued at more than $200,000 (or $100,000 where Casella's market share is 60 percent or more) or any transfer station or landfill that accepts Vermont waste. Casella has paid $50,000 to the attorney general's office to reimburse the costs of investigating the solid waste markets.

The settlement terms and conditions remain in force until 2012. If the court finds that Casella violates any of the provisions, the company will be subject to fines and whatever orders are necessary to address the violations that the state can prove.

[In Re: Casella Waste Systems Inc., Washington County [Vt.] Superior Court, Docket No. 296-5-02, May 22, 2002]

The columnist is a Washington, D.C., attorney and serves as general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].