Why Garbage Collectors in Montana Have 40% Profit Margins

We all know garbage is important, but we don’t realize it. If it wasn’t, we wouldn’t make so much of it! We freely acquire goods in a free and extremely competitive marketplace, where the consumer is king.

Can you imagine living somewhere where you had no choice but to buy or rent goods? One brand of car. One brand for clothing. One doctor. One barber. One sewer service. One garbage collector. Stop right there—because in many if not most Montana communities, there is but one brand of garbage collection to choose from, which means no choice at all. Consumer choice cannot affect the quality and cost of the service.

There is likely no area of government monopoly that is more harmful or less logical than Class D garbage collection. Here, potential competition is regulated by state law through a nearly impossible certification process at Public Service Commission. The pretense of “consumer protection,” Montana has a lot of monopolies or near-monopolies. They shut down the market and remove the fundamental right to private enterprise. This government protectionism is at its worst. It results in higher prices and lower quality of service than it would in an open, free, and competitive marketplace. Consumers suffer, but a few coddled and protected businesses reap enormous profit by avoiding competition or shedding normal business risks. 

The protected industry, benefitting with its often obscene profit margins, will bring forth a flood of sophisticated-sounding arguments, of course. They might argue that “uncontrolled competition” This destabilizes markets and puts at risk the quality and reliability services to the public. They will warn. “upstart operators” Some might throw their garbage in the ditches or on public land. All of these claims were made before the PSC and I can tell you that they are absurd. I have yet see any evidence supporting their arguments. What evidence could there be? They argue against the Role Competition itself.

How much are Montana trash haulers overcharging their captive customers in monopolized Montana markets? The PSC doesn’t regulate rates so there isn’t much information. But as an example, it was revealed during one of the PSC’s application dockets that Republic Service’s 2014 Montana Annual Report showed an eye-popping statewide average profit of 41 percent. This compared with testimony showing Oregon’s profit margins average 8 to 10 percent.

Monopolistic businesses are not bad providers by nature. They are simply a result of the market conditions in which they operate. Rates will fall if there is not enough competition. This removes the value of price signals. Likewise, if there is no threat of losing market share to another carrier, there is less reason to vigorously pursue a consumer’s business with new offerings or better deals. What other options are available to the consumer?

Rep. Caleb Hinkle’s HB 338 These state-sponsored monopolies would be ended. In the interests of maintaining their position as the dominant garbage company, incumbents will wage a fear-mongering campaign against the Hinkle bill. As usual, the consumers will not be represented at the legislative hearings.

These consumers include: These consumers include every homeowner as well as most landlords, manufacturers, service businesses, retailers, schools districts, colleges, universities, local governments, and any other entity that produces solid trash. All They all deserve the best service possible at the lowest cost. They won’t see it happen if there is no industry competition. Monopolies are government-created, but not government-regulated.

Although the stakes are high, the solution is easy. Allow consumers to choose and exercise economic freedom and reject government-created monopolies.

This article was republished with permission of the author from The Sun Times.

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