SUMMARY:
On a nationwide basis CHEP USA (A foreign owned multi-billion dollar pallet rental company whose parent company, Brambles reported profits of $734,000,000 in 2007.) is forcing the return of pallets from unwilling pallet recipients under non negotiable terms dictated by solely CHEP. CHEP has a uniform nationwide Asset Recovery Program (ARP) policy in which approximately 1,900 pallet recyclers are forced to return "lost" pallets that CHEP knowingly allows to leak out of their pallet rental network. (CHEP will issue approximately 220,000,000 pallets in 2006 and according to Elton Potts CHEP 's Senior VP of asset management and they expect 5.6% of those to be shipped outside of their network. An estimated 90 million are in circulation in the US). Pallet Recyclers are forced to return them to CHEP (often at a loss) or face a wrath of litigation from CHEP. (Note a recent October 2006 industry survey of pallet recyclers who participate in CHEP 's ARP....Many do so only out of fear of CHEP litigation.) PALLET ENTERPRISE RECYCLER SURVEY 9/2006
CHEP charges their rental customers upwards of $24 per pallet when they lose them or cannot account for them during CHEP audits. They also charge their customers a fee($3.50-$8.00 to as high as $18.00) for shipping to facilities that are shipped outside of their network. These facilities are referred to as Non Participating Distributors (NPD's) because CHEP has no agreement, no contract, or means of having these pallets returned to their possession without reliance on independent pallet recylcers.
In 2004 there were 21,000 to 32,000 NPD's who received CHEP pallets!
6-7 million CHEP pallets are forced onto NPD's each each year by CHEP. (Mock- Doc 236)
4-WAY BLOCK PALLET
As recently as October 2006, cases and judgments have provided additional evidence and discoveries that CHEP may be taking advantage of independent recyclers via their ARP policies on a nationwide scale. Obviously individual pallet recycling companies do not have the financial resources to address CHEP 's involuntary ARP program being forced onto pallet recyclers as it expands its push into the U.S. market. We believe that recent courtroom events have opened the door to the vast liability that CHEP may be creating for itself as it continues with these competition killing practices. The enormous litigation expenditures put forth by recyclers battling CHEP thus far should not go unnoticed as they have uncovered a treasure trove of discovery information that simply needs to be coalesced into a unified effort.
EVALUATING ANTITRUST & UNFAIR COMPETITION ISSUES
Recent surveys of independent pallet recyclers by the trade publication Pallet Enterprise revealed that CHEP 's ARP does not cover their cost, thus it was reported that many recyclers who participate in CHEP ’s ARP program do so only out of fear of litigation and reprisals from CHEP USA. This fear is well justified as CHEP has a history of suing recyclers who refuse to agree to their non-negotiable ARP program. CHEP continues its tactics as they are currently involved in five lawsuits with recyclers around the country as of November 23, 2006. This strategy allows them to extract unfair fees/terms that could not otherwise be possible in a free and open market.
The shocking revelation about this program is that CHEP knowingly allows rental customers to ship their rental pallets outside of their network to unwilling participants. So a key issue here is that CHEP 's lost pallets are not simply about the erroneous shipments of rental pallets outside of CHEP 's closed loop. It is a deliberate practice instituted by CHEP that they referred to as the AVP (Accelerated Volume Program.) CHEP bills their customers up-charges when they do this in a range from $3.5 to $8.00 to as high as $18.00 per pallets in addition to their normal transfer fees. Why would CHEP allow this? Here is an obvious possible explanation which boils down to a strategy that eliminates the competition by preventing the need for a customer to have multiple pallet suppliers.
CHEP could easily require and maintain that its pallets not be shipped outside of its rental network. This would be a simple and straight forward pallet rental program where CHEP maintains control of its rental pallets throughout the distribution channels and picking them up at the other end. The problem with this is that if CHEP simply rented the pallets they could not totally eliminate the competition.
As stated, CHEP bills their customers $24 if a customer loses a pallet. Obviously the customer would attempt to avoid this fee by not shipping the rental pallet outside of the network and would call upon non-rental pallet suppliers, or pallet recyclers, for goods being shipped outside of the agreed rental/distributor network. This is where CHEP uses what some have termed a “disguised sale”. As mentioned the customer would ordinarily turn to non-rental pallet suppliers to provide them with a $6 or $7 dollar pallet rather than be hit with a $24 lost rental pallet fee. By doing this CHEP has preempted the customers need for other suppliers by allowing the customer to ship the pallets out of CHEP 's rental network at a fee ($3.50 to $8.00) that coincidentally is the price range for what a 4-way recycled pallet might cost. In this way CHEP can counter any arguments or concerns that the customer may have about having to have multiple vendors, one for regular pallets and another for rental pallets.
With this competition killing strategy CHEP strikes a double blow to independent pallet recyclers as it penetrates its way into the U.S. market. Not only has CHEP eliminated the recyclers from the initial selling phase using this strategy it has implemented a system that force feeds the collection of these now lost CHEP rental pallets on to the very same recyclers.
4-WAY GMA PALLET
CHEP USA, a cleverly selected name that disguises the fact that it is a foreign owned entity that operates in 41 countries around the world. CHEP set it sights on the U.S market in the 1990's and now derives a huge percentage of its total profits from US operations. It could easily be argued that CHEP 's rapid growth to market dominance could not have been possible without this split strategy. They protect and guard their programs through lawsuits and intimidation. (Atlas Pallets). Very few individual pallet recyclers have the resources to individually contest CHEP ’s unjust practices…. most recyclers simply cannot afford to fight a multi-billion dollar foreign owned company like CHEP. This is why the U.S. pallet recycling industry must consolidate its legal strategy into a unified class action effort. The damages to independent recyclers are massive on a collective nationwide level, at millions upon millions of dollars in possible damages.
POTENTIAL AREAS TO EVALUATE AND ADDRESS.
I- Damages to Unwilling Recipients(retailers/distributors) of CHEP Pallets:
CHEP's tactic was to distance themselves from the dirty work of forcing NPD's to handover CHEP marked pallets. They accomplished this by enlisting, directing and influencing third party entities (pallet recyclers) to approach and collect CHEP marked pallets from local NPD's. Thus contracts to purchase white wood pallets from CHEP were given on the condition that the chosen pallet recycler meet quotas/minimums of CHEP marked pallets that they had collected from NPD's.
II - Damages to Recyclers:
III- Damages to CHEP Customers:
WHO IS CHEP USA?
FACTS
FORBES MAGAZINE ARTICLE- BEAST OF BURDEN 10/29/07