CHEPS PRACTICES REVEALED

Recent surveys of independent pallet recyclers by the trade publication Pallet Enterprise has shown that most recyclers feel the ARP does not cover their cost, thus many of the 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. This strategy of CHEP’s allows them to extract unfair fees/terms that could not otherwise be possible in a free and open market.

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CHEP knowingly allows rental customers to ship their rental pallets outside of their network to unwilling participants. CHEP bills their customers up-charges when they do this in a range from $3.5 to $8.00 per pallets in addition to their normal transfer fee. Why would CHEP allow this? Here is an obvious explanation which boils down to a strategy that eliminates the competition by preventing the need for a customer to have multiple pallet suppliers.

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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.
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Pallets rental service like CHEP bill their customer upwards of $20 if a customers 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, recyclers, for goods being shipped outside of the agreed network. This is where CHEP uses what has been 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 $20 lost rental pallet fee. CHEP has pre-empted the customers need for other suppliers by adapting and allowing the customer to ship the pallets out of the rental system at a fee ($3.50 to $8.00) that is typical for what 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.
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With this competition killing strategy CHEP strikes a double blow to recyclers. Not only has CHEP eliminated the recyclers from the initial selling phase using this strategy it has a system place to force feed the collection of its lost CHEP rental pallets on to the very same recyclers.

It could easily be argued that CHEP’s expansion into the US and growth to market dominance could not have been possible without this split strategy. They protect and guard their programs though lawsuits and intimidation. As we have seen no individual recycler will have the resources to individually contest CHEP’s unjust practices…. most recyclers simply cannot afford to fight. This my friend is why our 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.  With this amount of money at stake it appears to be enough of an incentive for a large law firm to address the issue.
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FOR DETAILS VISIT WWW.CHEPCLASSACTION.COM (This site is currently limited to potential class members and representing attorneys at this time.)

This entry was posted on November 15, 2006 at 1:29 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.