Browning-Ferris Industries

Birth and Rise of BFI

Tom Fatjo Jr. founded BFI in 1966. The birth of BFI was a result of national legislation, the Solid Waste Disposal Act, designed to regulate waste collection and disposal services, including higher standards of sanitation from collection trucks and increased use of landfill burial over incineration due to concerns about air pollution. Tighter government regulation necessitated larger capital investments by waste collectors, unobtainable by most small, family-owned businesses, which were the primary waste collectors of the time. This regulatory change created an opportunity for a larger, broader-reaching company that could professionalize the waste-management business.

Beginning by collecting residential waste with a single truck in Houston, Texas, Fatjo expanded his business to include collection of commercial and industrial waste. By 1968, Fatjo expanded into waste disposal, winning a large contract from the city of Houston. Partnering with corporate financier Louis A. Walters, Fatjo and Walters formulated a program of acquisitions of smaller collection and disposal companies across Texas and the southern United States. To raise capital for the acquisition program, in 1969, Fatjo and Walters acquired control of Browning-Ferris Machinery Company, a publicly traded manufacturer of, among other things, garbage trucks and landfill equipment.

In 10 short years, BFI had grown tremendously. Revenues were over $250 million, and the corporation accumulated over 60 landfills, becoming a critical asset. Regulation and increasing public anxiety made the creation of new landfills nearly unobtainable and maintenance of existing landfills increasingly expensive, thus helping create a natural monopoly. As early adopters, BFI and Waste Management were able to grow largely as a result of barriers to entry.

Congress passed the Resource Conservation and Recovery Act in 1976 (implemented by 1980), which was legislation designed to tighten control of potentially dangerous landfills, including chemical and toxic waste. With a similar effect as the Solid Waste Disposal Act, this legislation again helped create natural monopolies, as experienced companies such as BFI grew, while others were denied entry. By 1983, chemical waste provided 10 percent of BFI's revenue. However, by 1984, BFI was under investigation in seven states for charges of monopolistic practices, including price-fixing. These charges were denied, although BFI paid $15 million in out-of-court settlements by 1989. BFI's toxic landfills became a liability, ultimately resulting in BFI's withdrawal from the toxic-waste industry in 1990.

Recycling

Diversifying its interests, BFI experimented with paper waste recycling. However, declines in paper manufacturing proved detrimental to the paper recycling business for BFI, which created a spin-off company in 1975 for this segment of the business.

After instituting effective operational cost-cutting measures to resurrect the organization, BFI CEO and former Environmental Protection Agency director William D. Ruckelshaus was determined to grow the organization through recycling efforts despite wary naysayers. Focusing on paper waste, which accounted for 45 percent of the U.S. waste stream and soon would represent 85 percent of BFI's recycling business, BFI's recycling division grew astronomically, from less than $10 million in 1990 to $675 million annually by 1995.

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