Laundry Route Concentration  

1. Introduction

Laundry route concentration refers to a market situation in which a small number of laundry, linen-rental, uniform-service, or commercial laundry operators control a substantial proportion of the customer routes in a geographic area. A “route” generally represents a recurring network of customers from whom laundry or linen products are collected and to whom cleaned products are delivered.

Route concentration can create legitimate efficiencies because dense routes reduce collection and delivery costs. However, competition concerns arise where concentration results from customer allocation, territorial allocation, exclusionary contracts, coordinated bidding, refusal to deal, discriminatory access, or acquisitions that eliminate important route competitors.

The competition-law analysis therefore distinguishes between:

• Efficient route density — potentially pro-competitive;
• Structural concentration — potentially increasing market power;
• Artificial route allocation — potentially unlawful;
• Exclusionary conduct — potentially foreclosing competitors; and
• Collusion among route operators — potentially a cartel.

2. Meaning of a Laundry Route

A laundry route normally involves:

1. identifying a geographic group of customers;
2. collecting soiled laundry or linen;
3. transporting it to a laundry/processing facility;
4. cleaning or processing the products;
5. returning clean products; and
6. repeating the service on a regular schedule.

Commercial laundry and linen businesses may therefore possess valuable route density, customer relationships, delivery infrastructure, vehicles, processing capacity and customer-specific information.

The economic significance of a route was recognized by the U.S. Supreme Court in Kimball Laundry Co. v. United States, where the Court treated established laundry trade routes as possessing economically valuable customer patronage.

3. When Does Route Concentration Become a Competition Concern?

Concentration by itself is not necessarily unlawful.

The principal questions are:

A. How concentrated is the relevant market?

Authorities may examine:

• number of competing laundry operators;
• market shares;
• customer concentration;
• route density;
• geographic coverage;
• barriers to establishing new routes;
• switching costs;
• processing capacity; and
• availability of substitute suppliers.

B. How was concentration achieved?

There is an important distinction between:

Competition on the merits

A company wins customers because it offers lower prices, better service or more efficient routes.

and

Anti-competitive concentration

Competitors agree not to compete for one another's customers or divide geographic territories.

The latter can constitute horizontal market allocation.

4. Horizontal Route or Customer Allocation

One of the clearest competition concerns occurs where competing laundry companies agree:

• “You keep these customers; we keep those customers.”
• “Do not enter my geographic route.”
• “Do not solicit my customers.”
• “Tell me if one of my customers approaches you.”
• “Submit a high quotation if my customer requests a competing bid.”

Such arrangements eliminate the competitive process.

The U.S. Department of Justice has specifically prosecuted linen-supply arrangements involving agreements not to compete for each other's customers, notification when customers considered switching suppliers, and noncompetitive quotations.

5. Territorial Allocation

Laundry routes often have a geographic dimension, making them particularly susceptible to territorial allocation.

For example:

Laundry Company A agrees to service the northern district, while Laundry Company B agrees to service the southern district, and both agree not to compete in the other's territory.

This is problematic because customers are deprived of the ability to choose between competing suppliers.

A particularly direct example is United States v. General Linen Supply & Laundry Co., where the DOJ identified a horizontal customer/territorial allocation violation in the linen-supply industry.

6. Customer Allocation and Route Protection

Route concentration can also arise through agreements to protect existing customers.

For example:

• Company A cannot solicit Company B's restaurant customers.
• Company B cannot approach Company A's hotel customers.
• Competitors exchange information about customers considering switching.
• A competitor agrees to decline a customer's request for a quotation.

These arrangements may preserve existing market shares without genuine competition.

The DOJ's United States v. American Service Corporation involved allegations concerning customer and territorial allocation in the linen-supply sector.

7. Bid-Rigging and Laundry Routes

Route concentration may also facilitate bid-rigging.

Suppose several commercial laundry operators regularly compete for hospital or hotel contracts. They may theoretically coordinate:

1. Company A wins Hospital X;
2. Company B wins Hotel Y;
3. Company C wins Nursing Home Z;
4. the others submit deliberately high bids.

Although each customer appears to receive several quotations, the bidding process is actually predetermined.

The competition concern becomes particularly serious where competitors divide customers and manipulate quotations.

8. Route Density as a Barrier to Entry

An established operator may have substantial route-density advantages.

Suppose an incumbent already services:

• 1,000 hotels,
• 500 restaurants, and
• 300 healthcare facilities

within a compact geographic area.

A new entrant servicing only 50 customers may have much higher:

• fuel costs;
• labour costs;
• vehicle costs;
• collection time; and
• per-customer transportation expenses.

Consequently, economies of route density may constitute a legitimate economic advantage.

But they can also become an exclusionary mechanism if an incumbent deliberately prevents competitors from obtaining enough customers to achieve viable route density.

9. Refusal to Allow Route Access

Competition issues may arise where a dominant laundry or linen network controls an essential logistical resource and refuses competitors access.

Relevant questions include:

• Is the facility genuinely indispensable?
• Can competitors build another facility?
• Is access technically feasible?
• Is the refusal objectively justified?
• Does the refusal exclude an equally efficient competitor?
• Does the operator have a legitimate capacity or quality reason?

The analysis should therefore distinguish legitimate capacity management from strategic foreclosure.

10. Exclusive Contracts

Long-term exclusive laundry contracts can contribute to route concentration.

Examples include:

• exclusive hotel laundry arrangements;
• exclusive hospital linen arrangements;
• exclusive restaurant linen contracts;
• exclusive industrial-uniform contracts.

An exclusive contract may provide legitimate investment incentives. However, competition concerns become stronger where:

• the supplier has substantial market power;
• contracts cover most customers;
• contract duration is excessive;
• termination is difficult;
• competing suppliers cannot obtain sufficient customers; and
• the arrangement forecloses a substantial portion of the market.

11. Vertical Integration

A laundry operator may also acquire:

• linen manufacturers;
• uniform suppliers;
• laundry-equipment suppliers;
• route-management software;
• delivery fleets; or
• competing laundry businesses.

Vertical integration can create efficiencies, but it can also give the integrated firm incentives to disadvantage independent laundry operators.

For example, an integrated company might restrict access to an important supply input while simultaneously expanding its own laundry routes.

12. Merger and Acquisition Concerns

A merger between two large laundry operators can increase route concentration.

Authorities may examine:

Structural effects

• pre-merger market shares;
• post-merger concentration;
• number of remaining competitors;
• geographic overlap;
• customer overlap.

Competitive effects

• higher prices;
• reduced service frequency;
• lower quality;
• reduced innovation;
• reduced choice;
• foreclosure of smaller operators.

The relevant market might be:

commercial laundry services,

or a narrower market such as:

healthcare linen services,

depending on customer requirements and substitutability.

13. Important Case Laws

1. Kimball Laundry Co. v. United States, 338 U.S. 1 (1949)

The U.S. Supreme Court recognized the economic significance of established laundry trade routes. The case concerned the temporary government taking of a laundry business, and the Court considered the value associated with the business's established trade routes.

Competition relevance

The case demonstrates that laundry routes are not merely lists of addresses. They represent established customer relationships and recurring commercial patronage.

Principle

Established routes can constitute economically valuable commercial assets.

2. United States v. Western Laundry & Linen Rental Co., 424 F.2d 441 (9th Cir. 1970)

The defendants were charged with a Sherman Act conspiracy involving linen supplies in the Las Vegas area. The allegations included agreements to:

• raise and maintain prices;
• refrain from soliciting one another's customers; and
• allocate business.

The defendants entered nolo contendere pleas and were fined.

Competition relevance

This is particularly relevant to route concentration because customer non-solicitation combined with business allocation can transform naturally concentrated routes into artificially protected territories.

Principle

Competitors cannot use agreements protecting existing customer bases as a mechanism for suppressing competition.

3. United States v. American Service Corporation et al.

This DOJ enforcement matter involved laundry/linen-supply businesses and alleged horizontal customer and territorial allocation. The allegations included agreements not to compete for one another's customers and arrangements concerning competitive quotations.

Competition relevance

It illustrates the direct connection between route territories and horizontal market allocation.

Principle

Dividing customers or territories among competing laundry operators can constitute a serious antitrust violation.

4. United States v. General Linen Supply & Laundry Co.

The DOJ brought a criminal antitrust case involving linen-supply companies. The recorded violation was horizontal customer, territorial or market allocation.

Competition relevance

The case demonstrates that geographic route divisions are capable of constituting market allocation when competing suppliers agree upon them.

Principle

Route territories cannot legitimately be converted into mutually protected competitive domains through horizontal agreement.

5. United States v. Blue Bell, Inc., 395 F. Supp. 538 (M.D. Tenn. 1975)

The court examined an acquisition affecting the industrial rental-garment sector and found the relevant market highly concentrated. It concluded that the acquisition would probably substantially lessen competition.

Competition relevance

Industrial rental garments are closely connected with commercial rental-laundry operations because laundry operators provide recurring cleaning and rental services.

Principle

Concentration resulting from acquisition can be problematic where it substantially reduces competitive alternatives in a specialized rental-laundry supply chain.

6. Bascom Launder Corp. v. Telecoin Corp., 204 F.2d 331 (2d Cir. 1953)

The case involved coin-operated laundry-machine operations and the development of machine “routes.” The court considered Sherman Act and Clayton Act issues involving restrictions and tying arrangements.

Competition relevance

It demonstrates that the concept of a “route” can itself be an important economic component of a laundry-related business.

Principle

Competition analysis must consider not merely the physical equipment but also the network of locations and customers through which the business operates.

7. Carlton v. Manuel, 64 Nev. 570 (1947)

The case concerned the organization of laundry owners and the treatment of laundry drivers operating established laundry routes. The court record described the association's collective action concerning laundry-route operations; a concurring opinion characterized the arrangement as eliminating competition among laundry businesses.

Competition relevance

The case illustrates historically how coordination among laundry operators can affect both route operators and the competitive structure of the laundry industry.

Principle

Collective conduct by competing laundry businesses can substantially affect competition where it eliminates independent commercial alternatives.

8. Snowflake Laundry Co. v. MacDowell, 52 Wn.2d 662 (1958)

The dispute involved competing laundry routes on Bainbridge Island. The court considered conduct resulting in the diversion of laundry business and the establishment of a competing route.

Competition relevance

Although primarily a commercial dispute rather than a modern antitrust case, it demonstrates the economic significance of established laundry routes and customer relationships.

Principle

Laundry-route customers can represent a significant commercial asset, and competition involving established routes may generate substantial economic effects.

14. Comparative Case — UK Cleanroom Laundry Enforcement

The UK's Competition and Markets Authority investigated two suppliers of cleanroom laundry services and found that they had agreed not to compete for each other's allocated territories and customers. The CMA imposed a combined fine of £1.71 million.

This is highly relevant because cleanroom laundry services are specialized, making territorial and customer allocation particularly capable of restricting competition.

Principle

Agreements between competing specialized laundry suppliers to preserve allocated territories or customers can directly undermine competition.

15. Australian Laundry-Industry Illustration

Australian competition enforcement also demonstrates that competition law can apply strongly to laundry-related markets.

In proceedings involving Colgate-Palmolive, PZ Cussons and Unilever, the ACCC alleged coordination concerning the transition from standard-concentrated to ultra-concentrated laundry detergents. Colgate ultimately received penalties relating to the alleged arrangement, while Woolworths was also penalized for its involvement in the admitted conduct.

This is not a route-concentration case, but it demonstrates the broader principle that coordination among competitors in a laundry-related market can attract competition-law scrutiny.

16. Route Concentration vs. Route Allocation

17. Relevant Competition-Law Theories

A. Cartel / Horizontal Agreement

The most obvious theory arises when competing laundry companies agree to:

• divide routes;
• divide customers;
• fix prices;
• coordinate bids;
• restrict solicitation; or
• exchange strategically sensitive information.

B. Abuse of Dominance

Where one company has substantial market power, conduct such as:

• exclusive dealing;
• discriminatory access;
• predatory pricing;
• refusal to supply;
• tying;
• loyalty rebates; or
• strategic acquisition

may raise unilateral-conduct concerns.

C. Merger Control

Acquisition of a major competing route network can remove an important competitive constraint.

D. Vertical Foreclosure

An integrated laundry operator may disadvantage downstream or upstream competitors by restricting access to critical facilities, inputs, technology or distribution infrastructure.

18. Economic Effects

Excessive route concentration can potentially produce:

Higher prices

Customers may face fewer suppliers and weaker bargaining power.

Reduced service quality

Less competitive pressure may reduce:

• delivery reliability;
• pickup frequency;
• response time;
• customization.

Reduced innovation

Competitors may have less incentive to develop:

• route optimization;
• digital tracking;
• automated sorting;
• energy-efficient processing;
• contamination-control systems.

Higher switching costs

Customers may become dependent upon:

• customized linens;
• collection schedules;
• RFID systems;
• uniforms;
• customer-specific inventory.

19. Efficiency Defences

Not every concentrated laundry route is harmful.

A large route may produce substantial efficiencies through:

• lower vehicle mileage;
• higher vehicle utilization;
• lower fuel consumption;
• centralized processing;
• optimized pickup schedules;
• lower labour costs per customer;
• reduced empty-return trips.

Therefore, competition authorities should distinguish efficient route density from artificial foreclosure.

The key question is:

Did the undertaking obtain route concentration through competition on the merits, or through conduct that suppresses competitors and customer choice?

20. Compliance Measures

Laundry companies should establish clear compliance policies covering:

1. no allocation of customers with competitors;
2. no territorial division agreements;
3. no bid rotation;
4. no agreements not to solicit customers;
5. no exchange of competitively sensitive customer information;
6. independent pricing;
7. independent tender submissions;
8. careful review of exclusive contracts;
9. merger review for acquisitions of competing routes; and
10. employee training for sales and route-management teams.

Particular caution is required at industry associations because discussions concerning customers, territories, prices, bids or future competitive behaviour can create substantial antitrust risks.

21. Conclusion

Laundry route concentration is not inherently unlawful. Route density can generate substantial efficiencies and may naturally result from successful competition. The principal competition concern arises when concentration is artificially created or protected through horizontal agreements, territorial/customer allocation, bid coordination, exclusionary contracts, foreclosure or anti-competitive acquisitions.

The strongest case-law themes are:

• Kimball Laundry — economic value of established trade routes;
• Western Laundry — customer non-solicitation and business allocation;
• American Service Corporation — customer/territorial allocation;
• General Linen Supply & Laundry — horizontal market allocation;
• Blue Bell — concentration and acquisition effects;
• Bascom Launder — economic importance of laundry-related routes;
• Carlton — collective conduct among laundry operators; and
• UK Cleanroom Laundry enforcement — direct prohibition of territorial/customer allocation.

Accordingly, a competition-law assessment of laundry route concentration should examine market definition, concentration, route density, barriers to entry, customer switching, contractual exclusivity, horizontal coordination, foreclosure effects and merger-related loss of competition, while separately recognizing legitimate logistical efficiencies.