At a time when cash-strapped cities are pushing contractors to give them lower rates, one company has been getting – and keeping – street-sweeping deals by bidding low. But it’s also started something of a street fight.

To take advantage of falling prices, cities are putting more services up for bid rather than renegotiate old contracts or provide the services themselves. In this environment, City of Industry-based Athens Services has snatched up several six-figure contracts recently from bargain hunters including San Fernando, Pomona and Rosemead, increasing its foothold in Southern California to 17 cities total.

But rival company CleanStreet Inc., which has lost its contracts in Rosemead, Monrovia and other cities, claims its rival is fighting dirty.

At least one other competitor voices similar complaints about Athens. Bill Barrett, president of Oxnard-based Venco Power Sweeping Inc., recently lost bids to Athens in several Los Angeles County cities. In San Fernando, Venco had been the contracted sweeper for years, but Athens was awarded an annual contract in fall 2009 worth $121,000, which was about $30,000 less than Venco’s bid and $50,000 less than CleanStreet’s.

Competitors such as Venco and CleanStreet can’t bid as low if they want to make a profit, Barrett said.

“Companies like Athens are just driving street sweeping below cost,” he said.

Repeated calls to Athens, a family-owned company run by Chief Executive Ron Arakelian, were not returned. CleanStreet spokesman Andrew Jacoby and its attorney, Daniel Alderman, declined to comment.

Whether Athens is strategically pricing its service below cost or is just running a more efficient operation may come out in court. CleanStreet has sued Athens in Los Angeles Superior Court, alleging that its rival charges artificially low prices and is illegally bundling street sweeping with its trash-hauling business.

Under state law, below-cost pricing and bundling of goods can be considered illegal if proved to be anticompetitive.

“In order to entice cities to hire them, Athens has engaged in conduct that is in violation of California law,” the lawsuit filed by the Gardena-based sweeper states.

Regardless, cities and other governments are now more inclined to play companies against each other by putting more services up for bid. Thanks to the recession, companies seem more willing to drop their prices, often undercutting other companies that had longstanding agreements with local governments.

A prime example of that happened in Rosemead. There, CleanStreet had been the sweeper of choice for almost 20 years. But budget issues fueled by the downturn forced city officials to put several contracts out to bid instead of negotiating a renewal of the old contract.

“In the past, it was pretty much conceded that the city would work it out with the current contractor and negotiate instead of going out to bid,” Councilman Steven Ly said.

“This time around, some council members thought we should take advantage of these times and see if we can get a better price. Because of the economic situation, a lot of contractors are re-evaluating what it means to make a profit and have really brought down their prices.”

Out of four bidders, Athens came in with an offer that was “by far the lowest,” said Public Works Director Chris Marcarello.

Rosemead switched to Athens on July 1, and as a result will save $50,000 a year. Officials made similar switches for several other contracts, including tree maintenance and janitorial services, which will save more than $200,000 a year.

In Pomona, budget cuts caused that city to lay off employees and contract out sweeping services in September. Athens’ winning offer of $406,000 a year was $300,000 less than CleanStreet’s offer, and more than $60,000 less than the second-lowest bidder.

But can a low bid be too low?

The exact definition of anticompetitive, below-cost pricing “is a line that moves back and forth” depending on the judge and the facts of each case, said Scott M. Pearson, an attorney at New York-based Stroock & Stroock & Lavan LLP who has handled anticompetition cases.

“What you really want is an internal e-mail that says, ‘Let’s just put all these guys out of business and raise prices later,’” Pearson said.

But short of that kind of smoking gun, CleanStreet would have to prove its case based on evidence such as the prices of Athens’ other contracts, or try to determine the company’s actual cost of providing sweeping services.

Athens, on the other hand, might justify its prices by showing that its costs are lower because it runs a more efficient company, he said.

Not a sweeper

What puts Athens in a unique position to undercut its competition is that, unlike its competitors, “sweeping is not their primary business,” Venco’s Barrett said.

Besides Athens and CleanStreet, there are two other similarly sized sweeping companies in the county: Downey-based R.F. Dickson Co. and Norwalk-based Nationwide Environmental Services. Three more from outside county lines – Venco in Oxnard, San Marcos-based Cannon Pacific Services and Sunnyvale-based CleanSweep Services – also compete in the county.

Of all those, only Athens has another major source of revenue: The company is a trash-hauling and recycling service with exclusive deals in a number of cities.

In fact, in other cases, the company throws in free street-sweeping services as a deal sweetener for trash contracts – another practice contended by CleanStreet’s lawsuit.

One such bundling case is in Glendora. In 2007, the city notified Athens it intended to cancel its trash-hauling contract with the company; in response, Athens offered to sweep its streets for free. Glendora accepted that offer, and saved the more than $150,000 a year it was spending to do the job itself.

In South Pasadena, Athens has been providing free sweeping for 10 years as part of an exclusive trash deal. Previously, the city had been paying R.F. Dickson for the service.

“It seemed an appropriate complementary service they could provide us,” said Diana Harder, South Pasadena public works assistant.

But competitors said the bundling arrangements make it impossible for other street-sweeping companies to compete.

“There is no possible way street sweeping can be performed for free or for the prices Athens is quoting to cities based on the legitimate cost to do business,” complains CleanStreet’s lawsuit.

Bundling products isn’t inherently illegal – for example, there’s nothing wrong with giving away a free T-shirt with a 12-pack of soda – but it can be if it’s determined to restrain competition.

For example, tape manufacturers in 2003 complained that 3M was bundling its Scotch tape with several of its nontape products as part of a discount program – the more 3M products a retailer bought, the bigger the discount.

The U.S. Court of Appeals for the Third Circuit ruled that 3M couldn’t do that, because it was an unfair advantage over any rival tape maker “who does not manufacture an equally diverse group of products and who therefore cannot make a comparable offer.”

If Athens and CleanStreet go to trial, the case would be expensive to litigate, especially because both sides would have to hire economic experts, Pearson said. Considering that neither company is a huge corporation with deep pockets, it’s possible the case could be settled once a judge decides early on whether to grant an injunction against Athens.

“That way you have a preliminary indication of what’s going to happen,” he said.

Cities, meanwhile, are just happy to be enjoying the savings for their taxpayers.

“If they feel they can make a profit out of that, we’re certainly not going to complain about the extra savings,” Rosemead’s Ly said.