I would assume it's part of the City's power to issue a "franchise to operate". If you want a franchise, you pay a (now much higher) fee and agree to certain terms of operation. Given the issues at SMI this may have (accidentally) been a good idea.
Yes, many of us are upset, and the FLT article yesterday indicates that the City may be willing to take another look at this process. For example, if the goal is increased recycling, why every 2 weeks in enormous bins? My suggestion would be have the City issue a press release that describes the new rules and the reasoning behind them.