Ports: AdC presents three recommendations to the Government and administrations to improve competition in the sector 

The Portuguese Competition Authority (Autoridade da Concorrência, AdC) recommends to the Government and port authorities the adoption of measures to promote competition in the market for port terminal concessions, the liberalization of market access for towing and piloting services, and the redefinition of the port governance model.

The AdC considers that the adoption of the recommendations to promote competition and efficiency in port terminal concession contracts, namely through new open tender procedures, is a pressing issue given that 15 out of the 27 concession contracts analysed will expire until 2025 and 2 are currently undergoing renegotiation (the container terminals in the Port of Lisbon and the Port of Sines).

On the other hand, the implementation of the investment plan for ports (amounting to around 1.8 thousand million Euro) represents an opportunity to mitigate capacity constraints and improve intermodality conditions.

In order to take advantage of this window of opportunity to promote efficiency and competition in the Portuguese port sector over the next 5- to 10-year horizon, the AdC puts forward the recommendations to provide the competition perspective on the concession contract award and renegotiation processes, as well as to optimize port governance and the provision of port services.

The analysis conducted by the AdC shows that the proceedings of port terminal concessions are likely to be improved in the way of promoting competition and efficiency.

Additionally, a substantial share of port terminal concession contracts were awarded for a 30-year period, including the initial duration and possible extensions. These contracts show no significant relationship between contract duration and the level of private investment.

In light of the ongoing renegotiation process, the AdC considers that new public tender procedures should be favored over renegotiations, as the former allows exposing concessions to evolving market conditions more often. This increases the likelihood that the terminal is being run by the most efficient player at all times.

The AdC identifies other risks that renegotiation processes might carry, such as market foreclosure to competitors and unjustified benefits for the concessionaire, or adverse effects on the bidding strategies of participants in new tender procedures.

Notwithstanding the recommendation for new public tenders to be favoured over renegotiations, when a renegotiation takes place variable rents charged to the concessionaire should be reduced as to lower the price paid by service users. As a compensation, shorter duration in the remaining contract period or shorter contract extensions should be obtained.

Regarding the liberalization of towing and piloting services, the AdC considers, in line with the European Commission, that licensing generates higher benefits for consumers and the Portuguese economy when compared to the direct provision by port authority and concession models currently in use in Portuguese ports. Licensing regimes place each provider under greater market discipline.

Licensing allows for the simultaneous activity of several service providers and a varying number of service providers across time.

Regarding the third Recommendation, on the redefinition of port governance model, the AdC argues that a clear separation of the regulatory, port management and service provision and terminal operation activities is key, in order to eliminate the conflicts of interest the current model may entail.

Port authorities should follow guiding principles for promoting efficient infrastructure use, the good performance of port services and value creation for port users, taking into account the promotion of competition.

Port authorities should ensure that their revenues are limited to the amount that allows them to guarantee their economic and financial sustainability, and their ability to make the investments they are responsible for. To achieve this, port authorities should establish a dividend distribution policy that takes into account the port’s investment plan.

Port authorities should be obliged to publish a broad number of port efficiency and productivity indicators, in order to allow performance comparisons across the various ports.

The AdC’s recommendations are included in the final version of the Study on Competition in the Port Sector study (“Estudo sobre a Concorrência no Setor Portuário”, currently available in Portuguese). This study includes the responses received from the sector’s stakeholders, as well as the results of the collaboration between the

AdC and the Organization for Economic Co-operation and Development (OECD) on the transport sector, which led to the reformulation of the study’s structure.

The port sector plays a fundamental role in the Portuguese economy. It contributes directly and indirectly to job creation, domestic investment and economic development. For these reasons, the AdC has developed a number of analyses about the sector’s competition conditions over the past years.

27 December 2018