There are three categories of port-related competition. Interport competition arises when two ports in the same or in different countries compete for the same cargo. The scale of interport competition often depends on the size of the hinterland of the concerned ports. For example, Rotterdam competes with Antwerp, Hamburg, and Bremen for cargoes destined for Central Europe. Transshipment container trade competition often concerns an entire region; for example, in the South Asian region, the port of Colombo is competing with Singapore, Tanjung Pelepas, Dubai, Salalah, Aden, and possibly in the future with Vallarpadam. Intraport competition refers to a situation where two or more terminal operators within the same port area compete for the same type of cargoes. Intraterminal competition refers to two or more (stevedoring) companies competing within the same terminal. This situation is rare and usually only exists within small ports operating under the service port model with independent stevedores.
In general, intraport competition is favored by both government and port users, but is not always feasible. It depends on the volume of the cargo, which may not be sufficient to allow two or more operators to run a profitable and effective business. Establishing competition in the port sector requires four steps:
When intraport competition is muted or absent, the terminal operators (whether public or private) have an incentive to use their monopolistic market position to charge high tariffs (particularly for captive cargoes), which may justify regulation. The need for such regulation may lead to the creation of an independent port competition regulator. This regulatory function is usually instituted by law.
The main objective of the regulator is to ensure fair competition among competing operators in the port; control monopolies (including public ones) and mergers; and prevent anticompetitive practices. Generally, a port sector regulator has legal powers to interfere in anticompetitive practices such as:
A port competition regulator should only be established in the event of serious threats to competitive behavior within the port. It should preferably have the character of an arbitrator rather than a court of law, and be accepted by the port community as being independent. In the case that boundaries between port authorities and terminal operators are vague or nonexistent (when a port authority not only runs its own container terminal but also owns shares in a competing facility, as is the case in Sri Lanka), a regulator might be a solution for guaranteeing a level playing field for all port operators. A regulator, however, should not jeopardize the legal powers of port authorities to operate freely in the market or the ability of a terminal operator to negotiate tariffs with its clients.
Box 21 discusses the consequences of over competition in ports with insufficient volume, highlighting the case of the Port of Buenos Aires.
In a landlord port model, the public port authority itself is the first to exercise control over excessive pricing by marine or port services providers. A well-devised concession agreement still constitutes the best means to prevent an operator from misusing monopoly power.
In Module 6, a detailed analysis is provided concerning port regulation, including competition regulation. The next section emphasizes the legislative aspects of such regulation.
The introduction of a port competition act is only deemed necessary in the event that interand intraport competition is absent or not sufficiently developed to prevent monopolistic behavior, either by a port authority or a port operator (see Box 22). Reasons for introducing regulation in this respect are:
As indicated above, port competition regulation may either be introduced by law or be part of a concession agreement with a port operator. There is also the possibility of a merger between two port operators, resulting in the creation of a monopoly in the concerned port. In such a case competition regulation may be necessary either in terms of tariff regulation or in prohibiting the merger for being incompatible with fair competition.