The Italian Competition Authority (hereafter “AGCM”) recently intervened in the highly sensitive technical-nautical services sector, thereby constituting the first official attempt at opening this sector to free and effective competition.
As we pointed out in our previous newsletters, it has been clear for a long time that the Italian technicalnautical services sector could not continue to remain rooted in two principals, namely obligation and monopoly. While these principals are the origin of important premium charges limiting competition in Italian ports, they are potentially in contrast with principles of EU Competition policy.
We are currently witnessing the first signals of a new approach taken by the Italian administration, in particular the authority competent to recognise potential violations of Competition laws by enterprises as well as, more recently, public entities. Let us examine what exactly led to this AGCM decision.
The Maritime Authority of Messina rejected a request made by a shipping company to be authorised to autonomously provide navigation services in the port of Messina. The company thus presented a claim before the AGCM of violation of Competition Laws by the Maritime Authority.
On the 12 December 2012, the AGCM issued an opinion declaring that the right to autonomously provide navigation services cannot be excluded a priori, without an adequate public security justification.
Indeed, the right to autonomously provide services, including in the technical-nautical services sector, should be allowed by virtue of articles 101, 102 and 103 of the Treaty on the Functioning of the EU and article 9 of Law 287/1990. However, up until today, a different practice has developed in Italian ports, enabling the creation and preservation of a monopoly of a limited number of port operators authorised to supply individual mooring, navigation and towing services.
According to the AGCM, the obligation to make use of navigation services while entering or exiting a port should be preceded by “striking a balance between the need to ensure adequate security standards in the regulation of technical-nautical port activities and the need to preserve the highest possible degree of competition in the carrying out of economic and business activities.”
Furthermore, the Italian Competition Authority stated that, “the potential public security justifications which preclude the recognition of the right to autonomously provide navigation services should form the object of a claim strong enough to justify the following temporary breach of Competition laws.”
In other words, a Maritime Authority should no have the right to refuse to grant authorisation to a company providing its own navigation services without having previously ascertained the existence of public security needs (for example, connected to the port structure and underlying seabed), which may require recourse to the said port’s navigation personnel. When refusing to grant such authorisation, the relevant Maritime Authority must clearly state its security reasons, and the latter must be sufficient in order to justify the consequent limitation of competition.
Thus, the AGCM made a very clear declaration that the technical-nautical services sector is not and cannot be an enclave, in which Competition law principles do not apply to the port and within the port. On first reading, this decision appears to be explosive.
Let us speculate on the potential consequences of this ACGM decision for ship-owners and terminal operators.
- moorage: due to the particularities of this service, the security reasons justifying a limitation of competition are not immediately obvious. In particular, ship-owners could be authorised to provide the services themselves, and terminal operators could be permitted to carry out activities on the vessels held in the terminal under concession.
- pilotage: when the port structure and vessel characteristics (for example vessels exercising a liner service making frequent stops at the port during their voyages) enable it, the ship-owner may be authorised to provide its own services. In such a case, the Captain shall be guided through the VHF system, thus guaranteeing an adequate balance between security requirements and Competition laws.
Indeed, it is difficult to understand what security needs may justify the obligation to make use of pilotage services when a Captain is very familiar with the port as he passes through it frequently on his voyages.
Furthermore, in the aeronautical sector, where security concerns are much higher, aeroplanes may take off from and land off any airport in the world by simply following radio instructions;
- towage: in its opinion of 8 November 2012, the AGCM examined the refusal of the Maritime Authority of Milazzo to authorise an interested company to carry out towage services in the said port. The reason for refusal was namely based on the fact that in the said port, a towage services operator was already present.
So, the AGCM declared that port law does not foresee that the issuing of concessions for carrying out technical-nautical services should only take place “exclusively or through other means than a public tender”. Rather, “indeed, the choice of the services management model must be the result of a reflection exercise, balancing Competition laws and the collective need for public security.”
It must be remembered that towage services require a minimum amount of towboats and thus an important initial investment in order to carry out these services in secure conditions. In this context, it is clear that the maintenance of secure conditions, and at the same time, the carrying out of a lucrative towage service, require that the latter be undertaken by a sole operator in a said port.
However, the characteristics of the port and the number of vessels berthing at it could justify the presence of two or more operators. In this case, the security standards could be maintained high through requesting stringent technical and financial requirements in order to take part in the tender to gain access to the market and be issued (and able to maintain) the concession.
AGCM ordered the Milazzo (Messina) Harbour Master's Office (HMO) to report within two months – a deadline just expired – steps taken in order to get rid of hindrances to competition in tenders for the towing service.
Meanwhile a letter from the Ministry of Transport sent to HMO has stated that the Harbour Master's decision not to authorise an interested company to carry out towage services in the said port is lawful as this does not infringe competition rules but protect safety.
Therefore – according to the Ministry position – granting only one concession in any given port is the only way to preserve the safety’s standard of the towage service.
AGCM is granted the right to appeal the Ministry’s decision before a national Tribunal.This shall be the ultimate challenge between the two public powers in this very contentious issue.
In any case a very good chance to affirm, almost twenty years from the entry into force of Law 84/1994, the principle of “competition for the port and within the port” in the technical-nautical services sector.
In other words, the recognition of the right to autonomously provide services in the technicalnautical sector could be a first step towards:
- excluding or limiting the obligation to use such services in ports which have proven and urgent security needs;
- in any case, introducing the principle of competition between operators for access to the port, where a number of authorised agents may eventually be able to coexist and provide the same technical-nautical services.
Naturally, we await to see what consequences shall materialise from this evident clash between two eminent positions either in the case examined above or through initiatives which could be undertaken by shipping companies and other agents interested in providing technical-nautical services (notably, moorage and towage).