Ms Isolde Goggin:

I thank the committee for the invitation to discuss our work on competition in the ports sector. We are pleased to be here. I am accompanied by Ms Vivienne Ryan. She is head of the advocacy division that examines studies into markets where there is not an enforcement issue but where we feel areas of competition could be improved. I am also accompanied by Mr. Ciarán Aylward, a case officer in the Competition Authority. He is the main author of the ports study and I intend to direct hard questions to him. Mr. Ciarán Quigley is the secretary of the authority and head of corporate services and Dr. David McFadden is our legal adviser.

Let me put the study in context. We got a request from the Minister for Jobs, Enterprise and Innovation to carry out a study into the ports sector in the context of the Action Plan for Jobs. The underlying motivation for the study is competitiveness, jobs, keeping exports competitive and import prices down, and the role that can be played by the ports study. Timelines were set out in the Action Plan for Jobs. We worked towards that and produced the study last November.

We asked whether the competition in the Irish ports sector worked well for consumers and the economy. In many ways the ports sector has a very low profile. It is enormously important for exports to remain competitive. As an island nation we are dependent on ports. Therefore, our future economic success depends on our ability to trade. Prices are very sensitive to transport costs, particularly to port costs, and unnecessarily high charges or inefficient ports will increase the cost of importing and exporting goods. It is estimated that a 10% hike in transports costs can lead to trade volumes being reduced by more than 20%. Additionally, it is not just about costs but efficiency. It is about the throughput of ports and the speed with which goods are turned around or brought in and out. It is estimated that every extra day in transit reduces trade volumes by about 1%.

As part of the process of conducting a study, we decided in December 2012 to issue a consultation document. The rationale behind it was to verify our understanding of how competition works and invite interested parties to identify ways to strengthen competition. Before that we held a series of one-to-one consultations and had over 30 meetings with those involved such as Departments, public agencies, industry representatives, the ports and transport companies, port authorities and other port users. The consultation helped to build an understanding of the sector and identified key issues because not a whole lot has been written about the sector.

We received 33 submissions and the response was generally very positive because people were in agreement and indicated how it works. We also had a very good response from the various stakeholders because we sought further information and meetings to verify our understanding. They put a lot of time and effort into their responses and we thank them all for their co-operation.

There are two aspects of ports that are important: first, competition between ports, or inter-port competition; and second, intra-port competition, which is competition in the same port between different terminals and different service providers. The main focus of the study was on unitised cargo, of which there are two main types. The first is lo-lo, or lift-on/lift-off cargo, for which large cranes and port infrastructure are needed to move cargo in and out; the second is ro-ro, or roll-on/roll-off cargo, which is driven on and off a ship. There is also bulk cargo, which refers to large and heavy material such as liquid fuel, coal, fertiliser or animal feed. Exports are dominated by the unitised ro-ro and lo-lo cargo, while imports are dominated by bulk cargo.

The kinds of thing that influence inter-port competition are port location, traffic trends, the quality of road infrastructure, haulage costs, the degree of specialisation at ports and service frequency.

We found that the level of competition between ports in Ireland, that is, inter-port competition, is limited as is the scope for inter-port competition, mainly for historical and geographical reasons. Lo-lo terminal users increasingly utilise larger ports like Dublin, Belfast and Cork that are located next to large urban centres. They have the volume of traffic that justifies investment in the port infrastructure. Exporters and importers value the level of choice, service and frequency, while container shipping lines value large scale terminals that can minimise cost by facilitating bigger vessels and larger more efficient cranes.

Competition for ro-ro services is limited to east coast ports, including from Belfast, Warrenpoint, Drogheda, Dublin, Rosslare and across to the different ports in the UK. Frequency is a big issue because many ro-ro services are time dependent where people look at the supply chain from start to finish. They need to minimise the transit times and fit in the rest times for lorry drivers and so on so frequency of service is a big deal for those users. Where there is heavy bulk cargo, customers will generally seek to use the nearest port as happens at Shannon and Cork. I sent a copy of some documents to members of the committee which includes some useful diagrammes. Much of the bulk cargo goes into Shannon, coal into Moneypoint and aluminium ore into Aughinish Alumina. They are location dependent. Customers will not go to some other ports and incur the transports costs to go to those industries. Similarly Whitegate is used for the oil going into Cork.

Customers will also seek to use the nearest largest port which has the greatest frequency of service. Ensuring that competition within a port, that is, inter-port competition, works well is very important. It is particularly important in Dublin Port because it is the largest port in the country and the only one in the State that has grown its market share since 2005, and export focused cargo is becoming increasingly concentrated there with the improvements in the road network. In 2012, Dublin handled 43% of ro-ro and 57% of lo-lo cargo.

We looked at the leasing and licensing arrangements for lo-lo terminal operators and for service providers in Dublin Port. We are concerned that they may be restricting competition because they are very long arrangements. Some of the arrangements were entered into about 20 years ago. One has 110 years left of the lease and one has 85 years left and there is no scope for improvements in terms of performance measures. The third is providing lo-lo services under a general stevedore licence granted 20 years ago and is due for renewal. It can be renewed for another 20 years on identical terms once certain conditions are met. That is a concern. Those are very long timescales and it is hard to see how anybody else can get in. If they could do it better, how are they to get in because of the restricted capacity? What tends to happen if there are restrictions in competition is that the service gets worse and the charges increase.

While Dublin Port Company can impose performance measures on the licensed operator it cannot do it on the lease holders which have 85 and 110 years left to run. We recommended that Dublin Port Company should consider reducing the duration of those leases to address their anti-competitive impact. It should look at whether the repeated renewal of the licence of the third lo-lo terminal operator should be amended to facilitate new entry. We think those leases should be awarded for a shorter period on a fair, reasonable and non-discriminatory basis and should include efficiency measures that are enforced by Dublin Port Company. That means turnaround times and so on and ensuring that the operator is getting the cargo in and providing a good service to users.

There are only two general stevedore licences for the common user quays in Dublin Port - effectively, one operates on the northside and the other operates on the southside - and the licences are for 20 year periods and are automatically renewed. Dublin Port Company should issue at least two new general stevedore licences and should not have the clause in the current licences which allows for repeated renewal on more or less the same terms and conditions. In all ports, general stevedore licences should be granted to applicants on a fair, reasonable and non-discriminatory basis or through a tendering process. If cargo lines want to self-handle they should have that opportunity because many of them do that and are able to save money in that way and do not necessarily have to hire the services of a stevedore.

One issue that arose in the consultations when we talked to people was the idea of port closure and amalgamation. If ports are struggling, amalgamation may reduce and lower administrative costs. It is not likely to have much effect on inter-port competition or to generate the necessary scale to compete with Dublin Port. If a merger between ports is being proposed, we recommend that the Department of Transport, Tourism and Sport be required to seek the views of the authority, as we have a general function to look at mergers within the economy but they have to be above a certain threshold and normally the ports would be below that threshold. Either the Department of Transport, Tourism and Sport should seek our views or there is a facility to designate a certain class of mergers as being notifiable to the authority regardless of the turnover. That could be done by our own Minister. We recommend that the Department of Transport, Tourism and Sport should seek our views on competition effects of possible port mergers and amalgamations. The ports should be given intra-port competition as a key objective, that is, if a port can sustain competition for ancillary services, the stevedoring licences and so on. Some port authorities do not recognise the benefits of intra-port competition as a way of attracting users. In regard to competition and monopoly it has been said that the best of all monopoly profits is a quiet life. Sometimes if one has a single monopoly and a quiet life one does not feel the urge to do everything one possibly can to promote competition.

Investment to improve road and rail infrastructure may be justified for a number of reasons, one of which is competition, but also to remove bottlenecks or to abide by EU requirements for access to ports or to drive regional development objectives. We do not consider that type of investment will be warranted purely on competition grounds. We recommend that people consider it from other points of view but not to put money into ports on the grounds that it will drag traffic away from larger ports because the experience shows it does not happen but goes the other way around.

An issue that haunted the authority throughout the study was the difficulty in measuring performance and having access to proper data. This is not just an Irish phenomenon, it appears to be the case generally that ports differ a great deal. It is very hard to compare them across countries. If we take a concentration of ports along the North Sea coast such as Rotterdam, Amsterdam and Antwerp they do much transit traffic and are not just looking at traffic for that country, whereas here, being an island nation, the traffic is in and out, it is for Ireland. It is a bit different here than in continental countries. We recommend that the Department of Transport, Tourism and Sport should prioritise the collection and development of new data metrics and port performance measures for the main ports in order that it is able to track performance over time and see that the ports are improving. The study was published in November. Its recommendations are mainly directed towards the Department of Transport, Tourism and Sport, the Department of Jobs, Enterprise and Innovation and Dublin Port Company. The Department of Transport, Tourism and Sport has committed to responding to all the recommendations within six months of publication. We are interacting on a constant basis with our parent department, the Department of Jobs, Enterprise and Innovation.

Dublin Port Company is reviewing its franchise arrangements and concluded its consultation at the end of last week. It had held off doing so until it had an opportunity to look at our study. In its review Dublin Port Company acknowledged the length of the leases and licences and said that it would not consider granting leases and licences on such terms today and will seek to replace existing leases and licences with more modern and appropriate franchises. It indicated that there has been substantial investment and growth over the years and has raised the question as to how far it can go to undo the terms of an existing licence. We will await the outcome of that review and the response from the Department of Transport, Tourism and Sport. This will be an ongoing process when we will be working with all the relevant parties. We will be happy to answer any questions the committee may have.