Trouble on Israel's Waterfront

Antitrust chief set to declare ports' container operations oligopolies.

In the first salvo in the battle to create a new, privately run port facility on Israel's Mediterranean coast, on Thursday Antitrust Commissioner David Gilo informed the two state-owned port corporations in Ashdod and Haifa that he intended to declare them oligopolies in the field of loading and unloading of ship containers.

Gilo's declaration means that any new port facility built by the government at the two locations could only be operated by another franchisee that would compete with the two major port companies.

There are indications that Gilo's move will spark a response among port workers, even before any hearing on the issue. Any oligopoly determination by Gilo at the ports is subject to a hearing, and the hearing notice sent to the port companies advises them of a hearing date in July.

"Land and infrastructure designed to provide port services are a limited resource in the nearly total control of the port companies," Gilo wrote in hearing notices sent to the port corporations. "The transfer of additional land or newly built infrastructure to an [existing] port corporation would scuttle the possible entry of new competitors to the market for loading and unloading containers, and thereby do harm to competition and the public."

The port workers' leadership in Haifa and Ashdod are expected to meet today with Histadrut labor federation chairman Ofer Eini, TheMarker has learned, to consider recent developments - including statements last week by Finance Minister Yair Lapid over his intention to push, in the near future, for structural changes at the ports. Industry, Trade and Labor Minister Naftali Bennett expressed his own support for port reform and termed Gilo's latest move "courageous and important."

Transportation Minister Yisrael Katz also addressed the issue of port reform over the weekend, saying that injecting competition would lower the price of merchandise and the cost of living. "It's a big and heavy project," Katz wrote on his Facebook page, "but we will carry it out appropriately."

The workers' committees at the ports have so far refrained from taking protest action over any impending port reforms, so long as the proposals have not been translated into concrete changes. Now, however, they are expected to consider action in response to Gilo's oligopoly finding.

The workers' committees could declare a labor dispute, which theoretically at least could pave the way for strike action - this even though Gilo's move was more legal than political in character, in that he is purporting to enforce existing antitrust laws.

Earlier this month, TheMarker disclosed that the Antitrust Commission was considering barring control of new dock facilities planned at the Haifa and Ashdod ports to the existing port companies. If this step is taken, the government's hands would be tied, protecting the government from pressure from the unions. This would be in contrast to a scenario a decade ago, when the port companies were handed operation of new port facilities in Haifa and Ashdod, built at a cost of billions of shekels.

If, after a hearing, Gilo's finding that the two government port companies are oligopolies in the container sector is confirmed, he would have the authority to issue two orders. One would declare that the port companies cannot operate another port or provide port services to any other port other than where they are currently operating. This would mean that new docks that the government plans to build in Haifa and Ashdod would be operated by a new competing entity or entities.

A second order would maintain the status quo to the extent that it would limit further development of the existing ports run by the government companies. That could bar the port companies in Haifa and Ashdod from building new facilities such as breakwaters or dock space, further arousing the ire of the companies and their workers' committees.

Gilo could also make it a criminal offense for the existing port companies to do anything that would interfere with the entry of new players in the port sector.

Albatross Aerial Photography