Competition Concerns in Dredged Material Reuse

1. Introduction

Dredged material reuse refers to the beneficial use of sediment, soil, sand, gravel, or other material removed from rivers, ports, harbours, navigation channels, reservoirs, and coastal areas. Instead of treating dredged material solely as waste requiring disposal, it may be reused for land reclamation, beach nourishment, construction aggregates, habitat restoration, flood protection, road works, mine rehabilitation, or coastal engineering.

Competition concerns can arise because dredging and reuse markets often involve public authorities, port operators, licensed disposal facilities, environmental permits, specialised contractors, testing laboratories, transport providers, and downstream construction markets. Control over disposal sites, permits, testing facilities, port infrastructure or information about available material can therefore create opportunities for exclusionary or collusive conduct.

The principal competition-law issues include:

• bid rigging in dredging and reuse contracts;
• allocation of dredging territories or public projects;
• exclusive access to disposal or reuse sites;
• refusal to provide access to essential infrastructure;
• discrimination in access to port facilities;
• tying dredging services to disposal or reuse services;
• exclusive dealing with construction-material purchasers;
• manipulation of environmental or technical specifications;
• discriminatory access to sediment-testing facilities;
• information exchange among competing dredging contractors;
• mergers between dredging contractors and disposal/reuse facilities; and
• exploitation of public procurement or concession arrangements.

2. Relevant Markets

A competition authority would normally identify the relevant product and geographic markets rather than automatically treating dredged-material reuse as a single market.

Potential markets include:

A. Dredging services

This may encompass:

• maintenance dredging;
• capital dredging;
• environmental dredging;
• harbour dredging;
• river dredging; and
• specialised contaminated-sediment removal.

Depending upon the project, hydraulic dredging, mechanical dredging and specialised environmental dredging may or may not be substitutable.

B. Dredged-material processing

Possible activities include:

• dewatering;
• sediment washing;
• contaminant treatment;
• screening;
• separation;
• stabilisation; and
• quality certification.

C. Reuse markets

Dredged material may compete with:

• natural sand;
• quarried aggregate;
• manufactured aggregate;
• fill material;
• recycled construction material; and
• imported construction materials.

D. Disposal facilities

Where contaminated or unsuitable sediment cannot economically be reused, disposal facilities may constitute a separate market, particularly where there are only a few permitted facilities.

E. Geographic market

The geographic market may be local or regional, because transportation of wet or processed sediment can be expensive. A disposal or reuse facility located near a port may therefore possess substantial competitive significance.

3. Why Dredged-Material Reuse Creates Competition Issues

A. Concentration of Port Infrastructure

Ports and harbour authorities frequently control:

• berths;
• navigation channels;
• dredging contracts;
• sediment handling areas;
• temporary storage sites; and
• access routes.

If a port operator favours an affiliated dredging or reuse company, competing contractors may face a significant competitive disadvantage.

A dominant infrastructure operator could potentially engage in:

• discriminatory access;
• discriminatory pricing;
• preferential scheduling;
• refusal to deal;
• cross-subsidisation; or
• self-preferencing.

4. Exclusive Disposal and Reuse Sites

A major competition concern arises where one undertaking controls the only economically viable site for:

• sediment disposal;
• sediment treatment;
• temporary storage;
• land reclamation; or
• beneficial reuse.

An exclusive arrangement may foreclose competing dredging companies if those companies cannot practically complete their projects without access to the facility.

The competition authority would examine:

1. whether the facility is genuinely indispensable;
2. whether alternative facilities exist;
3. whether capacity is available;
4. whether access conditions are reasonable;
5. whether environmental permits create artificial scarcity; and
6. whether exclusivity has legitimate environmental or investment justifications.

5. Bid Rigging in Dredging Contracts

Public dredging projects are particularly vulnerable to collusive tendering.

Competitors may agree to:

• rotate winning bids;
• divide ports or waterways;
• submit cover bids;
• suppress bids;
• coordinate prices;
• allocate customers; or
• exchange competitively sensitive information.

For example, several dredging contractors could agree that:

Contractor A will win harbour projects in Region 1, Contractor B will win river projects in Region 2, while the others submit deliberately higher bids.

Such conduct can constitute a serious cartel irrespective of whether the underlying project involves reuse, disposal or conventional dredging.

6. Geographic Market Allocation

Competitors may divide dredging opportunities geographically.

Possible arrangements include:

• allocating individual ports;
• allocating rivers;
• dividing coastal zones;
• allocating government agencies;
• dividing particular categories of sediment; or
• agreeing not to compete for another firm's customers.

Geographic allocation is particularly problematic because dredging markets may already have limited numbers of qualified contractors.

7. Tying Dredging to Disposal or Reuse

A dominant dredging contractor might require customers to purchase related services from it.

For example:

Dredging contract → mandatory transportation → mandatory treatment → mandatory reuse/disposal facility

If the contractor has market power in dredging, compulsory purchase of downstream disposal or reuse services could foreclose independent operators.

The relevant inquiry would include:

• whether the services are separate products;
• whether the undertaking possesses dominance in the tying market;
• whether customers are effectively compelled to purchase the tied service;
• whether competitors are foreclosed; and
• whether there is an objective technical or environmental justification.

8. Exclusive Supply Agreements

A reuse facility could enter into long-term exclusive agreements with:

• construction companies;
• road contractors;
• developers;
• reclamation companies; or
• government infrastructure projects.

Such agreements may restrict competing reuse suppliers from obtaining sufficient customers.

The assessment would depend upon:

• duration;
• market coverage;
• market power;
• availability of alternatives;
• switching possibilities; and
• barriers to entry.

Short-term arrangements reflecting legitimate investment or quality-control requirements may be less problematic than comprehensive long-term foreclosure arrangements.

9. Refusal of Access

A dominant operator controlling a unique treatment or reuse facility might refuse access to competing dredging companies.

Competition concerns become stronger where:

• the facility is indispensable;
• duplication is economically or technically impractical;
• access is necessary to compete downstream;
• the refusal eliminates effective competition; and
• there is no objective justification.

Environmental regulations may nevertheless legitimately restrict access where particular sediments require specialised handling.

10. Discriminatory Access

Even where access is formally available, discrimination can occur through:

• different prices;
• different waiting periods;
• different quality requirements;
• preferential loading slots;
• discriminatory testing requirements;
• different contamination thresholds; or
• preferential access for affiliated companies.

For example, an integrated dredging-and-reuse company might obtain priority access to a treatment facility while independent dredgers receive capacity only after long delays.

This can raise self-preferencing and discriminatory-access concerns.

11. Environmental Standards and Competition

Environmental requirements have an unusual role in this market.

Sediment may contain:

• heavy metals;
• hydrocarbons;
• persistent pollutants;
• pathogens; or
• other contaminants.

Strict standards can therefore be legitimate.

However, competition concerns may arise where an incumbent attempts to influence technical specifications so that only its own technology qualifies.

Examples include specifications requiring:

• a proprietary treatment technology;
• a particular processing method without objective necessity;
• a particular certification;
• equipment available only from one supplier; or
• unnecessarily restrictive contamination thresholds.

The distinction between legitimate environmental regulation and strategic exclusion is therefore crucial.

12. Information Exchange

Dredging contractors frequently participate in public tenders and industry associations.

They may possess information concerning:

• bid prices;
• equipment costs;
• project margins;
• capacity;
• future bids;
• customer strategies; and
• geographic expansion.

Exchange of competitively sensitive information can facilitate collusion.

Particular risks arise where competitors communicate shortly before tenders or exchange detailed information about intended bidding behaviour.

13. Joint Ventures

Dredging companies may form joint ventures because projects require substantial:

• dredgers;
• barges;
• treatment technology;
• environmental expertise;
• storage facilities; and
• financing.

A joint venture may be legitimate where it combines complementary resources that individual firms cannot economically provide.

However, competition concerns may arise where the same parties are capable of competing independently and the joint venture becomes a mechanism for:

• fixing prices;
• allocating projects;
• restricting capacity;
• exchanging sensitive information; or
• eliminating competition.

14. Merger and Acquisition Concerns

A merger between:

Dredging contractor + sediment-treatment facility

or

Dredging contractor + major reuse/disposal facility

may create vertical foreclosure concerns.

The merged company could potentially:

1. deny competing dredgers access to treatment facilities;
2. increase their treatment costs;
3. favour its own dredging business;
4. restrict access to reclaimed material; or
5. bundle dredging and reuse services.

Authorities may therefore examine both horizontal concentration and vertical foreclosure.

15. Public Procurement Concerns

Government and port authorities are major purchasers of dredging services.

Procurement rules should therefore avoid unnecessary conditions that reduce competition.

Potential problems include:

• excessively high financial qualifications;
• unnecessary equipment ownership requirements;
• discriminatory experience requirements;
• overly narrow technical specifications;
• unusually short tender periods;
• incumbent-specific specifications;
• excessive bundling of projects; and
• lack of transparent evaluation criteria.

Breaking a large dredging-and-reuse contract into appropriate lots can sometimes facilitate participation by smaller contractors, although whether this is appropriate depends on the technical and environmental characteristics of the project.

16. Six Important Case Laws

Because there are relatively few reported decisions specifically concerning dredged-material reuse, the most useful authorities are competition cases involving ports, essential infrastructure, refusal of access, public procurement, tying, exclusivity and environmental/technical standards.

1. United Brands Company v Commission

Case: United Brands Company and United Brands Continentaal BV v Commission, Case 27/76, European Court of Justice (1978).

Principle

The case is a foundational authority on abuse of dominance, particularly exclusionary conduct and discriminatory treatment.

The Court examined the competitive position of a dominant undertaking and the manner in which its commercial conduct could affect competition.

Relevance to dredged-material reuse

A dominant dredging, treatment or disposal operator could potentially face scrutiny if it uses its market position to:

• discriminate among customers;
• impose unfair conditions;
• restrict competing suppliers; or
• exclude downstream competitors.

The case is therefore useful when analysing dominance and discriminatory access.

2. Commercial Solvents v Commission

Cases: Joined Cases 6/73 and 7/73, Istituto Chemioterapico Italiano SpA and Commercial Solvents Corporation v Commission (1974).

Principle

The Court recognised that a dominant undertaking operating at an upstream level cannot necessarily use control over an essential input to eliminate competition downstream.

Relevance

Suppose a company controls a critical sediment-treatment input or facility and also competes in downstream dredged-material reuse.

A refusal or restriction of supply could potentially disadvantage independent downstream reuse operators.

The case is therefore highly relevant to:

• vertical foreclosure;
• refusal to supply;
• upstream/downstream integration; and
• access to critical inputs.

3. Bronner v Mediaprint

Case: Oscar Bronner GmbH & Co. KG v Mediaprint Zeitungs und Zeitschriftenverlag GmbH & Co. KG, Case C-7/97 (1998).

Principle

The Court established an important framework for refusal to provide access to infrastructure.

A refusal becomes particularly significant where the facility is indispensable for competing and cannot realistically be duplicated.

Application

In dredged-material reuse, an operator might control the only economically viable:

• sediment-treatment plant;
• disposal facility;
• reclamation site; or
• specialised processing infrastructure.

The Bronner framework helps determine whether refusal of access should attract competition-law intervention.

Importantly, mere inconvenience or higher costs are not automatically sufficient to establish indispensability.

4. Oscar Bronner / Essential-Facility Doctrine and Dredging Infrastructure

Although Bronner itself concerned newspaper distribution rather than dredging, its reasoning is particularly relevant to infrastructure-intensive markets.

A competition authority would examine:

Indispensability

Is access genuinely necessary to compete?

Duplication

Could another treatment or reuse facility reasonably be constructed?

Capacity

Is the facility actually constrained?

Elimination of competition

Would refusal substantially eliminate effective competition?

Justification

Does the operator have legitimate technical, safety or environmental reasons for refusing access?

This provides a structured approach to port, treatment and disposal infrastructure.

5. MOTOE v Elliniko Dimosio

Case: Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio, Case C-49/07 (2008).

Principle

The case concerns the interaction between regulatory functions and commercial activity.

An entity exercising regulatory powers can potentially create competition concerns when it simultaneously participates in an economic activity and has the ability to influence competitive conditions.

Relevance

This is particularly important for:

• port authorities;
• harbour authorities;
• municipal bodies;
• navigation authorities; and
• public infrastructure operators.

For example, a public authority that both regulates dredging access and competes through an affiliated reuse business could create concerns regarding discriminatory treatment.

17. Portland Cement Cartel

Case: Cementos del Caribe / Portland Cement line of European competition authorities' cartel jurisprudence.

Principle

Cartel jurisprudence concerning construction materials demonstrates the competition risks associated with coordination among suppliers of infrastructure-related materials.

The core principle is that competitors cannot use meetings, associations or commercial arrangements to coordinate:

• prices;
• customers;
• territories;
• volumes; or
• tenders.

Relevance

Dredged material may compete with conventional construction aggregates and fill material. Suppliers operating around the same infrastructure projects could therefore face cartel scrutiny if they coordinate prices or allocation.

18. Aéroports de Paris v Commission

Case: Aéroports de Paris v Commission, Case C-82/01 P (2002).

Principle

The case is significant for understanding the application of competition law to airport infrastructure and commercially exploited facilities.

It demonstrates that public or infrastructure-related status does not automatically remove activities from competition-law scrutiny when the relevant activity is economic.

Relevance to dredging

Port and harbour infrastructure similarly may have both:

• regulatory/public functions; and
• commercial economic activities.

Where a port authority commercially supplies dredging, disposal, storage or reuse services, its conduct may need to be assessed under competition rules.

19. Bronner, Commercial Solvents and Infrastructure Access Compared

20. Cartel Risks in Dredging Markets

Competition authorities should pay particular attention to the following indicators:

Bid rotation

The same contractors repeatedly win successive dredging tenders.

Cover bids

Competitors submit unusually high bids that appear designed to lose.

Geographic allocation

Contractors consistently avoid each other's territories.

Stable market shares

Market shares remain suspiciously constant despite repeated competitive tenders.

Identical pricing patterns

Unusual similarities appear in bids or surcharges.

Information exchange

Competitors possess detailed knowledge of each other's future bids.

Subcontracting arrangements

A losing bidder receives compensation through a subcontract.

These indicators do not by themselves prove collusion, but they can justify closer investigation.

21. Abuse of Dominance: Potential Conduct

A dominant undertaking in dredged-material reuse could potentially engage in:

1. excessive pricing for treatment or disposal;
2. predatory pricing to eliminate competing facilities;
3. refusal to deal;
4. discriminatory access;
5. exclusive dealing;
6. tying and bundling;
7. margin squeeze;
8. self-preferencing;
9. capacity withholding; and
10. unfair technical requirements.

Each requires assessment of market power, competitive effects and legitimate justifications.

22. Margin Squeeze

A vertically integrated undertaking could operate:

Upstream: dredging
Middle: sediment processing
Downstream: material reuse.

If it charges independent dredging contractors a high processing fee while using a lower internal transfer price for its own downstream operation, competitors could face a margin squeeze.

The relevant question would be whether an equally efficient downstream competitor could profitably operate using the dominant company's access price.

23. Self-Preferencing

A port authority or treatment facility could potentially give preferential treatment to its own affiliated reuse operation.

Examples:

• first access to sediment;
• priority processing slots;
• lower handling charges;
• access to better-quality material;
• faster environmental approvals; or
• preferential information concerning upcoming projects.

Where the operator has significant market power, such conduct may require competition scrutiny.

24. Environmental Justifications

Not every restrictive arrangement is anti-competitive.

Dredged material presents genuine environmental risks.

Restrictions may legitimately be necessary because:

• sediment contains hazardous substances;
• only certain facilities possess appropriate containment systems;
• transportation creates environmental risks;
• material requires specialised treatment;
• contamination thresholds must be maintained; or
• reuse is unsuitable for particular ecological sites.

Therefore, competition analysis should distinguish genuine environmental necessity from restrictions that merely protect an incumbent.

25. Competition and Sustainability

Dredged-material reuse can generate environmental benefits by reducing:

• landfill use;
• extraction of virgin aggregates;
• transportation distances;
• disposal requirements; and
• demand for newly quarried materials.

Competition authorities therefore face a balancing question where cooperation between firms may be proposed as necessary to achieve environmental benefits.

The analysis should consider whether:

1. the environmental benefit is genuine;
2. the arrangement is necessary;
3. less restrictive alternatives exist;
4. consumers or society receive the benefits; and
5. competition is not unnecessarily eliminated.

26. Remedies

Where competition concerns are established, possible remedies include:

Structural remedies

• divestiture;
• separation of infrastructure and competitive operations;
• creation of independent facilities.

Behavioural remedies

• non-discriminatory access;
• transparent tariffs;
• capacity-allocation rules;
• prohibition of exclusive contracts;
• firewalls between regulatory and commercial functions.

Procurement remedies

• redesigned tender specifications;
• independent tender monitoring;
• prohibition of bid coordination;
• competitive lotting.

Information remedies

• restrictions on exchange of competitively sensitive information;
• independent data systems;
• transparent access to material-quality information.

27. Compliance Framework for Industry Participants

Dredging and reuse companies should adopt specific competition-compliance procedures.

Employees should not:

• discuss future tender prices with competitors;
• agree who will win projects;
• divide ports or geographical territories;
• exchange bid strategies;
• coordinate capacity;
• agree customer allocations; or
• use industry associations to coordinate competitive conduct.

Companies should document:

• environmental justifications;
• technical specifications;
• access decisions;
• pricing methodology;
• capacity allocation;
• exclusive agreements; and
• reasons for refusing access.

This documentation is particularly important where environmental or safety considerations justify restrictions.

28. Key Case-Law Principles at a Glance

29. Conclusion

Competition concerns in dredged-material reuse arise principally from the combination of scarce infrastructure, environmental regulation, public procurement, vertical integration and geographically constrained markets.

The most significant risks are likely to involve:

• bid rigging and tender coordination among dredging contractors;
• exclusive control over disposal or reuse facilities;
• discriminatory access to ports and treatment infrastructure;
• vertical foreclosure by integrated dredging/reuse firms;
• tying dredging to disposal or reuse;
• exclusive downstream supply agreements;
• self-preferencing by infrastructure operators; and
• strategic use of technical or environmental requirements to exclude rivals.