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The Danish market for gravel and sand pumping - anti-competitive effects of articles 19 and 20 in the Danish Act on Raw Material

22. juni 2005

3/1120-0100-1238/ISA/FIB/LDA The Council meeting 22 June 2005

In November 2004 The Danish Competition Authority received a complaint concerning the administration of the provisions in articles 19 and 20 in the Danish Act on Raw Material. These articles concern vessel approvals and licenses to gravel and sand pumping.

On the basis of the complaint in question The Danish Competition Authority launched an investigation into the anti-competitive impacts of the rules in question.

According to article 19 in the Danish Act on Raw Material a vessel must be approved by the Danish Forest and Nature Agency (The Danish Authority administrating the implementation of the Danish Act on Raw Material) in order to pump gravel and sand. According to article 20 in the Danish Act on Raw Material it is an additional demand that the undertaking pumping gravel and sand is granted a license to pump within a specific geografical area.

With regard to article 19 in the Danish Act on Raw Material, the explanatory notes state that in order to achieve an approval a vessel must have a cargo-carrying capacity not exceeding 2000 m3, and the total cargo-carrying capacity of all the approved vessels must not exceed 26250 m3. The Forest and Nature Agency has implemented the rule in article 19 in accordance with these directions.

The Danish Competition Authority finds that article 19 in the Danish Act on Raw Material prevents new competitors from entering the Danish market of gravel and sand pumping. Environmental protection is of crucial importance according to the articles 19 and 20 in the Danish Act on Raw material. However the Danish Competition Authority finds article 20 adequate in order to ensure the environments considerations according to the intention of the law. Consequently The Danish Competition Authority has no valid arguments for maintaining article 19 in the Danish Act on Raw Material.

The potential exists for an undertaking to be granted a license to survey the seabed before applying for a license to pump gravel and sand. Such a survey right can be granted with priority access to subsequently achieving a pumping license. A survey right may last for up to 3 years. Afterwards the undertaking can own an exclusive right for an additional period up to 10 years to pump gravel and sand in the area agreed upon. Typically the license lasts for entire 10 years.

The Danish Competition Authority has found that the exclusive rights system has an anti-competitive effect and is too far-reaching than necessary in order to promote investments in survey etc.

Thus, The Danish Competition Council has made an inquiry to the Danish minister of the environment pursuant to article 2 subsection 5 in the Danish Competition Act. In theinquiry The Competition Council recommends a

  • removal of article 19 in the Danish Act on Raw Material
  • revision of article 20 in the Danish Act on Raw Material, so that survey license as a principal rule should not be granted with priority access to subsequently achieving a pumping license. A priority survey access right should only be granted when being justifiable by significant investigation costs, and generally the right should not last for more than one year.
  • revision of article 20 in the Danish Act on Raw Material, so that pumping licenses should only be granted with an exclusive right if specifically justified. An exclusive right should not last for more than two years unless the survey or the environmental examination has required a disproportionately high level of expenses, or unless a longer duration may be justified by extraordinary environmental protection considerations or considerations to the Danish stock quantity of raw material or the supply of raw material.