The South Korean government has taken steps to exempt the shipping industry from anti-trust regulations, after the Korea Fair Trade Commission (KFTC) levied an aggregate fine of almost US$672 million on 23 liner operators.
The financial penalty was imposed in June after an investigation showed the companies colluded between 2003 and 2018 to fix freight rates on the South Korea-South-east Asia route.
Although the Shipping Act allows such collusion, it was not explicitly permitted in the Fair Trade Act that the shipping industry is free to do so.
Therefore, when the KFTC received complaints from timber importers in July 2018, an investigation was launched.
The timber importers became suspicious when almost all liner operators simultaneously raised freight charges for the South Korea-Southeast Asia route.
KFTC’s three-year investigation resulted in the financial penalty that caused an outcry from the Korea Shipowners’ Association and the Korea Shipping Association, which asserted that shipping companies, having emerged from years of losses, could find themselves out of their pockets to pay the fine.
The affected companies include 12 South Korean liner operators, including HMM and SM Line and 11 foreign liner operators, including Maersk Line, COSCO Shipping Lines and SITC Container Lines, causing the Chinese government to protest to its South Korean counterpart.
On 5 October, South Korea’s parliament, the National Assembly, passed an amendment to the Shipping Act, stating that the Ministry of Oceans and Fisheries is authorized to regulate shipping companies’ joint actions, which would not be subjected to the Fair Trade Act. The amendment has provisions enabling retroactive enforcement.
However, KFTC stated that the amended act could not be applied retroactively, particularly to its decision to impose the fines on the liner operators, as the matter had been investigated and concluded.
Oceans and fisheries minister Moon Seong-hyeok said, “It is true that shippers are having difficulties in import/export logistics as shipping capacity is in short supply due to Covid-19, but for the 15 years that the KFTC has been taking issue with, shippers have always had the upper hand. There has never been a case where shipping companies have taken profit through joint actions.”
KFTC chairwoman Joh Sung-wook, speaking at a National Assembly plenary session on the same day, expressed determination to proceed with the penalty. “Unfortunately, the Fair Trade Act cannot be applied to this case that has been investigated,” she noted.
Noting that the matter had caused friction between the MOF and KFTC, Joh said that she would participate if the Office for Government Policy Coordination initiates mediation.
Martina Li
Asia Correspondent
