S. Korea: Assembly audit to target shippers

Freight rate hikes and collective actions imposed by local shipping companies are set to be among the key agenda items addressed during this year’s government audit.

Late last month, the Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee passed a revised bill stating that collective actions by shippers will not be subject to the antitrust act. The revised bill countered the 800 billion won ($674 million) in fines imposed by the Korea Fair Trade Commission (KFTC) on shipping companies.

The KFTC expressed concerns about the revised bill, claiming it runs counter to global trends and could spark worries of abuse in other industrial sectors.

Since 2018, the antitrust regulator has investigated allegations that HMM and others colluded to fix higher freight rates for a Southeast Asian sea route.

After expanding its investigation into foreign firms in May, the regulator informed 23 local and foreign shippers that they may face fines adding up to 800 billion won in total for allegedly violating the Fair Trade Act.

Many lawmakers have voiced concerns that the passage of the revised bill could impact the country’s competition law.

“If a bill that is made specifically to hinder an ongoing investigation is passed by the National Assembly, there are worries it could damage the country’s Fair Trade Act,” said ruling Democratic Party of Korea (DPK) Rep. Oh Gi-hyoung, a member of the National Policy Committee.

“If it is passed, how can we go forth with collective actions made against freight costs in the future?”

All eyes are on whether the KFTC will continue to maintain and enforce the 800 billion won in fines against the 23 local and international shippers.

The fines are around 8.5 percent to 10 percent of sales that were made through price fixing from 2003 to 2018. The total fines on 11 local shipping companies stand at 560 billion won, ranging from 3.1 billion won to 230 billion won depending on the sales of each firm.

Local shippers have protested fiercely against the regulator’s move. They claimed they had no choice but to take collective action to compete against global shipping powerhouses and that their collective actions on freight rates and other contract conditions were allowed under the country’s Maritime Shipping Act.

The global leaders in the shipping industry have engaged in fierce price competition, forcing smaller and less influential shipping companies to file for bankruptcy and then drastically raising freight rates which relayed the burden onto freight shippers and consumers in the past.

Local and overseas shippers believe the fines are in violation of the Marine Transportation Act and the Fair Trade Act.

The country’s Fair Trade Commission also said it will not regulate collective actions or conditions permissible under other laws.

However, the regulator believes the move by the shipping companies cannot be viewed as a justifiable act as they failed to meet certain criteria under the law, including informing and obtaining written agreements from shippers of the changes, reporting the changes to the minister of oceans and fisheries and allowing shippers to bail out of the agreement at any given time.
Source: The Korea Times