The Fair Trade Commission imposed a correction order and a fine of 96.2 billion won on 23 domestic and foreign shipping companies.
The Fair Trade Commission judges that the fact that these shipping companies have been fixing shipping rates for the Korea-Southeast Asian route for 15 years is beyond the scope permitted by law.
At first, the Fair Trade Commission examiner said that it was necessary to impose a fine of up to 800 billion won, but the Plenary Meeting of the Fair Trade Commission significantly reduced the size of the fine in consideration of the specifics of the industry.
Fair Trade Commission "Right fixing 120 times"
The Fair Trade Commission believes that these shipping companies have reached an agreement on freight rates 120 times on the Korea-Southeast Asian export and import routes through 541 meetings between December 2003 and December 2018.
It was also decided to impose a correction order and a fine of 165 million won on the Southeast Asia Regular Shipping Association (Dongjeonghyeop), which helped them collude.
According to the Fair Trade Commission, the negotiations began in October 2003 when the presidents of major national shipping companies, such as Goryeo Un and Janggeum Merchant Marine, agreed to increase freight rates simultaneously on three routes: Korea-Southeast Asia, Korea-China, and Korea-Japan.
Since then, other national shipping companies belonging to the Dongdonghyup and foreign shipping companies belonging to the IADA (International Maritime Association between domestic and overseas shipping companies operating on Asian routes) also joined.
They agreed and implemented the introduction and increase of the minimum basic fare and incidental fares.
Externally, they hid the fact of collusion by announcing that 'the individual shipping companies decided on their own judgment'.
On March 16, 2017, secured by the Fair Trade Commission, in a group chat room with the sales team leader at the time, a Dongdonghyup official said that the Ministry of Oceans and Fisheries had received a report from the shipper, and said, 'Please respond to the recovery of freight rates as thoroughly implemented for survival at the level of individual shipping companies.' demanded, and some shipping companies even mentioned 'retaliation' against the shipper.
Ministry of Oceans and Fisheries "Joint act is not illegal"... What is Article 29 of the Shipping Act?
According to the Fair Trade Commission's explanation, this is a perfect collusion.
However, the shipping industry has foretold an administrative lawsuit accusing the Fair Trade Commission of stigmatizing shipping companies as unjust co-actors using flaws in the procedure.
I think it's natural for them to protest because they are the parties involved, but looking at the position of the Ministry of Oceans and Fisheries, which is the competent ministry, that is not the case.
After the announcement of the FTC, the Ministry of Oceans and Fisheries said, "There is no change in the position that the joint action is not an illegal act under the Shipping Act." Whether the action is within the scope permitted by law.
The controversial legal provision is Article 29 of the Shipping Act.
Article 29 (Agreement on Freight, etc.) ① A person who has registered a foreign port cargo transportation business (hereinafter referred to as "foreign cargo transportation business operator") shall arrange freight rates and ships with other foreign port cargo transportation business operators (including foreign cargo transportation business operators). Contracts or joint acts (in the case of a person who operates an out-of-port irregular cargo transport business, contracts or joint acts related to freight are excluded; hereafter referred to as the "Agreement") may be made regarding the loading of cargo and other conditions of transport.
As seen in Paragraph 1, the Korean Shipping Act permits shipping companies to engage in joint actions on freight rates, etc.
'Earring on your ear, nose ring on your nose'...
The situation itself is ambiguous.
In the shipping industry, when large global shipping companies, including the EU, went bankrupt with price competitiveness, and then drastically increased freight rates, the UN recognized collusion in the shipping industry as an international practice through the Liner Charter in 1974. It claims that it has been operating in this way for over 40 years until now by amending the Shipping Act in 1978.
The Fair Trade Commission did not take issue with the joint act itself as stipulated in the law.
However, the shipping companies said they did not comply with this, saying that joint actions of shipping companies are only permitted under the conditions set by the Shipping Act.
According to the Shipping Act, joint actions must be reported to the Minister of Oceans and Fisheries within 30 days, but the agreement was not reported to the Ministry of Oceans and Fisheries 120 times.
However, the Ministry of Oceans and Fisheries, which is the competent ministry, is of the opinion that there is no need to report any price adjustments that are made from time to time within the basically set range.
Furthermore, the position is that it is not illegal collusion because the shipowners received a lower freight rate than the initial agreement with the shippers.
In an interview with the media, an official from the Ministry of Oceans and Fisheries also said, "If you look at the FTC sanctions, they did not recognize the shipping law at all and judged its illegality."
Reconciliation of differences between ministries is good... who pays the fine
The Fair Trade Commission and the nature of the shipping industry, which says that unless sanctions are imposed on the act of collusion by hiding behind old practices, export companies that have to pay high freight rates cannot be protected. All the opinions of the Ministry of Oceans and Fisheries that it is true are correct.
It is said that consultations between ministries are in progress over the revision of the shipping law.
However, it is questionable whether it is correct to impose sanctions on companies before the resolution of differences between ministries is over.
It is said that the imposition of a penalty surcharge may be justified, and even if it is not, the penalty surcharge may be revoked depending on the shipping industry's appeal or the result of the revision of the shipping law.
But, if the result is good, is it all right?
Before taking action in the private sector, it seems necessary to organize opinions between government departments.
(Photo = Yonhap News)