Seoul court rules that freight-fixing fine was wrongful to Evergreen

In a victory for container lines, the Seoul High Court on 1 February overturned a fine imposed by the Korea Fair Trade Commission (KFTC) on Evergreen Marine Corporation for freight-fixing.

The Taiwanese mainline operator was one of 23 box lines that KFTC fined a total of US$81 million in January 2022, for fixing South Korea-Southeast Asia freight rates.

KFTC began investigating in July 2018, after receiving complaints from timber importers that almost all liner operators simultaneously raised freight charges for the South Korea-Southeast Asia route.

After the commission disclosed that the total fine could be almost US$672 million in May 2021, an outcry came from the Ministry of Oceans and Fisheries, Korea Shipowners’ Association, Korea Shipping Association and the Federation of Korean Seafarers’ Unions, who feared that the massive financial penalty could set back the recovery in the shipping industry.

Five months later, South Korea’s parliament, the National Assembly, amended the Shipping Act, stating that the Ministry of Oceans and Fisheries is authorised to regulate shipping companies’ joint actions, which would not be subjected to the Fair Trade Act.

Even then, KFTC chief Joh Sung-wook said that it was unlikely that the amendment could be retroactively applied, and the US$81 million aggregate fine was announced subsequently.

Evergreen itself was fined US$2.72 million. Other affected liner operators were 12 South Korean carriers, COSCO Shipping Lines, Maersk Sealand, SITC Container Lines, Yang Ming Marine Transport and Wan Hai Lines.

In June of the same year, 15 box lines were slapped with another US$64 million in total fines, for fixing South Korea-Japan rates.

The KFTC’s action drew ire from the Korea Shipowners’ Association and the Ministry of Oceans and Fisheries, as the Shipping Act permits shipping companies to engage in joint actions relating to freight rates and that the KFTC had unilaterally investigated and penalised the liner operators.

Evergreen and the other liner operators filed individual lawsuits with the Seoul High Court, asserting the fine was wrongful. Nineteen other suits are pending.

The ruling is significant in that it is the first case where the KFTC’s sanctions against a shipping company were judged to be wrongful. In particular, the verdict is expected to have a significant impact on lawsuits filed by other shipping companies against KFTC in the future.

Martina Li
Asia Correspondent