South Korean lawmakers want shipping removed from anti-trust jurisdiction

Amid ongoing action to rescind the massive fines imposed by the Korea Fair Trade Commission (KFTC) on South Korea’s liner operators, lawmakers plan to amend the country’s Monopoly Regulation and Fair Trade Act to exempt the shipping industry from its jurisdiction to prevent a recurrence.

KFTC has imposed a fine in excess of US$613 million on 23 liner operators, including a dozen South Korean companies that include HMM, SM Line, Pan Ocean and Sinokor Merchant Marine. The 11 foreign liner operators affected include COSCO Shipping Lines and SITC Container Lines, prompting an angry reaction from the Chinese government.

Assemblyman Wi Seong-gon of the ruling Democratic Party, proposed partially amending the Shipping Act to state that the Monopoly Regulation and Fair Trade Act does not apply to shipping companies’ joint freight-fixing actions.

The penalties, for fixing freight on Korea-Southeast Asia routes between 2003 and 2018, were imposed in June.

KFTC declared that the errant operators will have to pay a penalty amounting to 8.5%-10% of revenue from Southeast Asian services, prompting protests from the Korea Shipowners’ Association and Korea Shipping Association.

KFTC investigated after timber imports filed complaints on 18 July, when nearly all liner operators simultaneously raised South Korea-Southeast Asia freight charges.

While the Shipping Act stipulates that contracts or joint acts regarding freight rates are permitted only for seaborne exports, it is not clearly stipulated that such actions are exempted from the Monopoly Regulation and Fair Trade Act.

Wi said, “Considering the special characteristics of the liner shipping market, which requires a large amount of capital because several ships are used per route, major advanced shipping countries have historically allowed shipping companies to jointly act on ship arrangement, cargo loading, and freight rates.”

His proposal was supported by 11 other assemblymen from among his party colleagues and six assemblymen from the opposition People Power Party.

Welcoming the lawmakers’ proposal, Korea Shipping Association vice-chairman Kim Young-moo commented, “If large-scale fines are imposed according to the Fair Trade Commission’s judgment, most small and medium-sized container shipping companies with poor business conditions face bankruptcy. To complete the industry revitalisation that has just begun to produce results and prevent disputes with foreign countries, joint actions in the shipping industry must be regulated by the Shipping Act and excluded from the Fair Trade Act.”