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Fair Trade Commission Investigates Korea-China and K

Aerial view of Gwangyang Port container terminal.

[Asia Economy Honam Reporting Headquarters Reporter Kim Chunsu] The Korea Fair Trade Commission's announcement of imposing fines totaling 500 billion KRW on 12 domestic container shipping companies has triggered an emergency in the shipping industry at Yeosu Gwangyang Port.

According to shipping industry insiders on the 2nd, the Fair Trade Commission recently announced plans to impose fines of approximately 500 billion KRW on 12 domestic shipping companies and 300 billion KRW on 11 foreign shipping companies for colluding on maritime freight rates on Southeast Asia routes.

The Fair Trade Commission maintains the position that the shipping companies “did not receive approval from the Commission for their joint actions” and that these were “unfair joint actions that did not meet the procedures stipulated by the Shipping Act.”

In response, the shipping companies strongly opposed the decision. They argue that joint actions by liner shipping companies are based on the Shipping Act and therefore do not require approval from the Fair Trade Commission. They also claim that they followed the procedures set out in the Shipping Act, and even if there were some procedural defects, these should be addressed by the Ministry of Oceans and Fisheries under the Shipping Act, not by the Fair Trade Commission.

The shipping industry contends that joint actions by container liner shipping companies have been legally implemented worldwide for a long time under international agreements, and that Korea has also established related provisions in the Shipping Act based on these international agreements.

In fact, joint actions by liner shipping companies are internationally implemented under the ‘UN Liner Code ’74,’ adopted in 1974 by UNCTAD (United Nations Conference on Trade and Development), a UN-affiliated organization.

Korea ratified this agreement in 1974 and established its basis in Article 29 of the Shipping Act, which has been in effect to this day.

After completing the investigation of the Southeast Asia route, the Fair Trade Commission is conducting investigations on the Korea-China and Korea-Japan routes. The shipping industry fears that if fines are imposed on these routes based on the same logic, the total amount could approach 2 trillion KRW.

The shipping industry argues that the Fair Trade Commission's actions stem from ignorance of the shipping industry and represent an abuse of power that undermines the foundation of the rule of law.

They criticize the Fair Trade Commission for arrogantly exercising unchecked authority over companies and industries, which contradicts the government’s shipping industry promotion policy, especially as the Moon Jae-in administration has been making every effort to revive the shipping industry by establishing a five-year shipping reconstruction plan and investing massive funds since its first year in office following the bankruptcy of Hanjin Shipping in 2017.

In particular, countries competing with Korea such as Shanghai, Hong Kong, and Singapore are implementing strong support policies for their domestic shipping companies. The shipping industry expresses frustration and concern over whether the Fair Trade Commission has a fundamental understanding of the national logistics industry given its unreasonable measures.

The shipping industry is also worried that if the Fair Trade Commission’s measures materialize, it could lead to serious diplomatic conflicts and retaliatory actions from foreign countries.

If the Korean government sanctions joint actions permitted under international law, the global shipping industry could deviate from the international order, and foreign governments might impose reciprocal sanctions on Korean shipping companies when their own shipping companies are sanctioned by Korea.

There are also concerns that lawsuits for damages from domestic and foreign cargo owners could flood in, escalating the situation uncontrollably.

◆ Must be handled according to the Shipping Act!~~~

The shipping industry insists that joint actions by shipping companies have historically been exempt from antitrust laws internationally, and therefore urges the Fair Trade Commission to properly recognize and judge this matter. They maintain that this issue should be handled under the Shipping Act, not the Fair Trade Act.

Meanwhile, political parties from both the ruling and opposition camps, as well as maritime authorities, have called for the cancellation of the Fair Trade Commission’s plan to impose fines worth several hundred billion KRW.

They argue that if the Fair Trade Commission’s decision contradicts the government’s ‘shipping reconstruction’ will, it will cause distrust and confusion regarding government policies. On the 24th, the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee adopted a resolution urging the application of the Shipping Act to joint actions by regular container shipping companies at a plenary meeting.

Committee Chairman Lee Gae-ho said, “Advanced countries overseas allow joint actions in vessel cargo operations,” and added, “It should primarily be regulated under the Shipping Act, and considering the risk of bankruptcy for container shipping companies with poor management conditions, the imposition of large fines by the Fair Trade Commission needs to be reconsidered.”

It is highly unusual that the ruling party, opposition, and government have all voiced a united ‘opposition to sanctions’ ahead of the Fair Trade Commission’s cartel sanctions, expected in August, drawing attention to the outcome of the Commission’s final deliberation (decision by the full committee).

This content was produced with the assistance of AI translation services.