[Column] Fair Trade Commission Douses the Reviving Shipping Industry

[Sejong=Asia Economy Reporter Kwon Haeyoung] "I really don't know which country's government agency the Fair Trade Commission belongs to. They are completely pouring cold water on the shipping industry that is just beginning to revive."

The criticism from officials in economic departments toward the Fair Trade Commission (FTC) is not trivial. This is in response to the FTC's notification in May imposing fines of up to 800 billion KRW on 23 companies, including 12 domestic shipping companies, for collusion in shipping freight rates from 2003 to 2018.

The biggest complaint is that the FTC has not considered the situation of domestic shipping companies at all during the so-called collusion period. According to a paper by Professor Yang Changho of Incheon National University, the operating profit margin of the 12 domestic container shipping companies fined averaged -0.4% annually from 2003 to 2018. The operating losses of shipping companies were due not only to the downturn in the industry but also to the chronic low freight rate structure. In the shipping market, shippers are the "super gap," and shipping companies are the "super eul." Although freight rates have recently soared due to increased cargo volume, the structure that allows shipping companies to engage in cutthroat competition at any time has not changed.

Article 29 of the Shipping Act recognizes joint activities such as freight rates, vessel deployment, and cargo loading for these reasons. Article 58 of the Fair Trade Act already exempts the application of the Fair Trade Act when legitimate acts are performed according to other laws. Nevertheless, the FTC is determined to enforce sanctions. Given this situation, a bill has even been proposed in the National Assembly to prioritize the application of the Shipping Act to joint activities of shipping companies.

If the FTC insists on imposing fines, small and medium-sized shipping companies are likely to go bankrupt. Foreign shipping companies subject to sanctions may withdraw from domestic operations due to FTC risks. Freight rates are likely to rise further.

This issue is not about overlooking legal violations because companies are struggling. If the FTC insists solely on its principles, key industries could collapse. The FTC is becoming "Galapagosized." It should understand the market better than anyone but is failing to communicate with the market. This is why the words of officials asking, "Are you really a government agency of the Republic of Korea?" echo in our ears.

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