Fair Trade Commission Imposes 80 Billion KRW Fine for Korea-Japan Route Collusion... Zero Fine for Korea-China Route

[Asia Economy Sejong=Reporter Dongwoo Lee] The Korea Fair Trade Commission (KFTC) has decided to impose corrective orders and fines totaling 80 billion KRW on 15 shipping companies that colluded on container shipping rates on the Korea-Japan route. However, for 27 shipping companies that colluded on rates on the Korea-China route, only corrective orders will be issued without fines.

According to the KFTC on the 9th, a total of 15 shipping companies, including 14 domestic companies such as Korea Marine Transport, Janggeum Shipping, and Namseong Shipping, as well as foreign companies like SITC, agreed on shipping rates on the Korea-Japan route 76 times from February 2003 to May 2019. Among them, 14 companies except Panstar Line.com were also found to have colluded on the Korea-China route.

From January 2002 to December 2018, over 17 years and 68 occasions, 27 shipping companies?16 domestic and 11 foreign?received corrective orders for colluding on Korea-China route rates. The companies agreed and executed minimum rates (AMR), newly introduced and increased ancillary charges, and bidding prices for large shippers to raise or maintain rates on the Korea-Japan and Korea-China routes.

During this process, they also agreed not to poach existing customers of other shipping companies, thereby restricting competition. They jointly refused shipment to shippers who did not comply with the agreement. When major corporate shippers such as Samsung, LG, and Hyundai Kia Motors tried to resist, they even took retaliatory measures such as refusing shipment until receiving a written statement agreeing to accept the rates.

Shipping companies that violated the rate agreements faced penalties such as suspension of space provision for six months and exclusion from joint operations if violations accumulated.

The KFTC explained, "Due to the Korea-Japan route collusion, shipping companies increased their revenue from freight rates and achieved profitable management, earning 62 billion KRW in 2008 alone (12 billion KRW from cost savings and 50 billion KRW from additional ancillary charges)."

The KFTC also sanctioned the Korea Coastal Shipping Council (Han Geunhyeop) and the Yellow Sea Regular Shipping Council (Hwangjeonghyeop), which convened meetings for rate agreements and encouraged compliance, for violating business association prohibitions. Han Geunhyeop, which supported the Korea-Japan route collusion, was fined 244 million KRW along with corrective orders, while Hwangjeonghyeop for the Korea-China route received only corrective orders.

There are similar forms of collusion on routes to Southeast Asia, China, and Japan, but some express surprise that fines were not imposed for the Korea-China route collusion.

The KFTC stated, "The Korea-China route is a market where the governments of both countries have long managed ship deployment volumes through shipping agreements and related shipping talks, so supply volume (capacity) is already determined. Considering this comprehensively, the competition-restricting effects and ripple effects of rate collusion are not significant."

Cho Hong-seon, head of the Cartel Investigation Bureau at the KFTC, said, "There is no significant difference in the type, form, or content of joint actions among the Korea-Southeast Asia, Korea-Japan, and Korea-China routes. However, since the Korea-China route collusion occurred in a market where the two governments limited supply, competition was already somewhat restricted, so the resulting competition-restricting effects, damages, and ripple effects were relatively minor."

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