Fines for shipping lines for past collusion on rates set to be confirmed
The hefty $81m in fines imposed by the Korea Fair Trade Commission (KFTC) on 23 liner operators is expected to confirmed, after the country’s Supreme Court ruled this week that the Fair Trade Act does apply to collusion on fixing freight rates.
In January 2022, 23 liner operators, including 14 from South Korea, and others including Evergreen, Cosco, Maersk Sealand, Yang Ming, HMM and SM Line, were taken to task after timber traders complained about their simultaneous raising of freight rates between 2003 and 2018. The investigation took three years.
During the KFTC probe, the Ministry of Oceans and Fisheries (MOF) moved to exempt such joint action from the Fair Trade Act. However, the exemption came too late, and the KFTC said it could not be retroactive. The subsequent fines brought backlash from the MOF, Korea Shipowners’ Association and Chinese government.
All the liner operators and feeder trade association Korea Near Sea Freight Conference filed individual lawsuits to challenge the legality of the penalty.
They argued that Article 29 of the Shipping Act explicitly permitted joint actions, thereby excluding the application of Article 58 of the Fair Trade Act. They also claimed that the authority to regulate such joint actions lay with the Minister of Oceans and Fisheries, not the KFTC.
However, KFTC lawyer Kim Seol-I argued” “Collusion should only occur to the extent that residual competition is protected. The purpose of Article 29 can only be upheld if procedures such as prior consultation with shipper associations and subsequent monitoring by the MOF are conducted to ensure that competition is not unduly restricted.”
The freight rates were fixed without discussing with shipper groups and the MOF, the lawyer claimed.
The Supreme Court judges agreed with the KFTC’s position, and dismissed the suits brought by HMM, KMTC Line, Pan Ocean and Heung-A Line. The suits filed by the other 19 shipping lines and Korea Near Sea Freight Conference are pending in the Seoul High Court, which stayed these proceedings, pending the Supreme Court ruling.
The high court is npw expected to also rule in favour of KFTC.
