23 shippers fined 96.2 billion won for collusion on freight rates

South Korea's antitrust regulator said Tuesday it has decided to impose a combined fine of 96.2 billion won ($80.7 million) in fines on 23 Korean and foreign shippers for their collusion to fix freight rates.

Since 2018, the Fair Trade Commission (FTC) has been looking into allegations that the country's top shipper, HMM Co., and 22 local and foreign shipping lines colluded to fix higher freight rates for Southeast Asian sea routes.

The shippers ― 12 South Korean and 11 foreign ― colluded to set the shipping costs of container cargo services 120 times between December 2003 and December 2018 in a bid to hike the minimum level of freight rates and other costs, according to the regulator.

The South Korean shippers claimed they are allowed to take collective actions on freight rates and other contract conditions for transportation under the country's maritime shipping act.

But the regulator said their acts were "illegal" as they failed to meet certain criteria that are permissible under the law.

To be recognized as legitimate collective actions under the shipping act, shipping lines must report their moves to the maritime minister within 30 days. They should also adequately discuss the move with a group of freight owners prior to making a report.

The FTC expected its latest decision to help prompt shippers to take collective actions on freight rates under due process and prevent trading companies from sustaining financial damage.

Korean shipper Korea Marine Transport Co. will be tentatively slapped with the largest fine of 29.6 billion won and HMM will face a fine of 3.6 billion won. Singapore-based Sealand Maersk Asia Pte Ltd. is expected to be imposed with a 2.37 billion-won fine.

But the regulator's decision appears to be lenient, given that it informed the shippers in May in a review report that it may impose up to 800 billion won in fines for the violation of the fair trade act.

"In deciding the level of fines, the regulator fully took account the nature of the shipping industry," FTC chief Joh Sung-wook told a press briefing.

The FTC said it will continue to take "stern" actions against suspected illegal collusion on freight rates in the shipping sector.

The regulator is currently looking into allegations that shipping lines colluded to fix shipping costs for the South Korea-China routes and Korea-Japan ones.

The latest collusion case sparked fierce protest from an association of shippers and led to tensions at the parliamentary level over a push to revise the maritime shipping act.

Local shippers said if the regulator imposes what they see as an excessive fine, it could deal a blow to the country's shipping industry.

A ruling party lawmaker proposed a revised bill last year that says collective actions by shippers will not be subject to the antitrust act, in a move to put pressure on the FTC.

The maritime ministry and a related parliamentary committee sided with the shipping sector, saying the shippers' actions were justifiable collective ones under the shipping law.

The antitrust regulator expressed opposition to the bill, saying the legislation move runs counter to global trends.