Twenty-three major and regional liner operators have been directed to pay a hefty penalty to the Korea Fair Trade Commission (KFTC) for allegedly ‘fixing’ freight rates on South Korea to Southeast Asia lane between 2003 and 2018.
Among HMM, SM Line, Korea Marine Transport (KMTC Line), Pan Ocean, Sinokor, Maersk, Evergreen, Yang Ming, Wan Hai, SITC, and Cosco, KMTC received a penalty of $24.86m, while HMM, South Korea’s flagship carrier are required to pay around $3m.
The KFTC initiated its investigation in 2018 on complaints from timber importers signaling towards the simultaneous hike in freight rates by linear operators on South Korea to South-east Asia route.
Acting on the complaints received by the antitrust agency, Liner importers were asked to tender a fine of $672m which led to protests from several associations and unions such as Korea’s Ministry of Oceans and Fisheries, the Korea Shipowners’ Association, Korea Shipping Association, Federation of Korean Seafarers’ Unions alongside the Chinese government. Citing the adverse impact of the pandemic on the shipping industry, the penalties were brought down to help it recover losses.
In October 2021, the Shipping Act that subjected liner operators to KFTC action was amended to protect them against any action of the agency. However, KFTC chairperson Joh Sung-wook holds that such an amendment cannot be applied retroactively and the penalties must be settled, as the operators acted in contravention of the law. The fines have been justified claiming that the nature of the shipping industry has been taken into consideration before computation of the penalty.
Non-cancellation of such penalties has caused resentment among the Korea Shipowners’ Association which intends to file a lawsuit seeking a waiver of the fines.