FTC fines feared to prompt foreign regulators to sanction local shipping companies

A Hyundai Merchant Marine containership using eco-friendly bio heavy oil is seen in this file photo. Courtesy of HMM

Taiwanese, Singaporean firms consider filing lawsuits

By Park Jae-hyuk

A decision by the Fair Trade Commission (FTC) to fine shipping companies is stoking concerns about potential economic retaliation from foreign governments. The FTC decided to slap a combined 96.2 billion won ($80 million) in fines on 23 shipping companies, including 11 foreign firms, for 15 years of alleged collusion to fix the freight rates for sea routes between Korea and Southeast Asia.

The Ministry of Oceans and Fisheries, which supervises the shipping industry, criticized the penalty for providing a reason for other countries to sanction Korean shipping companies arriving in their ports.

Although the maritime ministry did not issue an official statement on the FTC's decision on Tuesday, insiders in the agency told reporters that the shipping companies conducted collaborative actions in compliance with the Marine Transportation Act.

According to the FTC, the foreign shipping companies that were slapped with fines are four Taiwanese companies, three Singaporean firms and four based in Hong Kong. Among them, Taiwan's Wan Hai Lines was slapped with the heaviest fine of 11.5 billion won.

They are alleged to have colluded with Korean shipping companies starting in 2003 to simultaneously raise freight rates for three sea routes ― Korea-Southeast Asia, Korea-China and Korea-Japan. The antitrust regulator said the shipping companies refused to transport the freight of cargo owners who protested the rate hike.

Fair Trade Commission Chairperson Joh Sung-wook announces the antitrust regulator's decision to slap a 96.2 billion won fine on 23 shipping companies, during a press conference at the Government Complex Sejong, Tuesday. Yonhap

"Our recent decision was meaningful as it showed our willingness to sternly regulate collaborative acts that fail to meet certain criteria that are permissible under the law," FTC Chairperson Joh Sung-wook said at a press conference.

The FTC reduced the total size of penalty from 800 billion won that it previously considered during a review last May, but domestic and foreign shipping companies protested the decision, threatening to file lawsuits.

"The FTC ignored the purpose of collaborative actions that have been allowed by international laws over the past 100 years," the Korea Shipowners' Association said in a statement. "We express regret over the FTC's decision to sanction shipping companies that have followed laws over the past four decades."

According to industry sources, Wan Hai is considering a lawsuit and other countermeasures against the fine. Singapore's Pacific International Lines is considering all possible options against the penalty, although it was slapped with the lowest fine of 23 million won.

The possibility of the FTC imposing additional fines on shipping companies that sailed the Korea-China and the Korea-Japan routes has fueled concerns over intensified international disputes. Shipping companies claimed that the littoral sea routes have already been subject to tough regulations aimed at maintaining the national security of the three countries.

"If the FTC slaps fines on shipping companies that sailed the Korea-China and the Korea-Japan routes, this will deteriorate the competitiveness of Korean companies, while benefitting large foreign shipping companies," the Federation of Korea Maritime Industries said in a statement. "In that case, the damage will be shifted onto Korean cargo owners."

The federation emphasized that the antitrust watchdog's tough measures will prompt foreign shipping companies to avoid anchoring in Korean harbors. The main opposition People Power Party also said in a statement that the FTC's decision will ruin the nation's shipping industry that has struggled to revive itself since the bankruptcy of Hanjin Shipping in 2017.

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