The Fair Trade Commission will deliberate on the case of price fixing by 23 domestic and foreign shipping companies on the 12th. The amount of fines alone is known to reach up to 800 billion won, and attention is focused on the level of sanctions as it has spread to a conflict between the Fair Trade Commission and the Ministry of Oceans and Fisheries.
The Fair Trade Commission will hold a plenary meeting on the same day and deliberate on the allegations of violations of the Fair Trade Act by 23 shipping companies, including HMM (formerly Hyundai Merchant Marine). The results of the review are expected to be announced later this month.
The case began in 2018 when the timber import industry reported to the Fair Trade Commission that domestic shipping companies were suspected of collusion, such as raising freight rates for Southeast Asian routes all at once.
The Fair Trade Commission examiner broadened the scope of the investigation to foreign shipping companies, and determined that 122 prior consultations with 23 shipping companies between 2003 and 2018 were illegal activities that did not meet the legal requirements.
According to Article 29 of the Shipping Act, shipping companies may enter into contracts or joint acts regarding freight rates, ship arrangement, cargo loading, and other conditions of transport. However, in order to engage in a joint act, it is necessary to meet the requirements of prior consultation with the shipper’s organization, report to the Ministry of Oceans and Fisheries, and free entry/exit. Otherwise, the Fair Trade Act will be applied as an unfair joint act.
Accordingly, the Fair Trade Commission examiner sent a review report (the equivalent of the prosecution’s indictment) to each company in May last year, stating that a fine of up to 800 billion won (10% of total sales is applied) is necessary. It is known that some shipping companies have opinions of prosecution.
The shipping industry reacted immediately. It is argued that it was a legitimate joint act based on the shipping law. In addition, there are concerns that a ‘second Hanjin Shipping bankruptcy’ could occur if the Fair Trade Commission imposes an unreasonable penalty.
Meanwhile, the Ministry of Oceans and Fisheries, through the National Assembly’s Agriculture, Forestry, Livestock, Food, Marine and Fisheries Committee, promoted a bill to amend the Shipping Act to prevent the application of the Fair Trade Act to joint actions under the Shipping Act, resulting in conflicts between ministries. In particular, the revised shipping law is known to contain retrospective application to existing cases, resulting in controversy. In response, Fair Trade Chairman Cho Seong-wook repeatedly stated his policy of “processing in principle” and confronted them.
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