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HMM container carrier Nuri. (HMM) |
The Fair Trade Commission is expected to decide next month on punitive actions against major shippers following allegations that shipping lines from both home and abroad have rigged freight charges.
According to government sources on Sunday, the FTC plans to hold a full-member meeting to discuss whether the accused 23 companies colluded to raise shipping costs for service on a Southeast Asian sea route. The allegation was first reported to the FTC by importers in the timber industry in 2018.
A full-member meeting is where a conclusion is reached, after an investigation and a hearing with the accused. It could happen before the end of August, the sources said.
In May, the FTC sent screen reports to the shippers, including Korea’s sea flag carrier HMM Co., Korea Marine Transport Co. and Sinokor Merchant Marine Co., to notify them that they may have violated the fair trade law.
The watchdog’s report also said each company may be subject to a fine worth 10 percent of the annual sales, and the penalty can go up to as much as 800 billion won ($684 million).
The accused companies strongly resisted, saying that their joint action to set prices is legitimate according to the Marine Transportation Act. They also raised a concern that the excessive amount of penalties might lead to bankruptcy of the companies.
The act stipulates that shippers can take collaborative action when entering into an agreement on cargo rates, allocation of vessels, stowage of cargo and other transport terms and conditions, when they fulfill certain conditions.
Under the law, the firms in agreement have to exchange sufficient information on the transport conditions with shippers’ association, and report their agreement to the Ministry of Oceans and Fisheries. The companies should not be restricted from participation or withdrawal from the agreement unreasonably, it adds.
The shipping service providers claim that, due to the distinct nature of the industry, collaborative action is needed to prevent a monopoly in the market. If they do not set an agreed standard of operating terms and conditions, it can lead to excessive competition, and only the strongest will survive, an industry official said.
The antitrust watchdog, however, viewed the shipping firms collaborating to set the operating terms and conditions as going over the legal mark.
While the opinion is divided on the case, lawmakers are taking sides with the shippers, proposing a revision bill to not apply the fair trade act on activities conducted accordingly to the Marine Transportation Act.
The revision bill, presented by a ruling Democratic Party of Korea lawmaker, is expected to be tabled at a parliamentary subcommittee in September. Even if it glides through the legislative procedures, it is unlikely to come into effect to save the shippers from the FTC decision, if it decides to punish them.
The FTC is also against the revision bill, as it takes the view that the proposal would be literally allowing bid rigging of the shippers.
By Jo He-rim (
herim@heraldcorp.com)
