Korea's FTC steadfast on fining shippers despite claim on legitimacy in minimum charge

The Korean antitrust agency remains steadfast in its plan to fine maximum 800 billion won ($676.1 million) on shippers for past freight rate rigging despite strong protest from carriers and the Ministry of Oceans and Fisheries about a norm in minimum freight rates in the Southeast Asian sea routes.

The Maeil Business Newspaper found the Fair Trade Commission (FTC) in its 1,000-page report discovered “intentionality” that “impairs competition” after its examination on rate-setting actions by 23 local and foreign shippers on Southeast Asian route.

It deemed 82 out of 233 discussions on rates by shippers amounted to “unjust collective action.”

Freight carriers set minimum shipping rates that they promise not to drop beneath in order to compensate for shipments that contain less cargo or go by less populated lanes.

According to the FTC report, the Committee of Shipowners for Asian Liner Service in 2003 agreed to go by agreed minimum rates (AMR) for the purpose of bringing a recovery in rates on the export route. Non-Korean flag carriers like Evergreen Marine, Yang Ming and Wan Hai Lines also joined the agreement from 2005.

The FTC sees the collaborative act of 122 discussions supported by the Intra-Asia Discussion Agreement (IADA) and the committee is a cartel. Container carriers did not report detailed discussions and notify the result to the owners, which is regarded as illegal. They also prohibited the use of words that could imply a collaborative act when notifying the shippers of a rate hike, the report noted.

The Ministry of Oceans and Fisheries, the Korean authority on marine transportation act, disagrees, arguing 19 rate-setting joint actions had been reported.

Shippers also strongly protest that the FTC has misinterpreted a legitimate collective action.

They argue they had not profited from the rate action. For one, none had made money after the minimum rates came down to $220 per TEU in 2018 from $400 in 2003 on the Korea-Thailand route.

But the FTC found the association had restricted competition by fining any shipper that does not go by the agreed rates.

Shippers again retorted as shippers stopped going by the agreed rates freely in turn from 2010 to 2018.

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