South Korea’s Trade Fair Commission was able to find traces of widespread collusion for the second time in 2022. The conspiracy includes but is not limited to price-fixing among shipping companies operating between South Korea, Japan, and China.
The Trade Commission issued over $63 million in fines against the fifteen shipping companies with operating routes to Japan yesterday. But, South Korea’s disciplining didn’t stop there. They also ordered the designated companies sailing to China to halt their actions, helping restrict competition on the waterways. Interestingly enough, South Korea did not note similar discrepancies on routes to North America and Europe.
The Federal Trade Commission (FTC) has a tumultuous history with South Korea’s shipping sector. The FTC has alleged in the past that to remove competitors from the seas, the line workers collaborated to stifle competition, regulate pricing, and carve out a market among one if not all of the scheme’s members.
In their more recent endeavors, the FTC revved its engine in aggression. They are also saying that companies that refused to cooperate were punished, including revoking their container storage privileges and canceling reservation cancellations to ‘corner’ them to accept the agreed-upon freight rate.
In their report, The Commission referenced 76 instances on Japanese routes from February 2003 to May 2019. Their report showed how all companies would agree on freight rates and bidding prices for larger shippers. The Commission’s report highlighted the various points of the alleged price-fixing, showing companies not only agreeing to the lowest level for introductory freight rates but also the introduction and increase of multiple rates, reducing competition all through the waterway.
In response to the fines, the companies banded together and claimed that they weren’t breaking any laws. They argued that they are permitted to take collective actions on freight rates under Korean law. They put evidence where their claims were by directly citing the rules under the maritime shipping act allowing collaboration and further changes in the law enacted by South Korea’s parliament.
The FTC soon fired back with a statement explaining their decision by saying they granted the situation on the Chinese routes. They were only directing the companies to stop their coercive business activities and not fining them.
“The act of colluding on Korea-China routes isn’t much different from that on the Korea-Southeast Asia or the Japan routes,” said Cho Hong-sun, director-general of the FTC’s cartel investigation bureau. “But the conspiracy was committed when the governments of both countries — Korea and China — had already limited competition by restricting cargo volume as agreed under a shipping agreement. Thus the impact or the damages were relatively small.”
To combat future discrepancies, the Commission plans to work closely with the Ministry of Oceans and Fisheries to improve the regulatory systems. They say that their overall goal is to increase the monitoring through cooperative management by the maritime authorities to protect import and export shippers.