LPG suppliers biggest anti-trust violators

By Kang Seung-woo

The liquefied petroleum gas (LPG) and aviation industries came top in terms of fines issued by the nation’s anti-trust watchdog last year.

The Fair Trade Commission (FTC) announced in its report Wednesday that six LPG suppliers were ordered to pay a cumulative 409.4 billion won ($379.10 million) in fines in 2010 for fixing product prices, while 21 domestic and foreign air freight service providers were also fined 84.3 billion won on similar charges.

The organization decided to punish the six LPG providers a combined 668.9 billion won for fixing prices in December 2009.

The companies subject to the regulatory measures are E1, SK Gas, SK Energy, GS Caltex, Hyundai Oilbank and S-Oil.

The penalty is the largest ever imposed on a single industry in Korea, indicating that the government is getting tough on activities that hamper fair market competition.

SK Gas was fined the most at 198.7 billion won, followed by E1 with 189.4 billion won; SK Energy, 160.2 billion won; GS Caltex, 55.8 billion won, S-Oi,l 38.5 billion won and Oilbank, 26.3 billion won.

The FTC, however, exempted all or half of the penalties for SK Energy and SK Gas, granting leniency for their report to the authorities about the price collusion in the industry.

They were found to have collaborated in fixing the prices of products such as propane and butane, from 2003 to 2008 by sharing information and cooperating in making decisions on prices.

The collusion took place especially after the government lifted its price-monitoring rule in 2001 for the LPG industry. Until then LPG suppliers were required to receive approval before adjusting product prices.

The FTC also slapped a collective 120 billion won in fines on 19 airline companies from 16 countries that supply air freight services in and out of Korea. Two airliners out of the selected 21 avoided fines but were ordered to stop the practice.

The companies fined included Korea’s flagship carriers Korean Air and Asiana Airlines, as well as Germany’s Lufthansa and Air France.

At that time, Korean Air was forced to pay the largest amount of 48.74 billion won, followed by Asiana and German-based Lufthansa paying 20.66 billion won and 12.10 billion won respectively.

Although a combined 120 billion won in fines was handed out, the overall amount was reduced to 84.3 billion won because of a leniency program.

The FTC declined to disclose who benefited from the reduction.

A collective 20.4 billion won fine was imposed on seven pharmaceutical companies for unduly luring customers with rebates and obstructing business activities of generic drug makers.

The firms were GlaxoSmithKline Korea (GSK), Daewoong, Pfizer, MSD Korea, Jeil Pham, Lilly Korea, and Korea Otsuka Pharmaceuticals.

In the report, the FTC added that it had imposed fines of 608.1 billion won on companies last year, up 63.9 percent from a year earlier.

There was a spike despite a fewer number of cases under deliberation. The FTC dealt with 3,505 cases suspected of hampering fair market competition last year, down from 4,594 in 2009. Of them, 66 cases led to penalties, compared with 78 a year earlier, the report said.

The FTC strengthened its overview of cartel activities such as price fixing as part of efforts to beef up its clampdown against corrupt business activities that prevent fair market competition.