SK Energy, HD Hyundai Oilbank face fines over alleged fuel price fixing
Summary
The Fair Trade Commission sent a review report to SK Energy and HD Hyundai Oilbank on Wednesday over alleged collusion on gasoline, diesel and kerosene prices in South Korea. The alleged conduct lasted from February 2022 through March this year and involved exchanging provisional prices, final prices and sales policies. The FTC estimated affected sales at about 44.1 trillion won and proposed corrective measures and fines that could collectively reach 4.63 trillion won. The commission will decide the final sanctions after the companies submit their opinions and exercise their right to defend themselves.
Key Facts
- South Korea’s oil refining industry is highly concentrated, with SK Energy, HD Hyundai Oilbank, GS Caltex and S-Oil accounting for about 98 percent of the domestic market.
- The alleged collusion involved a post-settlement pricing system in which refiners initially set provisional prices and later determined final prices to settle the difference.
- The FTC classified the alleged conduct as a serious violation under the Fair Trade Act.
- Current FTC penalty guidelines allow fines of up to 10.5 percent of relevant sales for serious violations, although the final amount could be substantially lower.
- The FTC said the alleged conduct also involved price information exchanged after the outbreak of the Middle East conflict.
2 refiners could incur up to $3.45 bil. in fines
A gas station employee refuels a car in Seoul, Sept. 20. Yonhap
SK Energy and HD Hyundai Oilbank may face sanctions from the Fair Trade Commission (FTC) over allegations that they colluded on gasoline, diesel and kerosene prices, with combined fines potentially reaching 4.63 trillion won ($3.45 billion).
The antitrust regulator said Wednesday that it sent a review report to the two companies, formally launching deliberations over the alleged price-fixing case.
The FTC said the alleged collusion lasted from February 2022, shortly before Russia's invasion of Ukraine, through March this year, shortly after the outbreak of the war in Iran. The case covers petroleum products that are essential to household and economic activity.
Korea's oil refining industry is highly concentrated, with SK Energy, HD Hyundai Oilbank, GS Caltex and S-Oil accounting for about 98 percent of the domestic market.
According to the FTC, SK Energy and HD Hyundai Oilbank exchanged information on the prices of gasoline, diesel and kerosene, including provisional prices, final prices and sales policies. The regulator also determined that the two companies colluded on prices following the outbreak of the Middle East conflict.
The alleged conduct involved the industry's post-settlement pricing system. Refiners initially set a provisional price when supplying petroleum products to gas stations and other customers. They then determine a final price early the following month and settle the difference between the initial and final prices.
HD Hyundai Oilbank’s refinery in Seosan, South Chungcheong Province / Korea Times file
The FTC said the two refiners gain an unfair advantage by exchanging such pricing information with each other.
The regulator estimated that sales affected by the alleged collusion amounted to about 44.1 trillion won. It classified the conduct as a "serious violation" and proposed corrective measures and fines.
“FTC investigators determined that the conduct constitutes a serious violation of the Fair Trade Act and proposed corrective measures and the imposition of a fine,” an official from the watchdog said.
“The commission will conduct deliberations to make a final determination on whether the law was violated and, if a violation is confirmed, will also determine the specific level of sanctions.”
Under the FTC's current penalty guidelines, serious violations are subject to fines of up to 10.5 percent of relevant sales.
Applying the relevant rates to the estimated sales could result in combined fines of up to about 4.63 trillion won, though the final amount could be substantially lower depending on the period and scope of violations ultimately recognized.
The FTC will hold a full commission meeting to determine the final sanctions after completing procedures to allow the companies to submit written opinions and exercise their right to defend themselves.
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