2/23/2007

Four oil companies fined for price rigging

Korea Herald Feb. 23, 2007

The Fair Trade Commission yesterday slapped fines of 52.6 billion won ($54.5 million) on four major oil refineries for illegal price-fixing.
The antitrust watchdog said SK Corp., Hyundai Oilbank Corp., GS Caltex Corp. and S-Oil Corp. were found to have conspired to raise prices of petroleum products such as gasoline, diesel and kerosene in 2004.

The FTC also decided to file a complaint against the four companies to the prosecution.

"The oil cartel, between April 1 and June 10, is estimated to have caused customer damage amounting to 240 billion won, or 15 percent of the companies' total sales," the FTC said. The four refiners' combined sales from April to June were 1.6 trillion won, it said.

"The refiners are suspected of fixing prices for longer periods but as of yet, we only have evidence of illegal practices during those two months."

The oil companies are strongly refuting the FTC's claims, saying that they have not colluded to fix prices and that it is impossible to do so under the petroleum market structure.

They refuted the FTC's position that prices of domestic petroleum products jumped much more than international crude prices during the two months.

"We believe the FTC's decision does not reflect the facts and the realities of the marketplace," Katharine Kho, spokeswoman of SK Corp., said yesterday. "Further administrative action including an appeal will be carefully reviewed, so the commission's announcement today should not be considered the final judgment on this issue."

An S-Oil spokesman also said that his company does not accept the FTC's decision and it will take due legal steps. "There is no evidence that our company was involved in any cartel conspiracy," he said.

The refineries questioned the credibility of the FTC allegation, noting that it did not specify the names of company officials who took part in the alleged cartel scheme, when or where they met, and that product price gains varied from company to company.

"The Ministry of Commerce, Industry and Energy guided us directly or indirectly on the prices, so it is hard to accept the accusation that we ignored this to fix prices," said an oil company official.

Consumer rights groups and lawmakers have often raised the issue of possible price rigging by oil refineries but it had never been officially proven. The companies have flatly denied the allegations, referring to the perfect market competition and price settling system which reflects international oil prices.

Once a criminal investigation begins, the watchdog plans to work with prosecutors to find further evidence of the companies' price rigging.

Top refiner SK Corp. faces the largest fine at 19.2 billion won, followed by GS Caltex's 16.2 billion won fine, Hyundai Oilbank's 9.3 billion won penalty and S-Oil's 7.8 billion won penalty.

The FTC began a probe into the prices of the refiners in 2004 when oil product prices rose sharply.


Earlier this week, 10 local petrochemical companies were fined a total of 105.1 billion won for rigging prices of polypropylene and high density polyethylene products, which are widely used to make plastic containers and bottles. The firms accepted the penalties.

The watchdog also plans to probe whether internet websites that provide consumer information such as product prices have caused damage to consumers by distorting data. It said it will come up with appropriate trade regulations for electronic transactions.

(sophie@heraldm.com)


By Kim So-hyun

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SeanHayes@ipglegal.com