Four refiners indicted over alleged wartime fuel price fixing

Prosecutors indicted four of Korea's largest oil refiners Monday, accusing them of pushing up fuel prices in the days after the Iran war sent global crude soaring.

The Seoul Central District Prosecutors' Office estimated the collusion at 14.2 trillion won ($9.27 billion) and said it helped drive a sharp rise in domestic pump prices just as the war was already squeezing consumers.

HD Hyundai Oilbank, SK Energy, GS Caltex and S-Oil, which together control 98.6 percent of Korea's fuel market, were all charged as corporations with violating the Fair Trade Act. Prosecutors also charged four executives. They indicted the head of HD Hyundai Oilbank's pricing department, who is in detention, along with a senior manager in the same department, the company's head of legal affairs and the head of GS Caltex's domestic sales division.

At the heart of the case is a wholesale pricing mechanism the industry calls the deposit price. Refiners set the provisional figure, known as a deposit price, and pass it to gas stations, which pay it up front before receiving fuel. Stations base their pump prices on it, then settle up at the end of the month against a final price the refiner sets on its own.

Prosecutors say the head of HD Hyundai Oilbank's pricing department reached a deal with a counterpart at SK Energy in early March, days after the war broke out, to raise both companies' deposit prices at once. Under the arrangement, SK Energy held its price 30 to 40 won per liter above HD Hyundai Oilbank's, and the two lifted their prices in step, the prosecution said. GS Caltex and S-Oil then followed the same upward path, and domestic fuel prices climbed sharply within days.

Prosecutors argued the companies had little reason to raise prices so steeply. The refiners were sitting on sizable crude stockpiles when the war began, investigators said, yet lifted their deposit prices from the first business day by margins they described as almost without precedent.

The prosecution confirmed that GS Caltex and S-Oil tracked the moves of HD Hyundai Oilbank and SK Energy but did not charge the two with collusion. It found no evidence, prosecutors said, that either had directly agreed on price increases with anyone. Even so, the prosecution concluded, the price-following produced an effect economically similar to a cartel.

Investigators also recovered internal messenger exchanges at some of the refiners. In them, employees wrote lines such as "We're raising the price another 100 won today," "Looks like we'll make 2 trillion won this year" and "a company that lives off the war."

The prosecution also found that HD Hyundai Oilbank and SK Energy had been trading price information well before the war. The two began sharing deposit-price data in July 2024 and coordinated their pricing from then on, prosecutors said. That long-running exchange formed the basis for the charge against the senior manager in the pricing department.

Prosecutors put the direct collusion between HD Hyundai Oilbank and SK Energy at 14.2 trillion won. They estimated the total anticompetitive impact at about 26 trillion won once the effect of GS Caltex and S-Oil following those prices was included.

The SK Energy employee who allegedly struck the deal with HD Hyundai Oilbank was not charged. Legal sources believe SK Energy was granted leniency under a program that reduces or waives penalties for staff who report antitrust violations or cooperate with investigators.

A prosecution official addressed why the SK Energy side had escaped charges.

"We comprehensively considered both the degree of cooperation with the investigation and the degree of involvement in the crime," the official said.

Also charged: strong-arming independent gas stations

Prosecutors brought a separate Fair Trade Act charge over the way the refiners dealt with independently owned gas stations. Using their dominant position, the companies allegedly pushed these stations into contracts requiring them to buy their entire fuel supply from a single refiner. 

Because the refiner alone sets both the deposit price and the month-end final price, a station could not easily turn to a cheaper supplier even when one existed, prosecutors said. Fuel quality varies little from one refiner to the next, they noted, so price is where competition should play out. The exclusive contracts and after-the-fact settlement, in the prosecution's view, stripped stations of that choice and left the distribution system open to collusion.

Stations that broke the exclusivity terms faced penalties, the investigation found, including suspension of their loyalty-card programs, demands to repay costs and large damages claims.

Erasing evidence before the Fair Trade Commission stepped in

Two of the executives were also charged with destroying evidence before the Fair Trade Commission, the antitrust regulator, could inspect the companies.

HD Hyundai Oilbank's head of legal affairs learned in advance of a planned on-site inspection by the commission in March and, prosecutors say, ordered staff to delete internal files that had compiled rival refiners' price information. The head of GS Caltex's domestic sales division is accused of ordering the deletion of an internal messenger chat the company had set up to share materials from its pricing meetings.

"We will spare no effort in pursuing this prosecution so that the defendants, who committed a grave crime of disrupting oil prices amid national turmoil, are given sentences that match their offenses," a Seoul Central District Prosecutors' Office official said. "To prevent this from happening again, we will work closely with the Ministry of Trade, Industry and Resources and other agencies."

BY SUK GYEONG-MIN [[email protected]]