S Korean firms fined $12.3m for pricing cartel

23 June 2008 08:26  [Source: ICIS news]

SINGAPORE (ICIS news)--Eight petrochemical companies in South Korea have been fined a total of won (W)12.7bn ($12.3m) by the country’s Fair Trade Commission (FTC) on 18 June for fixing prices of six products, the government body said in a statement on Monday.

"The chairman of FTC, Baek Yong Ho, decided on 18 June after a meeting with the committee, to impose a fine on eight petrochemical companies for price fixing of six products," FTC said in the statement in Korean.

SK Energy, GS Caltex, Samsung Total Petrochemicals, Honam Petrochemical and Daelim Corporation were among the companies that were fined for fixing prices of styrene monomer (SM), toluene, xylenes, monoethylene glycol (MEG), diethylene glycol (DEG) and ethylene oxide (EO).

Investigation results showed that including SK Energy, seven companies had fixed prices for SM from October 2000 to September 2004. The cartel made up 94.6% of the SM market.

SK Energy was also involved with four other companies in fixing prices of toluene and xylenes from January 2002 to June 2005, in which the cartel made up 82.5% and 93.9% of the respective markets at that point of time.

Samsung Total and four other companies had formed a cartel from January 2001 to December 2004, dominating 51% of MEG, 99% of DEG and 100% of EO markets respectively.

Fines imposed (figures in millions of wons)

Firms	SM	Toluene	Xylene	MEG	DEG	EO	Total
SK Energy	672	2,966	1,198	-	-	-	4,836
GS Caltex	-	1,990	882	-	-	-	2,872
Samsung Total	0	818	291	121	75	463	1,768
Honam	0	0	0	175	180	543	898
Daelim	619	0	0	-	-	-	619
Dongbu HiTek	471	-	-	-	-	-	471
Seetec	844	-	-	0	0	0	844
Samsung Chem	0	-	-	28	45	322	395
Total	2,606	5,774	2,371	324	300	1,328	12,703

Source: Fair Trade Commission

Product Pricing Formula

SM [September 2000 – December 2001]

-large companies: {(local criteria*currency conversion*70%) + (domestic criteria*30%)}

-small companies / dealers: {(local criteria*currency conversion*70%) + (domestic criteria*30%)}*(1+0.10)            

[January 2002 – September 2004]

-large companies: {(local criteria*currency conversion*70%) + (domestic criteria*30%)}*1.08

-small companies / dealers: [{(local criteria*currency conversion*70%) + (domestic criteria*30%)}*1.08]*1.05   

Toluene (previous month’s average of ICIS FOB Korea *average currency conversion of previous month) + (αmiscellaneous expenses)

Xylenes (previous month’s average of ICIS FOB Korea *average currency conversion of previous month) + (αmiscellaneous expenses)

MEG     SABIC MEG ACP*110%*currency conversion rate    

DEG     ICIS weekly spot price*110%*currency conversion rate   

EO      SABIC MEG ACP*136%*currency conversion rate    
Source: Fair Trade Commission

Legends:

Local criteria: (Previous month’s average of Platts FOB Korea + previous month’s average of ICIS US Gulf Spot) / 2
Domestic criteria: International benzene price*0.8042 + Quarterly average of ethylene prices*0.2805 + Won 238/kg

($1= W1,032)

By: Brian Myung
65 6780 4359

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