The Seoul Central District Prosecutors’ Office on the 6th indicted the four major refiners—HD Hyundai Oilbank, SK Energy, GS Caltex, and S-Oil—on charges including violations of the Fair Trade Act. The head of HD Hyundai Oilbank’s pricing division was also indicted while in custody.
Prosecutors concluded that, after the outbreak of the U.S.-Iran war, HD Hyundai Oilbank and SK Energy coordinated in advance on the timing and scale of their price increases. The direct collusion was calculated at 14.2 trillion won.
Including the ripple effects, the total scope of competition restriction was estimated at 26 trillion won. However, follow-on pricing behavior is not subject to criminal punishment under current law.
The domestic refining market is an oligopoly in which the four companies hold a 98.6% share. Prosecutors view the lead-follow structure as having allowed the collusion to spread across the entire market.
The indictment also included charges related to exclusive purchase contracts, post-settlement pricing systems, and destruction of evidence. The indictment itself does not mean guilt has been established; the allegations will be determined at trial.
◆ Immediately after the war, simultaneous price hikes pointed to collusion, prosecutors say
When the U.S.-Iran war broke out, fuel prices surged. Consumers accepted it as unavoidable. Prosecutors saw it differently, concluding that a substantial portion of the spike was the result of collusion.
The Fair Trade Investigation Division of the Seoul Central District Prosecutors’ Office, led by Chief Prosecutor Na Hee-seok, said on the 6th that it had indicted the four refiners on charges including violations of the Fair Trade Act. A, the head of HD Hyundai Oilbank’s pricing division, was indicted while in custody. A responsible manager, the legal affairs office chief, and the head of GS Caltex’s domestic sales division were also sent to trial.
According to prosecutors, the direct collusion between the two companies amounted to 14.2 trillion won. HD Hyundai Oilbank and SK Energy allegedly aligned in advance on the timing and scale of their price increases. SK Energy reportedly set prices 30 to 40 won per liter higher. The two companies are under investigation for exchanging price information from July 2024 through last February.
What prosecutors focused on was the speed of the increases. During the Russia-Ukraine war, international oil prices fell on the first day and rose only a week later. This time, they jumped together from the first day of the conflict. Refiners had already built up substantial crude inventories. Prosecutors said the sharp rise was not inevitable.
Prosecutors do not view this collusion as a one-off deviation. They believe the exchange of information between the two companies had been ongoing even before the war. The detained HD Hyundai Oilbank executive had previously handled pricing information at SK Energy, suggesting a long-standing channel between the two firms. Prosecutors say this longstanding practice became overt during the crisis.
Internal messenger chats were also cited as evidence. In an S-Oil pricing division chatroom, messages such as “Looks like we’ll make 200 billion won this year” and “A company that lives off war, indeed” were exchanged, prosecutors said.
◆ Oligopoly and lead-follow structure among the four refiners
The reason the collusion spread across the market lies in its structure. The domestic refining market is dominated by four companies with a combined 98.6% share. When HD Hyundai Oilbank and SK Energy raised prices, GS Caltex and S-Oil followed.
Prosecutors described the conduct of the two follower companies as “conscious parallel behavior.” It involves moving in the same direction after observing a competitor’s price changes. No direct evidence of collusion was found, so this part was excluded from the criminal indictment on collusion charges.
Still, the market impact was significant. Prosecutors estimate that once the ripple effect of the follow-on behavior is included, the total scope of competition restriction rises to 26 trillion won. The two companies were the source of the collusion, but the burden was shifted to consumers across the market.
The contract structure tying gas stations to refiners also came under scrutiny. The four refiners signed exclusive purchase agreements with independent gas stations, requiring them to buy only their products. Prices were unilaterally notified by the refiners. If stations sourced fuel elsewhere, they faced disadvantages such as damage claims or suspension of bonus cards. Prosecutors concluded that stations had no choice but to rely on ex post pricing. All four companies were indicted on this charge.
Prosecutors also disclosed witness testimony. A representative from the Korea Oil Station Association reportedly said, “The refiners are like kings” and complained that stations had lost price competitiveness. Prosecutors say gas stations are structurally unable to switch suppliers easily.
◆ Enforcement gaps and distribution structure remain key issues
This case exposes loopholes in the system. Of the 26 trillion won in competition restriction, a significant portion came from follow-on behavior. That conduct is not subject to criminal punishment.
“Conscious parallel behavior” is difficult to regulate under the law. In an oligopoly, it is common for companies to follow competitors’ prices. To punish it, evidence of an agreement between business operators is required. Such evidence was not found for GS Caltex and S-Oil. That is why they avoided criminal liability even though the market impact was substantial. How to deal with price-following in an oligopoly remains an open question.
The burden fell on consumers. Prosecutors say supply prices rose even though there was little increase in underlying costs. The higher wholesale prices were then passed through gas stations to retail prices. In other words, collusion was one factor behind the inflationary pressure that built during the war.
Charges of evidence destruction were also included in the indictment. Employees at HD Hyundai Oilbank and GS Caltex allegedly learned in advance of on-site investigations by the Fair Trade Commission and instructed others to delete related documents and internal messenger records. Prosecutors also said it was confirmed that three refiners reported lower-than-actual supply prices to the Ministry of Trade, Industry and Energy.
The industry has pushed back. It argues that in the refining business, it is difficult to separate product-specific costs in accounting terms. Prosecutors countered that the materials they secured showed evidence that the companies recognized and managed costs by product.
The final judgment will be made in court. An indictment does not amount to a conviction.
The government has already taken action. In March, it introduced a temporary ceiling price system for petroleum products in response to the war’s fallout. The measure was intended to stabilize prices. Industry observers believe that, depending on the outcome of the trial, internal controls over pricing procedures and the handling of competitors’ information will likely be strengthened. There could also be further policy discussions aimed at reforming contract structures and distribution practices in the refining industry.