Prosecutors expand oil price-fixing probe to target 'gapjil' allegations against refiners

By Choi Eui-jong, The Herald Business

Prosecutors investigating alleged oil price-fixing by South Korea's four major refiners — SK Energy, GS Caltex, S-Oil and HD Hyundai Oilbank — have begun questioning gas station industry figures and are now examining whether the companies engaged in "gapjil," or abusive business practices, and other unfair trade conduct.

The Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office, led by Chief Prosecutor Na Hee-seok, questioned an independent gas station operator as a reference witness this week. Prosecutors asked the operator whether refiners had coerced stations into signing exclusive full-purchase contracts as a form of gapjil.

Under full-purchase contracts — a longstanding practice in the domestic refining industry — a gas station agrees to source all of its fuel exclusively from a single refiner in exchange for financial support. Independent operators have consistently argued that such arrangements make it effectively impossible to switch to cheaper products from rival refiners, and calls for reform have grown steadily louder.

Prosecutors are conducting a fact-finding inquiry with independent operators to examine how exclusive contracts with a specific refiner prevent stations from choosing less expensive alternatives. Investigators are focusing not only on alleged price-fixing in the refining sector but also on unfair trade practices targeting gas station operators.

The issue of reforming exclusive full-purchase contracts has also drawn attention in the political arena. The Democratic Party of Korea's Euljiro Committee hosted a social dialogue and cooperation ceremony between gas stations and refiners in April, reaching an agreement to allow stations to transition to "mixed contracts" under which they would be required to purchase only 60 percent or more of their fuel from a single refiner, rather than 100 percent.

Prosecutors launched a full-scale investigation into alleged price-fixing by the refiners in March, when they began compulsory investigative measures. On March 23 and 24, investigators searched and seized materials at all four refiners and the Korea Petroleum Association — an incorporated association whose members include the four companies — on suspicion of violating the Monopoly Regulation and Fair Trade Act.

President Lee Jae-myung said on March 5, amid rising fuel prices following the outbreak of hostilities between the United States and Iran, that authorities "must crack down hard and respond decisively to any attempt to exploit the difficult market environment through hoarding or unreasonable profiteering."

The following day, the Ministry of Justice announced that Minister Jeong Seong-ho had directed the Supreme Prosecutors' Office to respond strictly in accordance with the law and principles, describing price-gouging and collusion that exploit public hardship as "serious antisocial criminal acts."

Prosecutors also raised related questions during the March search of the Korea Petroleum Association. Earlier this month, investigators questioned a working-level official from S-Oil's retail management team as a reference witness. The refiners, however, are reported to be denying the charges.

The Fair Trade Investigation Division has been aggressively targeting collusion. In April, it indicted Daesang, Sajo CPK and CJ CheilJedang on charges of fixing prices for starch and sugar products. CJ CheilJedang and Samyang Corp. were also indicted on charges of leading a sugar price-fixing scheme. Prosecutors say they are concentrating their investigative resources on strictly punishing fair trade offenses that threaten the livelihoods of ordinary citizens.