Fines for LPG suppliers may be lowered

Fair Trade Commission Chairman Chung Ho-yul yesterday hinted that six energy firms accused of pricing-fixing may face smaller than expected fines.

Two LPG importers - SK Gas and E1 - plus four refiners - SK Energy, GS Caltex, S-Oil and Hyundai Oilbank - are widely expected to be fined for raising 22 trillion won in "undue" revenue by fixing the prices of liquefied petroleum gas between 2003 and 2008. Observers have speculated that the combined amount of the penalty would be at least 1 trillion won ($861 million).

According to the fair trade law, the FTC can levy price fixing-related fines of up to 10 percent of the sales.

Chung said speculations that the fine could exceed 1 trillion won are based on the judgment by investigators and that the anti-trust body would also hear from the accused companies before it concludes the case.



"The actual size of the fine may be different than (what already has been suggested)," Chung told reporters at a seminar hosted by the Federation of Korean Industries.

"I know that we need to offer companies a chance to state their views on the issue."

Citing the complexity of the case, the anti-trust watchdog postponed its ruling - which was due on Thursday - by two weeks.

Currently, the LPG supply market is led by SK Gas with a 26.6 percent market share, followed by SK Energy with 24.4 percent and E1 with 21.2 percent, according to data provided by the Korea National Oil Corp.`s. GS Caltex has a 16 percent market share, trailed by S-Oil with 7 percent and Hyundai Oilbank with 4.8.

Assuming that a 1 trillion won fine is divided among six companies according to their market shares, SK Gas and SK Energy may face an individual fine of 200-250 billion won, industry officials said.

If they receive fines of more than 200 billion won, a significant share of their net profits will be eroded from next year, they added.

However, Hyundai Securities analyst Park Dae-yong said the fine will not have a long-term impact on refiners.

"This is surely negative news for stock prices of refiners in the short term. But investors wouldn`t sell their shares just because they were fined," Park said.

"The refiners are likely to file an appeal against the FTC`s decision."

Meanwhile, S-Oil spokesman said the company was "never involved in price-fixing."

(christory@heraldm.com)

(yoonmi@heraldm.com)



By Cho Chung-un and Kim Yoon-mi