Collusion to Raise Liquefied Carbonic Gas Prices by 46%... 5.3 Billion KRW Fine Imposed

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] Nine companies that colluded in the bidding for liquefied carbon dioxide gas used for ship welding by the four major shipbuilders, including Hyundai Heavy Industries and Samsung Heavy Industries, will be sanctioned by the Fair Trade Commission.

On the 3rd, the Fair Trade Commission announced that it would impose a fine of 5.33 billion KRW on nine companies, including Yujin Chemical and Taekyung Chemical, which colluded on the winning bidders and bid prices in the liquefied carbon dioxide gas purchase bidding by shipbuilders. These companies colluded not only in the shipbuilders' purchase bids from 2017 to 2019 but also in the sales prices and quantities of liquefied carbon dioxide gas supplied to filling stations. A Fair Trade Commission official said, "We will strengthen monitoring of collusion in intermediate and subsidiary materials sectors that undermine industrial competitiveness," and added, "We plan to strictly sanction any violations of the law."

The background of the collusion among liquefied carbon dioxide gas manufacturers and sellers lies in the shipbuilding industry's recession that began in 2016. At that time, as demand for liquefied carbon dioxide gas for ship welding sharply declined due to the downturn in the shipbuilding industry, the profitability of liquefied carbon dioxide gas manufacturers deteriorated. In fact, the winning bid price for liquefied carbon dioxide gas purchased by the four major shipbuilders, including Hyundai Heavy Industries and Samsung Heavy Industries, dropped by about 25%, from 154.5 KRW per kg in 2015 to 116 KRW in 2016.

In response, seven liquefied carbon dioxide gas manufacturers, including Deokyang and Taekyung Chemical, held a meeting of sales managers at the Carbon Association office in June 2017. On that day, these companies agreed to set the minimum bid price at 165 KRW per kg in the liquefied carbon dioxide gas purchase bidding conducted by the four major shipbuilders and to exclude filling stations from the list of prospective winning bidders. As a result of the collusion, all six purchase bids for liquefied carbon dioxide gas worth 14.4 billion KRW conducted by the four major shipbuilders from July 2017 to September 2018 were won by the companies agreed upon as prospective winning bidders. During the collusion period, the average winning bid price was 169 KRW per kg, a sharp increase of about 45.7% compared to 116 KRW in 2016 before the collusion.

Partial minutes of the sales managers' meeting held in June 2017 by seven liquefied carbon dioxide gas manufacturers, including Deokyang and Taekyung Chemical.
[Photo by Korea Fair Trade Commission]

Liquefied carbon dioxide gas manufacturers also colluded on the quantities supplied to multi-purpose filling stations. Four companies, including Deokyang, Seokdo Chemical, and Yujin Chemical, agreed around October 2017 to distribute the quantities of liquefied carbon dioxide gas sold to multi-purpose filling stations based on each company's past sales volume and not to compete on sales prices. Earlier, in September of the same year, when the sales prices of liquefied carbon dioxide gas rose simultaneously, multi-purpose filling stations demanded price reductions from manufacturers and threatened to change suppliers if necessary. In response, these four companies shared the quantities sold to multi-purpose filling stations from November 2017 to May 2019 and agreed on the distribution ratios for each filling station, enabling them to maintain stable prices as well as sales volumes.

This case is the first time the Fair Trade Commission has detected collusion in the liquefied carbon dioxide gas industry, where such collusions have occurred repeatedly. The Fair Trade Commission stated, "It is significant that we have detected and sanctioned collusion in the bidding and sales market of liquefied carbon dioxide gas, which is used as an essential subsidiary material or food additive across industries, for the first time," and added, "We hope this measure will establish a competitive order in the liquefied carbon dioxide gas trading market."

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