With domestic refiners sent to trial on charges of colluding on oil prices worth about 14 trillion won by taking advantage of the timing of the U.S.-Iran war outbreak, attention is on whether the government can seek damages against them.
At the time, the government lowered fuel taxes and prepared high oil price relief funds to rein in soaring gas prices, and it also directly purchased fuel in the public institutional sector. If collusion inflated gas prices, not only consumers but also government finances may have been harmed.
◇Two refiners indicted… prosecutors say "direct collusion totals 1.42 trillion won"
According to legal sources on the 8th, the Seoul Central District Prosecutors' Office Fair Trade Investigation Department on the 6th indicted major domestic refiners, including HD Hyundai Oilbank and SK Energy, on charges of violating the Fair Trade Act. Prosecutors say they unfairly drove up gas prices by setting the timing and scale of price hikes in advance.
Prosecutors found that HD Hyundai Oilbank and SK Energy (SK Innovation) shared pricing information from Jul. 2024. Prosecutors calculated their direct collusion at 1.42 trillion won.
GS Caltex and S-Oil were found to have raised prices by referring to the prices formed by the two companies. Prosecutors determined this produced a total competition-restricting effect of 26 trillion won. However, the two companies were not indicted on collusion charges because they are not subject to punishment under current law.
◇Could the government also be a victim? Claims possible for direct purchases
Article 109 of the Fair Trade Act holds that when a business or business association violates the law, it is liable for damages up to three times the amount of harm. The question is whether the government can claim damages as a victim of the refiners' collusion.
Legal sources broadly divide the government's potential damages into three categories: ▲ the excess expenditure on fuel directly purchased by the government, local governments, and public institutions ▲ the tax revenue loss from fuel tax cuts ▲ the spending on high oil price relief funds.
Many say the government can seek damages for fuel purchased directly by the government and public institutions. That is because the government and public institutions are economic actors that buy fuel in the market. If they bought fuel above normal prices due to collusion, they can claim the excess expenditure as damages.
The government has in fact sought damages from refiners before. Arguing that refiners supplying fuel to the military agreed in advance on volumes and unit prices before bidding, the government filed suit against them in 2001. In 2013, in this military fuel bid-rigging case, the Seoul High Court issued a recommendation for settlement ordering five refiners, including SK Energy, to jointly pay the government 135.5 billion won.
◇Fuel taxes and relief funds are "indirect damages"… causation is key
Opinions are divided on whether the tax revenue loss from fuel tax cuts and the spending on high oil price relief funds can be viewed as damages from the refiners' collusion. Some say a damages claim is possible if the causal link between the collusion and government expenditure can be proven.
A large law firm attorney said, "If you prove the purpose and intent of the relief funds, and further demonstrate sufficient causation that the funds would not have been paid absent the collusion, then you can claim them as damages."
This means it must be shown that the government did not simply respond to rising global oil prices, but that domestic gas prices rose further due to refiners' collusion and, as a result, government fiscal expenditure was unavoidable.
◇Counterargument says "hard to hold them liable for policy judgments"
Another view is that it is difficult to assign responsibility to refiners for the government's policy expenditure. Unlike cases of directly buying fuel at higher prices, the fuel tax cuts and relief payments involved the government's independent policy judgments.
Attorney Hong Jeong-seok of Yoon & Yang LLC said, "The tax outlays from fuel tax cuts and the relief funds constitute indirect damages," adding, "Damages for direct purchases are likely to be recognized, but indirect damages need to be examined separately."
Attorney Go Jeong-pyo of Law Firm Won also said, "It does not seem easy to recognize indirect causation," adding, "In particular, fuel tax cuts are somewhat removed from the collusive conduct, and there could be a rebuttal that the relief funds were paid through an exceptional policy decision."