Six South Korean petrochemical companies and 37 of their executives and employees have been charged over what prosecutors call the largest price-fixing scheme in the country's history, involving 16 trillion won ($11.5 billion) worth of products. The cartel covered basic raw materials used across industry, from construction materials to semiconductor inputs, passing costs on to end consumers.
The Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office, headed by Na Hee-seok, said on the 1st that it had indicted 43 people in total — six petrochemical companies and 37 executives and employees, including current and former chief executives — on charges of violating the Fair Trade Act. Two of them, both executive directors, were indicted and detained: a former business unit head at LG Chem and a sales division head at PKC.
According to prosecutors, seven companies that together dominate the domestic petrochemical market — LG Chem, Hanwha Solutions, Aekyung Chemical, OCI, LOTTE Fine Chemical, PKC and UNID — are accused of agreeing on the size and timing of supply price changes for eight petrochemical products between January 2021 and April this year. The cartel covered 16.3961 trillion won in sales, the largest figure in any price-fixing case prosecutors have investigated.
The products involved were polyvinyl chloride (PVC), plasticizers, caustic soda, hydrochloric acid, sodium hypochlorite, toluene diisocyanate (TDI), epichlorohydrin (ECH) and chlorine. PVC is used in pipes, window frames and wire coating, while caustic soda is used in semiconductor manufacturing and water treatment. ECH is a raw material for epoxy resin, which goes into semiconductor packaging materials and printed circuit boards.
The collusion was carried out mainly through meetings of team leaders from each company. Officials from the firms decided when and by how much to adjust prices for each product, then pushed the agreed terms through with their customers. To conceal the arrangement, the companies even set in advance the order in which they would send out price increase notices.
With large customers that ran procurement tenders, the investigation found, the companies coordinated which firm would win and what prices to bid, so that each could maintain its market share while applying the agreed prices. They also agreed not to approach one another's customers.
Prosecutors concluded that the price-fixing drove up purchasing costs and manufacturing expenses across related industries in a chain reaction, affecting the prices of finished goods and passing the burden on to ordinary consumers.
"Price-fixing in petrochemical products leads to higher purchasing costs for industries that use them as raw materials, so related companies inevitably suffer direct harm first," a prosecution official said. "Ultimately it drives up the prices of the products those companies make, so the damage is passed on to the general public."
Prosecutors launched the formal investigation in early August, searching the offices of the seven petrochemical companies and the premises of 80 people connected to the case. On the 16th, they sought arrest warrants for eight senior executives and employees, but the court granted warrants for only two.
