South Korea probes $7.5 billion biofuel bid-rigging scheme

South Korea's Fair Trade Commission (KFTC) has initiated disciplinary proceedings against seven biofuel manufacturers and sellers for allegedly colluding on bids and prices for over 11 years. The investigation targets a market worth nearly 10 trillion won ($7.5 billion), with potential fines estimated to reach up to 2 trillion won ($1.5 billion) if the allegations are confirmed.

The KFTC's investigation division submitted a report to the commission detailing its findings and proposed sanctions. The companies under scrutiny include DS Dansuk, Aekyung Chemical, SK Eco Prime, SK Chemical, Emax Solution, JC Chemical, and KG Eco Solution. The probe revealed that these firms systematically engaged in bid-rigging and volume allocation agreements from December 2013 to February 2025.

Investigators found a typical "dummy bidder" scheme, where one company was pre-selected as the winner, and the others adjusted their bids accordingly. The total value of bids affected by this alleged collusion amounts to approximately 9.7 trillion won, comprising 7.76 trillion won for biodiesel and 1.95 trillion won for heavy oil. Under the Fair Trade Act, bid-rigging can incur fines of up to 20% of related sales, and the calculation base often includes the amounts submitted by dummy bidders, potentially pushing the total fines significantly beyond simple calculations.

Biodiesel is a mandatory blend (4%) for diesel fuel in South Korea, purchased by oil refiners through bids. Heavy oil is procured by major power generators via bids to meet renewable energy supply obligations. Oh Hyang-rok, head of the KFTC's Cartel Investigation Bureau, stated that the bid-rigging likely had a small but undeniable impact on diesel prices.

The KFTC investigators concluded that the companies' actions constituted a serious violation of the Fair Trade Act, specifically regarding bid-rigging and volume collusion. The commission plans to issue corrective orders, impose fines, and recommend prosecution for the companies and their executives. The final decision on sanctions will be made after reviewing the companies' statements and holding a full commission meeting.

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It seems difficult to say that it had no impact, however small, on diesel prices.