The U.S. Justice Department has slapped three South Korean companies with US$236 million fines for conspiring to fix the fuel price sold to the U.S. military bases in South Korea. The firms will plead guilty to the criminal charge.
The fines were slapped on GS Caltex Corp., SK Energy Co. Ltd., and Hanjin Transportation Co. Ltd. The companies have agreed to pay US$82 million in criminal fines and US$154 million in civil damages to the U.S. The price rigging reportedly spanned a period of more than 10 years, from March 2005 until the year 2016. Petroleum and refinery companies in South Korea, together with their agents, worked at suppressing competition during the bidding process of U.S. military fuel contracts.
“[The three] and other co-conspirators rigged bids and fixed prices for fuel supply contracts issued by the U.S. military in this strategically critical region for over a decade… As a result of the anti-competitive agreement, the U.S. Department of Defense paid substantially more for fuel supply services than it would have absent the collusion,” Makan Delrahim, United States Assistant Attorney General for the Antitrust Division, said in a statement (Reuters).
SK Energy is expected to pay the highest amount of fines at US$124.5 million. The company had come into an agreement with the Justice Department to conclude the case in the fourth quarter. GS Caltex will pay US$104.2 million. Although Chevron owns 50 percent of GS Caltex, no Chevron employees have been implicated in the case.
Hanjin Transportation will pay the lowest fines at just US$7.6 million. “[The company is] committed to complying with the antitrust and competition laws and values its decades-long relationship with the U.S. military,” Seung Bae Lee, Hanjin representative, said to ABS CBN News.
The fines paid by the three firms will reportedly exceed the amount of individual overcharge. In the past, only a few bid-rigging cases involving the federal government as the victim were prosecuted. But Delrahim expects the situation to change. Over the next few months, the Justice Department will be announcing a task force that will tackle state and local procurement frauds.
U.S. military in South Korea
The United States and South Korea entered into a mutual defense treaty in the early 1950s in which the U.S. agreed to protect the Asian nation in exchange for South Korea paying half of the operational costs. In 2016, the government of Korea had paid US$821 million to the U.S.
The U.S. has approximately 28,000 troops and civilian forces stationed in South Korea, making the country the second biggest base for the American military following Japan. While the capital city of Seoul has been the headquarters of U.S. military forces for over seven decades, it was shifted to Camp Humphreys this year. The new base is said to span nine square miles and is located about 45 miles from the South Korean capital.
“This was a project that cost nearly US$10.8 billion to build over 10 years and the Republic of Korea investment was over 90 percent of the cost… For that 90 percent, the United States remains with you 100 percent,” Vincent Brooks, Chief of the U.S. military forces, said in a statement (Reuters).
The U.S.military presence in South Korea neutralizes the threat of North Korea and China, ensuring peace in the region.