Gas stations in South Korea will be able to fill up to 40% of their monthly fuel purchases with products from other refiners, as long as they buy at least 60% from the refiner whose brand they carry. A "retroactive settlement" practice, under which the final price is set about a month after delivery, will also be abolished in principle.
The Fair Trade Commission (FTC) said on the 26th that it had revised the standard dealership contract for the petroleum distribution sector to reflect the changes. The revision follows a mutual-cooperation agreement signed in April between the gas station industry and the country's four refiners — SK Energy, HD Hyundai Oilbank, S-OIL and GS Caltex.
The biggest change is that the contract now spells out gas stations' ability to source fuel from multiple refiners. Previously, it was common for a station to sign a full-purchase contract with a single refiner and receive products only from that company. Under the revised contract, a station can enter a deal in which it buys at least 60% of its total monthly volume from that refiner, leaving up to 40% to be purchased from other refiners.
The revision does not, however, newly permit multi-refiner purchasing. Under the current Fair Trade Act, it is already prohibited for a refiner to force a gas station into buying 100% of its supply from one company. Rather than re-authorizing conduct already banned by law, the revision aims to change actual trading practices by clearly writing the industry-agreed multi-purchase standard into the standard contract.
Refiners are also barred from unfairly discriminating against stations on supply prices, volumes or trading terms because they buy from multiple refiners. This too reflects in the contract the existing principle under the Fair Trade Act that prohibits discriminatory treatment.
The retroactive settlement method, which fixes petroleum product prices after the fact, is also being reworked. Under the revised contract, refiners must set payment based on the price at the time a station places its order. The current method — supplying products first and then determining the final price a month later by applying figures such as the monthly average price — will be abolished in principle.
For gas stations, this means the purchase price is locked in at the time of purchase, reducing business uncertainty from price swings. The FTC also expects trading prices between refiners and gas stations to become more transparent.
There are exceptions. A gas station that wants retroactive settlement can use it upon request. Even in that case, however, the final price must be set within seven days of the order rather than a month later as before.
The revision was pursued after concerns that exclusive-supply and retroactive-settlement practices were adding to the burden on the gas station industry as refiners' supply prices rose amid a surge in global oil prices. Earlier, on April 9, the Korea Oil Station Association and the four refiners signed a mutual-cooperation agreement to convert full-purchase contracts into mixed contracts requiring at least 60% purchases, to disclose daily reference sale prices in advance, and to abolish the retroactive settlement system.
"We will actively promote the revised standard dealership contract and encourage its use," an FTC official said, "and we plan to check whether trading practices in the petroleum distribution industry change through a survey of dealership transactions."
