Collusion probe focuses on domestic automakers

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Collusion probe focuses on domestic automakers

Five local automakers are being investigated by the Fair Trade Commission on suspicion of collusion in retail pricing.

According to the FTC, Hyundai, Kia, GM Korea, Ssangyong and Renault Samsung have been under investigation since last month. Although the business watchdog hasn’t revealed details of the investigation, industry observers speculate the FTC is trying to determine whether five automakers colluded on promotions and the retail prices for vehicles and options.

It is the first time local automakers have been investigated on such allegations. The FTC began an investigation of imported car companies in April involving alleged price fixing and high repair costs.

According to industry sources, the FTC is focusing on the fact that local carmakers haven’t reduced prices as much as foreign car brands. However, Korean carmakers say it is unfair to compare them with imports because their price reductions were mainly due to smaller tariffs as a result of free trade agreements with the United States and the European Union.

With aggressive promotions, sales of imported cars reached 156,497 units in 2013, up 19.6 percent from 2012, according to the Korea Automobile Importers and Distributors Association.

Fines are typically between 2 percent to 10 percent of earnings during the violation period. The Korean passenger car market is estimated at 26 trillion won ($24 billion) annually.

The highest fine ever by the FTC was in 2009, when it imposed a fine of 668.9 billion won on six energy companies for collusion on liquefied petroleum gas prices.

Last July, the FTC announced that seven commercial truck manufacturers had been manipulating retail prices for nine years and imposed a 116 billion won fine.

The investigation took more than two years, according to the FTC.

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