By Kim Rahn and Park Si-soo
Costco Wholesale kept its Korean stores open yesterday, defying local governments’ ordinances to have big discount stores closed two Sundays per month.
The American retail giant opened its nine stores at 8 a.m. as usual.
Last week, it said it will continue to ignore regulations banning discount warehouses and retail megastores from operating on the second and fourth Sundays of a month. Costco opened its shops on Sept. 9.
Government officials are planning to fine Costco with a 20 million won (about $18,000) fine after a 10 million won fine for its first violation.
The toughest penalty under the ordinance is a 30 million won fine, but it seems that Costco would rather pay up and keep the shops open.
Costco’s stance is adding to the skepticism over the decision to restrict the business hours of mega retailers,
Officials, however, are looking to strengthen sanctions, even considering introducing business suspensions, and plan to revise the ordinance by November.
Costco said it will only close on New Year’s Day, Lunar New Year‘s Day and Chuseok, the Korean version of Thanksgiving. It claims its decision to open Sunday was justifiable because business-hour restrictions by municipalities were ruled illegal by the Seoul Administrative Court in June.
The court sided with the plaintiffs E-mart, Home plus and Lotte Mart, which claimed that authorities ignored several required legal processes before implementing the changes.
However, officials question whether Costco could claim to enjoy the same rights won by the retailers involved in the lawsuit.
“There is no way to justify Costco deciding to open its shops on Sundays,” said Kang Hee-eun, an administrator at the Seoul Metropolitan Government.
“When the lawsuit was filed, Costco laid low as it didn’t want to spark conflict. However, after rival retailers won in court, Costco is the front runner claiming all the benefits. How hypocritical is that?”
The Korea Times contacted Costco’s Seoul office several times for comment on Sunday, but nobody answered.
Some experts suspect that Costco’s steadfast resistance, despite state penalty and public criticism, is to take advantage of a free trade agreement (FTA) with the United States. The FTA prohibits all kinds of discriminations against American firms on Korean soil.
“The restriction could be viewed as a violation of the FTA,” said lawyer Song Ki-ho specializing in international trade. “I don’t rule out the possibility that Costco wins in an international lawsuit, if any, are raised against the rule.” Costco has taken no legal action so far.
Some citizens here denounced the firm’s Sunday opening.
A 61-year-old housewife, surnamed Cho, lambasted Costco’s flip-flop when it comes to Sunday opening, saying the company has to “file a suit if it wishes to open, too.”
“Those stores which joined the suits spent their time and effort. It is not right for Costco to take advantage of the situation. It should take the same process if it wants to operate like others,” she said.
Many believe Costco Korea’s country manager Preston Draper is behind the resistance. Draper has criticized the restriction, saying in a recent interview with a local media outlet, “We disagree with (the new regulation) because we fundamentally supply products to small merchants; they are the majority of our clients.”
Tapping into the Korean market in 1998, Costco posted 2.086 trillion won in sales last year and 130.8 billion won in operating profit.