Costco Wholesale Korea could face 2nd penalty: official

The Korean unit of U.S. retail giant Costco Wholesale Corp. could face a second penalty of 20 million won (US$18,000) if it goes ahead with its plan to open its warehouses this coming Sunday, officials said Friday.

The U.S. retailer is banned from doing business on the second and fourth Sunday of every month as part of an ordinance meant to help revitalize South Korea's traditional markets as well as mom-and-pop stores.

Korea's largest retailer E-Mart and other local retail chains have challenged the ordinance in several local courts and won injunctions to suspend the implementation of the ban, paving the way for them to resume operations on the second and fourth Sunday of every month.

Costco Wholesale did not take the legal step and shut down its facilities every other Sunday for six weeks.

However, the U.S. retailer resumed its business on Sept. 9, a move that prompted Seoul's southwestern Yeongdeungpo district, home to Costco Wholesale, to slap a penalty of 10 million won on Thursday.

"Costco Wholesale is subject to a penalty of 20 million won for a second violation of the ordinance if it opens its warehouses on Sept. 23," said Jeon Young-jin, an official handling the issue at Yeongdeungpo district.

A third or more violation of the ordinance will result in the imposition of a penalty of 30 million won for each offense, Jeon said.

Costco Wholesale has said on its Web site that it will close only on New Year's Day, Lunar New Year's Day and the Chuseok holiday, the Korean equivalent of Thanksgiving Day.

Jeon's comment came days after Costco Wholesale Korea's country manager Preston C. Draper argued that his company's business is being unfairly disadvantaged by the enforcement of an invalid ordnance.

"Costco believes that the principles of equal protection under the law should apply to all similarly situated parties," Draper said in a statement posted on the Costco Wholesale Korea's Web site. "And, in light of these recent court rulings, we should also be allowed to operate our warehouses on Sundays, just like all other large marts."

However, an official handling the issue at the Ministry of Knowledge Economy said Costco Wholesale should blame itself for the business restrictions as it did not exercise its right to challenge the ordinance.

"The court injunctions apply only to those who challenged the ordinance," the official said on condition of anonymity, citing the issue's sensitivity.

He said Costco Wholesale will be subject to penalties if it contines to ignore the ordinance.

Repeated attempts to reach Costco Wholesale officials for comment were unsuccessful. (Yonhap)