"Bylaw Amendments and Association President Election: Duty-Free Industry Unites for Survival"

Competition in Patents and Business Rights Leads to Self-Reliance
Leadership Void Worsens Amid COVID Crisis
Initiating Bylaw Amendments to Elect Association President After 4 Years Vacancy

On the 18th, the duty-free shop at Terminal 1 of Incheon International Airport was quiet due to the impact of the novel coronavirus disease (COVID-19). Photo by Moon Honam munonam@

[Asia Economy Reporter Lim Hye-seon] As the novel coronavirus disease (COVID-19) crisis has prolonged, duty-free companies that had been surviving on their own have joined hands for survival. A consensus has formed that they need to speak with one voice in negotiating airport rent, leading to efforts to reorganize the association representing the industry.

According to the duty-free industry on the 16th, the Korea Duty Free Shop Association has begun revising its articles of association to elect a chairman, a position that has been vacant for over four years since September 2016. Before electing the chairman, the association is discussing with companies to improve the clause stating that "the chairman must be the CEO of a member company." The articles will be amended to allow not only CEOs of corporations but also representatives of different sectors to serve as chairman, in order to maintain fairness.

Starting in December 2000 as the Bonded Sales Office Management Council, the Duty Free Shop Association was newly launched under its current name in 2004. Since then, the chairman position has consistently been held by the CEO of Lotte Duty Free. This was because the articles of association included a clause that "the chairman must be the CEO of the member with the highest market share." When dissatisfaction arose in the industry, the association deleted the "highest market share" clause in 2010. However, since each corporation had one voting right, and Lotte held four voting rights, Lotte maintained the chairman position until 2016. To prevent concentration of the chairman position, the association revised the articles again in 2016 to state that "the chairman may not serve more than one consecutive term."

Despite these efforts, the association has struggled to appoint a chairman since former Lotte Duty Free CEO Jang Sun-wook resigned in September 2016. Initially, the duty-free industry was cautious due to external pressures. Duty-free shops had become a political issue, frequently being summoned by politicians. Subsequently, fierce internal competition strained relationships among companies. As competition intensified to secure licenses and business rights, companies did not hesitate to engage in mutual slander. With it becoming difficult to raise a unified voice, the association has remained leaderless.

The reason companies that had consistently remained indifferent for four years have now united is because they are facing a crisis due to COVID-19. Once called the "golden goose," duty-free shops saw their sales plummet as tourists sharply declined during the COVID-19 pandemic, reaching a point where they must worry about survival. In particular, conflicts over rent with Incheon International Airport Corporation made them keenly feel the need for a "focal point." Accordingly, companies agreed to strengthen the association to coordinate industry opinions and demonstrate leadership through flexible communication with the government. Candidates mentioned for the chairman position include Lee Gap, CEO of Lotte Duty Free; Han In-gyu, President of Hotel Shilla (head of duty-free division); and Son Young-sik, CEO of Shinsegae DF.

A duty-free industry official said, "Despite the need for the industry to speak with one voice and exert strength amid the COVID-19 crisis, the association has been quiet," adding, "We hope that starting with the election of a chairman, the association will be reorganized so that the industry can overcome difficulties together."