[Reverse Discrimination Caused by Regulations] Only Domestic Retailers Shackled... Costco and IKEA Benefited

Lotte DMC Complex Shopping Mall Development Passes Seoul City Review After 8 Years
Mart Entry Blocked Due to Win-Win Law... Regulatory Blind Spot Enables Bold Operations by Foreign Companies

[Asia Economy Reporter Jo In-kyung] Lotte Group's complex shopping mall development project in Sangam Digital Media City (DMC) finally passed the Seoul city review last month. The shopping mall development project, which was planned in 2013, barely cleared its first hurdle after eight years. Initially, Lotte aimed to create the largest shopping complex in the northwest area of Seoul by filling 82% of the total space with sales facilities, including Lotte Department Store, Lotte Mart, and Lotte Cinema. However, the plan, originally scheduled for completion in 2017, had been stalled until recently due to the agreement process with traditional markets under the "Act on the Promotion of Mutual Growth between Large Enterprises and Small and Medium Enterprises (Mutual Growth Act)."

Approval After Great Efforts, Mart Not Allowed

In the approved development plan, the sales facility ratio of Lotte Mall in Sangam-dong was reduced to 36.1%. Lotte plans to operate this location as a complex shopping mall combining famous brand stores and restaurants. As large-scale apartment complexes continue to be built nearby, many local residents hope for the entry of Lotte Mart or Lotte Super, but their entry is impossible due to issues related to the Mutual Growth Act.

A Lotte official said, "Initially, the area considered opening marts or corporate supermarkets (SSM), but due to conflicts with traditional markets, all such plans were abandoned. Now, the company is seriously considering utilizing the space more for officetels rather than shopping facilities."

Global Retail Giants Ignoring the Mutual Growth Act

While domestic retail companies face strict regulations to protect small local businesses, foreign companies have been thriving by either slipping through legal loopholes or boldly continuing business operations.

Costco Hanam branch, which opened in April 2019, is a representative case. At the time of opening, protests from small business owners around Hanam Deokpung Traditional Market and others continued. Even after the government intervened and requested a postponement of the opening four times, it was to no avail. Eventually, Costco paid a fine of 40 million won and opened the store. They judged that it was better to violate the law and pay the fine than to delay the store opening. Previously, when opening a store in Songdo, Incheon in 2017, Costco also received a recommendation to suspend operations temporarily but paid a fine and proceeded with the opening.

IKEA Wearing the Mask of a Specialty Store

Last year, when the government provided emergency disaster relief funds to all citizens due to COVID-19, IKEA Korea, a furniture specialty store, gained a windfall. While the emergency disaster relief funds could not be used at department stores or large marts, they were accepted at IKEA, classified as a specialty store.

Although IKEA is a furniture specialty store, it operates as a de facto complex shopping mall selling food and daily necessities, competing with large marts. However, it is not subject to mandatory closure regulations. Even if the complex shopping mall business restrictions currently being discussed in the National Assembly are realized, IKEA will remain in a regulatory blind spot.

A retail industry official said, "If Costco or IKEA, not Lotte, had tried to enter Sangam-dong in the past, they would already be operating after paying fines. While government regulatory policies remain trapped in the competition framework between large corporations and small business owners, domestic companies repeatedly suffer reverse discrimination against foreign companies."