The South Korean government has decided to scrap the controversial five-year cap in business license for local duty free shops, extending the business period to 10 years, as before the customs law was revised two years ago. It will instead up license fees by nearly 20 times from current 0.05 percent against revenue. It deferred a decision to late April whether to grandfather the regulation that cut short business period to five years to the two outgoing operators of Lotte World Tower and Walkerhill Hotel shops that must close soon after they failed to win renewal on their license tenure. Newcomers who won the license slot from them are vehemently opposing to keeping them in business.

The decision was made on Thursday in an economy-related cabinet meeting amid concerns of capital and human resources waste arising from the five-year cap on the duty-free shop business. The business also could lose competitiveness and consistency due to insecurity of its future. Under the revision, current players that won five-year license would be allowed to run business for another five years. The Ministry of Strategy and Finance and Korea Customs Service will draw up the guideline for license renewal by September. Previously, business renewal had been customary, allowing the players to run business if not for major illegal practice. The revised law two years ago has toughened the regulation that made Lotte close one of two shops in Seoul and SK its only outlet in Walkerhill Hotel in eastern Seoul. The strict regulations would be somewhat eased to ensure job security in the business, the government said. But a dominant player accounting for more than 50 percent of total revenue from tax-free retailers or if three top players take up more than 75 percent of the revenue, they will be handicapped in the evaluation to ensure fairer playing field, it said. A dominant player using its position to fix merchandise prices or intimidate other rivals will be banned from applying for license renewal for five years.

The government, however, put off decision whether to keep the two outgoing Lotte and SK shops in the business due to strong opposition from newcomers.

By Lee Sang-duk, Choi Seung-jin

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]