BUSINESS

Lotte Duty Free files complaint against airport operator over rental contract

By Yonhap
  • Published : Nov 6, 2017 - 10:57
  • Updated : Nov 6, 2017 - 10:57

Lotte Duty Free, South Korea's No. 1 duty-free company, said Monday it has filed a complaint against the operator of the country's main gateway, as their negotiations over cutting rental fees show no sign of a breakthrough.

Lotte Duty Free said it reported Incheon International Airport Corp. to the Fair Trade Commission on Thursday for what it called "unfair trading practices" regarding the operation of its business at the airport, located west of Seoul.

The company and the airport operator have been in talks since September, when Lotte requested an adjustment of the leasing fee to reflect sales, saying it could not pay rent for the remaining period of its five-year contract due to drastic changes in the business climate, including a plunge in the number of Chinese tourists.

This photo, taken Oct. 31, 2017, shows a duty-free store run by South Korean retail giant Lotte Group in Seoul. (Yonhap)

Lotte Duty Free signed the deal with the operator to pay rent totaling 4.1 trillion won ($3.6 billion) from September 2015 to August 2020.

Citing the Monopoly Regulation and Fair Trade Act, Lotte said the contract unfairly bans a renegotiation of rental fees based on a changing business environment, such as a drop in the number of flights or a change in government policies.

The company also said the conditions for canceling the contract are too strict.

Under their contract, the duty-free operator cannot revoke the agreement unless half of the promised five-year term has passed, and the company has to operate for at least four months after IIAC approves the cancellation. 

"We held three rounds of negotiations with IIAC, but could not find a middle ground," a Lotte official said, adding the company hopes to find a solution through the antitrust watchdog's mediation.

Lotte has been suffering a sharp decline in sales after Chinese travelers took cues from their government's restriction on travel agencies selling group package tours to South Korea.

The punitive action came in response to Seoul's decision to deploy a US anti-missile system on its soil to deter growing North Korean threats.

Last week, Seoul and Beijing announced that they will make efforts to put their relations back on track, toning down the yearlong conflict over the Terminal High Altitude Area Defense system. (Yonhap)