INCHEON – A significant dispute has erupted between the Incheon International Airport Corporation and Shilla Duty Free, after a court issued a mandatory mediation order demanding a 25% reduction in rent. The Incheon District Court made the decision on September 9, a move the airport corporation has swiftly rejected, vowing to file an immediate objection.
The court's ruling follows a mediation request filed by Shilla Duty Free, which cited mounting operating losses and sought a 40% rent reduction. The airport corporation’s refusal to participate in the initial mediation talks led to the court’s binding decision. Under the order, the corporation would have to cut Shilla's rent by ₩58.3 billion, a sum the airport leadership deems unacceptable.
According to a spokesperson for the airport corporation, the decision undermines the very principle of competitive bidding. "This airport's duty-free contracts are awarded through an open international bidding process," the official stated. "Accepting a court-mandated rent reduction simply because a business is struggling would set a dangerous precedent." The corporation fears that such a ruling could incentivize future bidders to make excessively high offers, knowing they could later seek judicial intervention to lower their rent if their business underperforms.
The legal battle is far from over. With the airport corporation planning to file an objection, and Shilla Duty Free set to pay a substantial sum in court fees, the case will likely proceed to a full-blown lawsuit. Industry experts estimate the court costs for a case of this magnitude could reach into the billions of won.
The dispute is not limited to Shilla. Shinsegae Duty Free has also filed a similar request for a rent adjustment. Given the recent ruling on Shilla’s case, it is widely anticipated that a similar mandatory mediation order for Shinsegae could be issued as early as this week. This year, Shinsegae's rent for its liquor, tobacco, cosmetics, and perfume outlets is approximately ₩234.7 billion.
The financial struggles of the duty-free operators are evident. Both Shilla and Shinsegae have reported significant losses, largely attributed to a decline in Chinese tourist numbers and shifting consumer purchasing habits. Last year, Shilla incurred a ₩91 billion loss, while Shinsegae reported a ₩87.1 billion deficit. The first half of this year saw continued losses of ₩16.3 billion for Shilla and ₩3.9 billion for Shinsegae. Should either company decide to terminate its contract early, it would be liable to pay a hefty ₩190 billion penalty to the Incheon International Airport Corporation.
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