Court rejects bid to nullify store closings

The Seoul Administrative Court yesterday rejected an injunction filed by E-Mart, Homeplus and Lotte Mart against Songa and Gangdong district offices for imposing mandatory holidays twice a month against seven discount chain stores and 48 super supermarkets (SSM) the retailers run in the areas.

This is the first verdict handed out by a local court after retailers took this matter to several regional courts opposing the government’s revised Retail Industry Development Act, which went into effect earlier this month.

The new law requires large discount chain stores and SSMs, or neighborhood-style outlets run by large discount chains, to close two days of every month, with the specifics to be decided by local councils. It also orders 24 hour stores to scale back their operating hours.

Most local councils designated every second and fourth Sunday as a mandatory holiday and retailers brought the matter to court arguing that this would present them with significant losses as 40 percent of their revenue comes from weekend sales.

“As discount chain stores and SSMs continue to expand, sales of small and medium retailers and traditional markets have shrunk,” the verdict said. “The Retail Industry Development Act was revised to protect these small retailers because they can’t compete on an equal footing with large retailers due to their small capital.”

The court also noted the benefit of shared growth outweighs the small losses that big retailers would suffer.

“Although large retailers would suffer losses due to the regulation, they can recover much of this by selling goods at bargain prices and giving more reward points on purchases a day before or after the mandatory holiday,” it said.

Legal experts said yesterday’s ruling will give local councils and regional governments more leverage when designating mandatory holidays for retailers. They also expect it to affect future rulings of courts in Bupyeong, Incheon, as well as in Suwon and Seongnam of Gyeonggi, where retailers have filed similar complaints.

More stores are expected to be closed in the coming weeks as the majority of local councils have almost completed the necessary legal procedures to enforce the regulation in their jurisdictions.

By Kim Mi-ju [mijukim@joongang.co.kr]