New Shinsegae Busan Faces Brush With Law

In the basement of Shinsegae Group's brand new multiplex mall in Busan, shoppers can find a complete variety of grocery, household and electronics goods, plus a full range of Shinsegae E-mart's private label products, all spread out across a huge space of 6,900 square meters. But the retail giant refuses to call what looks awfully like a hypermarket a hypermarket.

That's because the company did not get the necessary clearance to open a discount retailer prior to kicking off the multiplex shopping center dubbed the Centum City store in Haeundae, a southern port city, Tuesday.

Local real estate law, citing district unit planning regulations, bans the operation of oversized discounters on the piece of property Shinsegae's new store is sitting on.

Considering Shinsegae's industry supremacy and long retail experience, the slip up may have gone overlooked, but its rival Homeplus raised the issue last week, days before the opening.

It filed a complaint with the Haeundae District Office on Feb. 25, demanding that authorities cancel Shinsegae's operation permission. However, ward officials passed on the decision-making to the Ministry of Knowledge Economy and gave the retailer "conditional approval."

"Issuing last-minute changes will lead to enormous negative economic impact in the local community," said a ward official, who explained that Shinsegae and its related businesses have so far hired up to 6,000 people in the area.

The shopping center, which rang up a daily sales record of 8.1 billion won on the opening day, is expected to help draw tourists from regional cities and neighboring countries.

Downplaying the economic benefits, Homeplus officials criticized the district authorities for evading their responsibility in properly inspecting the massive 14-story multiplex from the start. The building contains entertainment and leisure facilities including a department store, spa, ice rink, movie theater and a driving range.

"If they knew the rules and Shinsegae's plan thoroughly, they would not have granted permission," said a Homeplus spokeswoman, who explained that a discounter, by law, is a retail outlet more than 3,000 square meters in size, less than half the size of Shinsegae's basement floor.

Dodging accusations, however, the country's No. 1 retail chain presented a different understanding of the district planning law.

"The regulation outlaws independent discounters from operating, not a business that is part of a department store," said a company official, who argued that the store layout has been property adjusted so that it would fit the definition of a "department store."

For example, shoppers have to go to separate checkout counters for grocery goods and electronics, instead of using one common counter for all products as hypermarkets allow.

Ministry officials said they will decide whether or not Shinsegae's basement retail outlet is legitimate within the next 15 days.