Costco Wholesale Korea is facing increasing heat from non-governmental organizations for ignoring local regulations imposing mandatory closure for two days a month.

A coalition of 520 civic groups campaigning for economic democratization announced Wednesday that it will hold a demonstration every two weeks outside the company’s branch in Yeongdeungpo in western Seoul in protest of Costco stores operating on days when they are required to close by order of local governments.

The group contains some of the country’s most influential NGOs, including the People’s Solidarity for Participatory Democracy, Korean Confederation of Trade Unions and the Lawyers for a Democratic Society. 

Under the Distribution Industry Development Act, the head of the city, county or district government can order superstores to close up to two days per month when deemed beneficial to the industry, welfare of the workers and for facilitating the growth of small and medium-sized retailers.

The clause enabling governments to take such action was added earlier this year as part of the efforts to limit large retailers’s impact on small businesses.

In Seoul, so-called super supermarkets and other large retailers of a similar type are required to close on the second and fourth Sundays of each month.

However, Costco stores opened on two relevant Sundays last month, prior to which the company had complied with the orders.

Ignoring the temporary closure order warrants a fine of 10 million won ($8,900) for the first offense, and 20 million won for the second offense.

However, with Costco Wholesale Korea’s daily operating profit dwarfing the fines, the efficacy of the penalization system has been called into question.

Last year the company recorded 130.8 billion won in operating profits, equivalent to a daily average of 80 million won.

For its part, Costco Wholesale Korea has argued that operating on the designated Sundays is legal as a coalition of local retailers won an injunction against the measure.

Seoul City’s position is that as Costco Wholesale Korea was not part of the suit, the court’s ruling does not apply to the U.S.-based retailer.

With the company appearing unlikely to follow local regulations, lawmakers and regional governments are stepping up their game.

Last month, Rep. Park Hong-keun of the Democratic United Party put forward a revision to the Distribution Industry Development Act enabling the authorities to cancel the business registration of large retail stores that ignore the order to close on specified days, while Daegu city plans to conduct a sweeping inspection of the Costco store in the southern city.

In submitting the revised bill, Park said that there is a need to strengthen the measures as the company had “fundamentally ignored the reasonable regulation aimed at shared growth with small and medium enterprises.”

By Choi He-suk  (cheesuk@heraldcorp.com)