Incheon Airport Corp.’s duty-free contract terms come under scrutiny

[Photo by Kim Ho-young]

Incheon International Airport Corporation (IIAC), which operates South Korea’s Incheon International Airport, has come under scrutiny for imposing what are seen as unfair contract terms on airport duty-free operators. The terms include demanding penalty fees that are ten times higher than industry norms and failing to provide provisions for damages when the contract is canceled due to a fault on the authority’s part.

According to Representative Yoon Chang-hyun, a member of the National Assembly’s Political Affairs Committee, Incheon Airport’s commercial facility lease agreement with duty-free operators specifies that in case of contract termination, the equivalent of the lease deposit must be paid as damages. The term has been criticized for significantly exceeding the standard level for lease transactions, which typically involve a penalty of ten percent of the lease price in real estate deals. The Korea Airports Corporation, responsible for managing domestic airports, also states in its standard lease agreement that the termination penalty is ten percent of the total rental deposit.

It was also noted that duty-free operators would be required to pay further compensation for actual damages in addition to the penalty. But there is no provision for compensation if the duty-free operator terminates the contract due to the fault of the IIAC.

“Based on the Supreme Court’s previous rulings, there have been legal cases where clauses imposing excessive damage obligations were deemed invalid through court proceedings and investigations by the Fair Trade Commission. Incheon Airport’s unfair terms and conditions could be obstructive, restricting airport duty-free opportunities to only well-capitalized, larger operators,” Yoon said.