Retail in Asia

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Is Guam the new travel retail destination?


DFS Guam, which last month won a lawsuit challenging the airport’s decision to award the duty free concession to Lotte Duty Free, is trying to use the courts to pressure Lotte to leave Guam so DFS can have a monopoly, the airport’s attorneys stated in a motion filed.

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Superior Court of Guam Judge Arthur Barcinas on Feb. 2 voided the 2012 request for proposals that resulted in the selection of Lotte, as well as the concession contract between the airport and Lotte.

Barcinas said the airport committed many violations of the procurement code, which denied DFS and all other proposers the right to a full and fair consideration of their proposals.

In the public interest, Lotte can remain at the airport until a new concession holder is selected, Barcinas stated. The Lotte contract is worth $154 million to the airport over 10 years.

Despite its legal victory, DFS on Feb. 16 filed a motion, asking Barcinas to change his ruling allowing Lotte to remain at the airport.

“This, in theory, would impermissibly permit Lotte to remain at the airport for an indeterminate period of time, unbound, because there is no time frame requiring GIAA to begin a new, lawful procurement process,” DFS stated in its motion.

The airport, which has appealed Barcinas’ ruling to the Supreme Court of Guam, on Friday opposed DFS’s motion for Barcinas to change his ruling.

“The scope of this litigation is already unprecedented among procurement cases on Guam, and appears to be unprecedented in every American jurisdiction,” the airport’s attorneys stated. “There is no legitimate reason for it to continue apart from (the airport’s) appeal to the Guam Supreme Court.”

As part of its filing, the airport included a declaration prepared by consultant Kottayam V. Natarajan Jr., who stated it is unlikely the airport will be able to successfully re-solicit the duty free concession in the near future.

He said the law requires the airport to use an “inferior” sealed bid process that will hamstring its ability to get the best possible proposal. It instead should be allowed to use a request for proposals, he said.

The DFS lawsuit also has tainted Guam and decreased the value of the airport concession, he stated. “I an unaware of a case where a concessionaire went so far as to sue another concessionaire over a procurement process,” he wrote. “In my opinion, the Guam procurement system appears to the outside world as broken.”

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And the airport concession is far less valuable today than it was in 2012 and 2013 because of changing market conditions, he stated. He said actual sales during the first four years of the Lotte concession were between $60 million and $165 million less than the lowest and highest projections.

“Clearly the Guam market is nowhere near as robust as the bidders through back in 2012,” he stated.