Big-box retailers in South Korea such as Tesco and Costco Wholesale Corp (COST.O) are reluctantly bowing to government demands aimed at protecting local merchants -- including plans to fine the super stores if they set up without the consent of nearby local merchants. There are signs that Seoul's new restrictions could scare off investors. "In my view, there is no longer much merit in investing in the South Korean market. Investment from (Tesco) headquarters will decrease," said Lee Seung-han, chairman of the Homeplus Group, Tesco's subsidiary in Korea. Not long after signing free trade agreements with the European Union and the United States which reduced the shelf price of products from fruit to wine, the South Korean government last year started tightening controls on hypermarket operators.