IN JUST a span of 5 months, 4 South Korean taxi drivers set themselves on fire. These taxi drivers were protesting against a single issue: ride-hailing services recently introduced to the South Korean transportation market. Tada—one ride-hailing service that operates with large 11-seat vans—has long been the center of controversy ever since its launch in October, 2018, causing intense anger and heightening tensions between the taxi industry and ride-hailing services. In response to such controversy, a revision to a law to ban Tada was officially passed on March 6, 2020; however, it is uncertain whether the revised law can be implemented effectively.
Ride-hailing hits a speed bump
Regulated by the Passenger Transport Service Act, the taxi industry in South Korea follows Article 34 of the law which states that with the exception of companies running 11 to 15 seat ride-hailing services, unlicensed services—which are services not officially registered as taxis—are prohibited from renting vehicles for commercial purposes*. Back in 2015, ride-hailing service Uber Technologies, Inc. was suspended within just two years from its launch after facing regulatory setbacks that stated that it violated the Passenger Transport Service Act by running as an unlicensed service. Similarly, the taxi industry heavily criticized Tada as the controversy lied in whether Tada should be considered a type of rental car service or as a paid unlicensed ride-hailing service**. Local taxi drivers claimed that Tada violated the transportation law by operating as the latter, arguing that Tada threatens taxi drivers’ source of income.
After a string of complaints from the taxi industry, Tada, along with Value Creators & Company (VCNC)—the company that runs Tada’s services—were indicted on Oct. 28, 2019 for violating the country’s Passenger Transport Service Act by operating a transportation business without a license. Since then, lawmakers proposed revisions for the amendment to the act—informally titled as the “Anti-Tada Bill”—to which if passed, Tada would face an end to its primary business. Tada in response argued that its operations are within legal boundaries as the transportation law on ride-hailing services includes an exception permitting the operation of rented vans with 11 to 15 seats***. The Korean Fair-Trade Commission (KFTC) stood with Tada, declaring that banning ride-hailing services like Tada is discrimination against a new type of transportation business, and stressing the need to cautiously review the revised bill as there are risks of hindering market competition and consumer benefit.
While these arguments were initially overridden as the National Assembly Committee decided to pass the revision bill, Tada faced a first court hearing on Dec. 2, 2019 and was acquitted of its allegations on violating the law two months later on Feb. 20, 2020. According to Korea JoongAng Daily, the Seoul Central District Court claimed that it is difficult to interpret the extent of penalty based on a law directed towards traditional, offline transportation services, adding that declaring Tada as illegal would go against the legal principle of “no penalty without a law.”
The “Anti-Tada Bill”
While the ruling resulted in a decisive win for Tada, the victory, however, did not last long. Aimed at protecting the vested interests of the taxi industry and their families ahead of the Legislative Election in April, The National Assembly plenary session**** decided to approve the revision to the bill once again. Following a majority vote by lawmakers, the revision was approved on March 6, 2020, ultimately forcing Tada to shut down its primary service. Up until now, Tada has been running its service based on the law that stated that 11 to 15 seat passenger cars can be operated; however, the revision of this law means that Tada will no longer be able to operate the same way. In an interview with The Yonsei Annals, Attorney Kim Jung-min from LawBase law firm said that the revised law has two major articles: a revision to block Tada’s current methods of operations, and the addition of restrictions on ride-hailing services. Under this revised law, Tada will be operating only for tourism and users must rent out the vans for over six hours, and can only be rented and returned at airports or seaports. The revised legislation will take effect in 18 months including a six-month grace period given to VCNC after the promulgation, and other ride-hailing services like Tada are also expected to be officially prohibited from operating*****. According to NewDaily, for Tada to maintain its current mode of operation, it will be required to change its service—such as the type of vehicle used and the way it operates—or pay monetary support to the taxi industry. By paying monetary support, Tada will be given a license to operate a new type of mobility service under governmental regulation and restrictions. Through these methods, The National Assembly believes it is possible to institutionalize Tada. However, as VCNC dismissed the proposal and stated that they would start terminating its operations from April 10******, it is likely that Tada will completely disappear from roads in 18 months’ time.
Will the new law be effective?
The revised law is highly likely to have a positive effect especially to the taxi industry, as it has long been condemning Tada and other similar ride-hailing services. According to Attorney Kim, it seems that the government and lawmakers carefully analyzed Tada’s conduct and operations before passing the revised law, making it almost impossible for Tada to make any attempts at continuing its current services. However, while the “Anti-Tada Bill” is good news for the taxi industry, there are uncertainties on whether the revised law will be effective to other stakeholders. “A law’s effectiveness is ultimately decided by how much the convenience and satisfaction of the general public increases from its implementation,” stated Kim. “A law should ensure a certain amount of freedom to a service and minimize restrictions so that consumers can still benefit even from its ban.” However, with numerous regulations put under the “Anti-Tada Bill,” the revised law not only hurts Tada’s business, but is also disadvantageous to the 1.7 million users and 12,000 drivers who benefited from Tada. Consumers even submitted a complaint to The National Assembly objecting against the bill*******. Titled as “Support Tada,” the complaint was made on Dec. 10, 2019 and was signed by over 60,000 users in less than a day. Attorney Kim pointed out that due to heavy public criticism against the revised bill, the law may have little or no effect in terms of national convenience.
Furthermore, according to Yonhap News, the passing of the revised law drew strong criticism from the business community and enterprise start-ups. In an era where South Korea is pushing to advance innovative sectors as its new growth engines, start-up companies condemned that the revised law fails to consider the potential of new mobility industries, only focusing on fulfilling the interests of the taxi industry instead. “With the upcoming Legislative Election in April, lawmakers could not ignore the side of taxi drivers,” said Kim. With the passing of the revised law being politically motivated to satisfy the taxi industry, which makes up a large portion of the country’s transport service, start-up companies are condemning the government’s decisions. “The amendment to the Passenger Transport Service Act is a barrier for start-ups at the forefront of innovation. It can be seen that the revised law is a major setback for South Korea’s innovative drive,” said Attorney Kim.
* * *
Recent events seem to have ended the heated debate between taxi drivers and ride-hailing services that have existed in South Korea for some time. Although the actual enforcement of the law is yet to take effect, the revision is already seeing drawbacks for start-ups and the possibility that Korea could lag in the global market. It is likely that the decision to ban Tada is a serious damage to long-term innovative growth and marks an end to ride-hailing services in Korea.
***Korea Tech Desk
****Plenary session: A conference where all members of the National Assembly gather for a voting procedure for a law’s revision or implementation
******The Korea Herald