Even the most groundbreaking innovations are powerless without the appropriate legal foundations to support them. On March 6, the National Assembly passed the revised Passenger Transport Service Act in an attempt to settle the conflict between the existing taxi industry and the rising ride-hailing service—Tada. Left with no legal basis to operate on, Tada announced their decision to “indefinitely terminate” their services shortly after. Amidst the controversy surrounding the revised bill, questions remain as to whether it will succeed in establishing common ground in the turbulent mobility industry.
The taxi business in Korea has long been fighting against startup mobility services, and the most recent conflict in the mobility industry is the taxi business’ bitter legal feud with Tada. Tada, a Korean ride-hailing service founded in 2018 by Value Creators & Company (VCNC), operates a business similar to that of traditional taxis by allowing customers to rent vehicles that come with a driver employed by Tada. Despite its initial success, Tada could not escape the vehement opposition from the existing taxi industry.
Legal Loophole Triggers Major Feud
The biggest problem, according to the taxi industry, was that Tada essentially was operating like a normal taxi business by taking advantage of a legal loophole in the Passenger Transport Service Act. According to Article 34 of the act, it is possible to provide drivers as a service if one rents a passenger van bigger than an eleven-seater. Based on this article, Tada only operates eleven-seater passenger vans. To this, the taxi industry pointed out that Tada vehicles often use the eleven-seater vans to provide service to individual passengers instead of groups, which they claim allows Tada drivers to operate just like a normal taxi without having to buy a taxi license.
In January, 2019, 12,000 taxi drivers held a mass protest in front of the National Assembly to express their opposition towards Tada. In February of the same year, the Seoul Taxi Association sued Lee Jae Woong, the Chief Executive Officer of Socar, who is also the founder of Tada. The government and the National Assembly deemed Tada an expediency and created a revised version of the Passenger Transport Service Act. Although Tada was found innocent in its first trial, on March 6, the National Assembly passed the revised Passenger Transport Service Act, taking away the legal basis for Tada’s operation and essentially crippling the business. On March 11, Tada announced their decision to “indefinitely terminate” their service beginning from April 10.
Not a “Tada Ban Law”
The revised bill is more commonly known as the Tada ban law, considering that the controversy around Tada’s legality was the driving force behind the passing of the bill. Much of the media coverage stemming from the bill also focused on its staggering blow on the popular ride-hailing service. However, Professor Kang Kyungwoo (Hanyang University, Department of Transportation and Logistics Engineering) offered a different perspective, calling the nickname Tada ban law a “distortion.” “The bill, rather than a ‘Tada ban law,’ is a law that simply requires a new way of operating mobility services,” said Professor Kang. “The crux of the matter is that ride-hailing services now have to buy a taxi license in order to operate, just like other normal taxis.”
Those in favor of the revised bill claim that the revised Passenger Transportation Service Act was much needed in order to restore fairness in the Korean mobility industry. Many agree with the Prosecution’s argument that Tada is an “illegal call taxi” and that despite its claim of being an innovation, its operation method was almost identical to that of a normal taxi. In addition, supporters of the revised bill claim that it has opened doors for various startup businesses in the mobility sector by offering a clear legal guideline for them to operate upon. The Minister of Transport, Kim Hyun Mi, also defended the bill by claiming that it is a “mobility vitalization law that provides the appropriate legal foundations for new mobility services.”
An Obstacle in the Mobility Industry?
Even so, the revised bill has problems of its own, as is the case with most legislations. The main argument against the revised bill is that the bill is not future-oriented enough and acts as an obstacle to innovations in the Korean mobility industry. The bill has also been accused of discouraging new startup businesses in the mobility sector. In regards to the concerns as to whether startup businesses will have a place in the over-saturated taxi industry, Professor Kang said, “Regardless of how innovative a startup mobility business is, it cannot operate without taxi licenses, which are limited in number, not to mention expensive. That makes Korean mobility services unappealing, with little hopes of exporting them; it is doubtful that investors will want to invest in startup mobility services anymore,” he added.
The new bill has given rise to new legal complications as well. The revised Passenger Transport Service Act goes directly against the legislations regarding autonomous vehicles announced by the Ministry of Land, Infrastructure and Transport in April, 2019. While it is illegal for Tada to operate as an autonomous car rental service according to the new bill, it is legal according to the aforementioned legislations regarding autonomous vehicles. One cannot ignore the unemployment the new bill will cause either. If Tada follows through with its announcement to “indefinitely terminate” all services in compliance with the bill, more than 10,000 Tada drivers will lose their jobs.
The Road to Coexistence
Notwithstanding the debate around the validity of the revised bill, questions remain as to whether the new law will finally find a way for the taxi industry and mobility services to coexist. Unfortunately, according to Professor Kang, the revised bill has only scratched the surface of the problem. “The devil is in the details,” said Professor Kang, regarding the prospect of finding common ground between the two sides. “The revised bill was a quick fix designed to settle the confusion surrounding Tada’s legality. Now that the enforcement ordinance has been announced, the details of the bill must be worked out to bring forth a win-win situation,” he said.
Professor Kang also emphasized the need for a “quick and fair process” when working out the details of the bill. “The government must provide a promising guarantee with regards to the availability of taxi licenses,” he said. “Secondly, the financial contributions regarding new mobility services must be increased as well.” Whether the new law will finally put an end to the seemingly endless feud between the taxi industry and mobility services remains unclear. There is no doubt the new law puts the Korean mobility industry in uncharted waters, but what seems more important is how the story unfolds henceforth.