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[Editorial] Keep innovation alive

Ride-sharing service doomed; Alternative way must be found to foster competition

The Land Infrastructure and Transport Committee of the National Assembly passed an amendment to the passenger transport service act on Friday.

Considering that earlier the related subcommittee had agreed on the amendment unanimously and that the bill caused few controversies, it is expected to pass the plenary session without a hitch.

If the amendment is implemented, Tada -- a South Korean rented van-hailing service -- will be unable to operate in the current form.

The act prohibits car rental companies from renting chauffeured vehicles, but its enforcement ordinance exceptionally allows rental of chauffeured cars if they are vans with 11 to 15 seats.

The amendment stipulates that vans with 11 to 15 seats can be rented with drivers only if they are rented for tourism and for at least six hours. It also restricts rental and return locations to airports and ports.

Tada dispatches -- precisely speaking, rents -- 11-seat passenger vans chauffeured by outsourced drivers to consumers who hail them using its mobile application. The company launched the service in October 2018 and has since attracted about 1.5 million subscribers.

There is skepticism over whether Tada is an innovative new business model suitable for the “fourth industrial revolution.” In a trial at the Seoul Central District Court on Dec. 2, the prosecution argued Tada did an “unlicensed call taxi business,” but the company countered that its business is renting chauffeured vans grafted with mobile platform technology. Recently the prosecution indicted SoCar, a mobility platform provider, and VCNC -- its subsidiary and operator of Tada -- for doing a de facto taxi business without a relevant license.

Under the act, anyone wanting to provide passenger transport services for fees must get a license, but a clause of its enforcement ordinance allows rental of chauffeured vans with 11 to 15 seats. Tada’s services are based on this exceptional clause. In this respect, it will find it hard to avoid criticism that it resorted to an expedient to do business.

There are also controversies over whether its drivers should be treated as freelancers or company employees. The Tada platform does not differ much from Kakao T, a taxi-hailing app launched by Kakao Mobility. Tada argues its business is basically car rental service but few users think they are renting cars.

Nevertheless, concerns that the amendment will nip the sharing economy in the bud must not be overlooked. Clumsy as it may look, a new business needs to be encouraged if it is ultimately linked to the fourth industrial revolution. If entrepreneurship and the spirit of challenge are discouraged, an economy will be stuck in the mold of crumbling old business models.

The Fair Trade Commission initially opposed the amendment, opining that “excluding Tada by statute causes concerns of restricting competition and reducing consumer benefits.” Although Tada is more expensive than taxi services, its vans are praised by users for not refusing to take passengers while some taxis do. Competition between car-sharing services and taxis can increase user benefits.

New mobility services including Uber and Grab are expanding in foreign countries. These new means of transport contribute to the enhancement of the quality of services through competition. But Korea is going in the opposite direction. The amendment ignores the interests of Tada users.

If Tada vanishes, Korea’s ride-sharing economy will likely be doomed. The bill went too far by substantially driving the company out of the market. The act should have been amended toward guaranteeing competition even though in a different form.

Even after the amendment passes the plenary session, the government, new mobility services, and the taxi industry will have 1 1/2 years to find an alternative way to live together. The amendment will be enforced a year after promulgation, and punishment for violation will take effect six months after enforcement. This grace period will be the last opportunity to ensure fair competition and mutual survival. It must not be wasted.

The transport authorities need to weigh up FTC’s opinions. Car-sharing services including Tada need to try to find ways to minimize conflicts with the existing industry.