Back To Top
Business

Constitutional Court rules in favor of Tada ban

Tada van (Yonhap)
Tada van (Yonhap)

An amendment to a law that effectively suspended the operations of Tada, a homegrown ride-hailing service, was ruled constitutional by the Constitutional Court on Thursday, putting an end to a yearlong dispute in the transportation industry.

In its judgment, the court said Tada’s service based on rented vans had “greatly increased social conflicts because it practically offered a taxi service without being subject to regulations affecting the taxi industry.”

The law was amended to offer a level playing field in the transportation industry, the court added.

The disputed revision to the Passenger Transport Service Act limited the use of rental vans by ride-hailing companies to vans with 11 to 15 seats -- and only for tour purposes, for a minimum of six hours and with limited pickup points at airports and seaports.

The change, which passed in the National Assembly in March 2020 and became effective in April this year, was lawmakers’ response to a heated debate in the transportation industry over the Tada Basic service, which used rented vans with 11 to 15 seats for paid rides via its ride-hailing app.

The country’s Passenger Transport Service Act in essence prohibits car rental firms from using their vehicles for paid transportation services, differentiating the car rental business from the taxi business. Vans with 11-15 seats were an exception.

“The exception allowing a vehicle rental enterprise to offer paid transportation services when it uses vehicles with 11 to 15 seats has been made to promote the convenience of tourists in small groups,” the court said Thursday.

VCNC, the operator of Tada, said it accepted the ruling.

“We respect the ruling of the Constitutional Court. Socar and Tada will provide convenient and safe transportation services abiding by the Passenger Transport Service Act,” Socar, the parent firm of VCNC, said in a statement. Socar runs a car-sharing service.

Tada announced the indefinite termination of its Tada Basic service, using the large vans, in March 2020. At that time, it had 1.7 million registered users and about 12,000 outsourced drivers.

Now, Tada runs three transportation services holding hands with existing taxi and chauffeur companies. It has Tada Light, a taxi service in partnership with privately owned taxi and taxi companies, Tada Plus, a premium taxi service similarly operated, and a chauffeur service.

The controversy over Tada, or the vehement opposition from the country’s 300,000 licensed taxi drivers, gripped the country in 2019, with several taxi drivers taking their own lives in show of their desperation. Many taxi drivers claimed Tada was evading the law to run a transportation business without obtaining a license from the Transport Ministry.

A private taxi drivers’ association has also filed a complaint against Lee Jae-woong, then chief executive officer of Socar, the parent company of VCNC, and VCNC CEO Park Jae-wook, accusing them of operating a taxi-like service.

In February 2020, the Seoul Central District Court found the two chiefs of the ride-hailing firm not guilty of violating the transportation law and called it an “innovative mobility business” that had yet to be categorized under the existing transportation business framework.

The Seoul court’s ruling, however, did not stop the National Assembly from passing the bill that put a halt to the Tada service in March 2020, as it sought to end the conflict between the service operator and taxi companies. Thursday’s ruling by the Constitutional Court is expected to affect the appeals case for Lee Jae-woong and Park Jae-wook, in which a ruling is expected Aug. 19.

By Jo He-rim (herim@heraldcorp.com)
MOST POPULAR