Setback to innovation

Changed law virtually bans ride-hailing service

The National Assembly's passage of a revision to the Passenger Transport Service Act has dealt a severe blow to the fledgling innovative ride-hailing service industry. This legislation no doubt is designed to put a virtual ban on Tada, an increasingly popular mobility platform operator with 1.7 million users.

On Friday, the Assembly approved the amendment aimed at imposing new regulations on ride-hailing service providers such as Tada. The revised law will go into effect a year after it is proclaimed. A six-month grace period will be given to ensure smooth implementation.

Tada, meaning “to ride” in Korean, began offering ride-hailing services with 11-seat vans via a smartphone app in October 2018. It is now synonymous with innovation. The current law bars any business from providing paid ride services with rented vehicles attached with a driver. However Tada is taking advantage of a clause that enables a mobility platform operator to rent 11-15 seat vans and arrange for drivers.

Under the changed law, however, mobility platform operators will be allowed to provide those services only for tourism purposes. They will be subject to restrictions on service hours and locations. The amendment stipulates that vehicles should be rented for at least six hours. It will also allow the outsourcing of drivers only when vehicles are returned at airports and seaports.

For these reasons, the legislation is seen as nothing but a ban on Tada. Furthermore, it will stifle innovation in the age of the Fourth Industrial Revolution, and deprive consumers of their right to enjoy innovative services. More seriously, adding more regulations to the passenger transport industry runs counter to President Moon Jaein's policy of promoting “innovative growth.”

In a nutshell, the country is taking a step backward, not forward, in promoting innovation as well as future-oriented new industries and services. Lawmakers and government officials stressed that the revision was aimed at permitting mobility platform operators to do business within legal boundaries. The new law calls on these operators to register for licenses, contribute money to a fund to compensate the taxi industry and be subject to an aggregate ceiling in the number of taxis.

We have to interpret the legislation as a politically motivated move to appease the country's 300,000 taxi drivers and their families before the April 15 general election. That is why most taxi drivers welcomed the passage of the bill. But Lee Jaewoong, head of car-sharing app operator SoCar, which owns Tada, strongly denounced the revision for stifling innovation and bringing an end to new services. He even threatened to stop Tada's operation.

Lee must have felt deep frustration at the legislation, not least because it came after a Seoul Court ruled in favor of the Tada service as a legitimate rental car service operator Feb. 9. The court turned down the prosecution's claims that Tada had unlawfully conducted a call taxi business without a license. Many people had expected the ruling to have positive legal implications on the revision.

However, the Assembly reneged on such an expectation. This means a failure to solve the conflict of interest between traditional taxi operators and emerging innovative ride-hailing service providers through dialogue and compromise. It is regrettable to see the Assembly protecting a conventional industry by sacrificing innovation.