Ride-hailing service Tada wins first court battle vs taxi industry

SoCar Chief Lee Jae-woong (left) and Park Jae-uk, head of Value Creators & Company (VCNC), answer questions from reporters on Feb. 19, 2020. [Photo by Lee Seung-hwan]

South Korea’s rental van-hailing service Tada has won the first court battle against prosecution, gaining impetus to normalize its mobility business that has faced multiple challenges, from die-hard cab drivers to ruling party lawmakers, accusing it of running an illegal taxi business.

A Seoul District Court on Wednesday acquitted Lee Jae-woong, chief executive officer of Tada’s parent company SoCar, and Park Jae-uk, head of SoCar’s subsidiary Value Creators & Company (VCNC), of charges that they had been illegally running a taxi business without a license.

Prosecutors had indicted them in October 2019 without physical detention, calling for a one-year jail term for both and a 20 million won ($16,800) fine against VCNC, which operates Tada.

“I thank the court for their wise decision in allowing us to enter a new era,” Lee said in a Facebook post released immediately after the verdict. “A new time has come for those that dream of innovation.”

He added that the new Tada, separated from SoCar, would move fast to assume its responsibilities as a new market player and create a new economy, business model and set of rules.

Earlier this month, SoCar announced it would spin off Tada into a standalone company on April 1.

The ruling is expected to influence the pending bill in the legislative dubbed “anti-Tada” law, which, if passed, can virtually kill Tada’s current van-hailing business. Under the proposed bill, Tada can only operate for tourism purposes and needs to rent out the vans for more than six hours, with the pickup points restricted to airports or sea docks.

Korea prohibits private vehicles from offering ride-hailing services unless they are licensed taxis. Tada launched in October 2018 by exploiting a legal loophole that allows rented chauffeur-driven vans with 11 to 15 seats to offer such services. It quickly became the country’s leading ride-hailing service, operating mainly in the Seoul metropolitan area.

[Photo by Lee Chung-woo]

Local taxi drivers and regulators have accused Tada of running an illegal taxi service. Tada insisted it was a legal platform offering a new type of mobility service based on rental vans that is differentiated from taxis.

Startup and mobility industries welcomed the decision, but said changes would need to be made in the legal framework to eliminate existing gaps and ambiguities.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]