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Lawmakers close Tada loophole

Bill would ban the ride-sharing service by September 2021
Mar 09,2020
Less than a month after a Seoul court affirmed the popular ride-hailing service’s legality, the National Assembly has passed a bill that would require Tada to substantially overhaul its business model or shut down next year.

During a plenary session late Friday night, lawmakers voted 168-8 to approve revisions to the Passenger Transport Service Act - a suite of reforms aimed at banning the service following condemnation of the company by Korea’s taxi drivers. Nine lawmakers voted “no opinion.”

The bill now awaits a final decision from President Moon Jae-in, who is widely accepted to sign the measure into law.

The legislation would prohibit renting vans with 11 to 15 seats with drivers for anything other than tourism purposes, mandates that vans be rented for at least six hours at a time and requires users to possess boarding passes when renting or returning the vehicles at airports and seaports.

Tada, which operates mostly in the Seoul metropolitan area, has been using 11-seat vans instead of sedans for its service, taking advantage of a loophole in the law that otherwise bans ride-hailing services from operating in Korea.

If Tada wants to stay in the ride-offering sector, VCNC, operator of the Tada service, will be required to acquire a taxi service platform license introduced under the revised legislation.

Lee Jae-woong, CEO of Socar, which owns VCNC, said in a statement Wednesday - after the bill passed the judiciary committee - that Tada would be stopping its service soon in anticipation that the legislation would pass.

“The decision from the National Assembly is bringing us back to the time of the past,” Lee said in the statement, adding that the new law is blocking innovation. “For a little less than a year and five months, Tada did its best to form an ecosystem that provides safer transportation means for 1.72 million people, better jobs for 12,000 drivers and improved earnings for taxi drivers.”

Shortly after the bill was passed, Tada sent a notice to its users that the service will be terminated within a month.

The Seoul Central District Court last month acquitted Lee and VCNC CEO Park Jae-uk of operating illegal taxi services last month, finding that they were operating a legitimate rent-a-van business. Tada then offered taxi drivers with a valid taxi license 5 million won ($4,100) and a waiver of fees for three months if they join Tada Premium, which requires that its drivers have special taxi licenses. Anyone with a regular driver’s license can join Tada Basic.

Under the new law, VCNC would be given a year and a half to stay in the market by changing its business plan.

The bill would take effect a year after promulgation. Punishments for violations would be suspended for an additional six months, meaning the Tada Basic service will have to shut down by September 2021.

In a last-ditch attempt to thwart the measure, Park asked Moon in a statement Friday to veto the bill, emphasizing that around 12,000 Tada drivers and 100 “young innovators” are going to lose their jobs. Lee also asked for the same to Moon in a statement shortly before the bill was officially approved.

“The National Assembly possibly had the votes of taxi drivers in mind ahead of the general election,” Park said in the statement. “Any businessman knows that [the bill] immediately puts a stop to investments and sends a lethal blow to [Tada], which already has suffered tens of billions of won in losses.”

Transport Minister Kim Hyun-mee told reporters Friday morning that the revision bill wasn’t written to target Tada. She argued that the ministry came up with the bill to provide room for other innovative mobility companies to compete, while ensuring Tada operates fairly in the market.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]