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(LEAD) Prosecution, startup operator argue over nature of mobility platform service

(ATTN: ADDS taxi drivers' news conference in 2-4 paras from the bottom; a related photo)

SEOUL, Dec. 2 (Yonhap) -- Prosecutors and a van-hailing operator on Monday engaged in a heated dispute at their first court hearing over whether the new mobility platform service is an illegal taxi service.

On Oct. 28, the prosecution indicted Lee Jae-woong, chief executive of car-sharing app operator SoCar, and Park Jae-uk, chief executive of SoCar's rental car hailing service arm, Value Creators & Company (VCNC), declaring their app-based business, Tada, an illicit, unlicensed taxi service.

Launched in October last year, VCNC's Tada (meaning "ride" in Korean) has become the country's leading car-hailing service, operating 1,400 11-seater vans and with 9,000 drivers as of the end of September. More than 1.25 million people registered for the service.

On Tada's first anniversary, VCNC announced an ambitious expansion plan under which it will operate 10,000 cars, and employ 50,000 drivers by the end of next year.

Taxi drivers have vehemently opposed the ride-hailing service from its onset, claiming it threatens their livelihoods and violates the transportation law that forbids rented vehicles from being used for commercial purposes and being provided by drivers. But the law has an exception for vans with 11 to 15 seats.

Tada argues its business is within legal boundaries, citing the law's exception clause, while taxi drivers argue Tada's business practice is an arbitrary application of the rule, irrelevant to its original purpose of promoting tourism.

This photo, taken on Oct. 23, 2019, shows taxi drivers calling for the suspension of the Tada service during a rally in front of the National Assembly in Seoul. (Yonhap)

"(Tada) has been doing a rent-a-car business, just like existing rent-a-car operators, which provide customers with rented cars and arrange drivers. Tada is, in essence, nothing different from them, with only mobile platform technology newly combined," a lawyer for Tada said during a hearing at the Seoul Central District Court.

"It's unreasonable if (Tada) receives discriminative treatment, by any chance, because the number of its users is large," the lawyer said.

The lawyer also cited the transport ministry's deregulation policy for the promotion of the country's car-sharing service, reminding that the exceptional clause on vehicles with 11 seats or more had been newly introduced to that effect.

The prosecution insisted, however, that Tada is nothing but a call taxi service, although its operator argues it is an innovative mobility business.

"Tada users are, in nature, passengers, not renters, under the transportation law, given that they do not effectively engage in the operation of the vans," the prosecution said.

The prosecution also cited the ministry's earlier judgment that app-based ride-sharing service providers, like Uber, belong to an illegal taxi service.

"(Car-riding services, like Tada,) should be nurtured within the boundary of the current law, even if it is a new industry," the prosecution said.

Taxi drivers hold a news conference in front of the Seoul Central District Court on Dec. 2, 2019, calling for Tada to cease operating. (Yonhap)

Taxi drivers called for the Tada service to be stopped during a news conference in front of the court where the hearing took place.

"Tada is simply a camouflaged illegal taxi service that is doing business while not offering four major obligatory insurances to its workers," the drivers said.

"Tada speaks of the (fourth industrial revolution) and the sharing economy, but how can its service can be called part of the (fourth industrial revolution) or the sharing (economy) given its business style is the same as that of taxis?"

Meanwhile, many industry experts express concerns over the prosecution's indictment, saying it will have a negative impact on the country's new growth engine.

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