The Seoul Central District Court ruled on Wednesday in favor of Socar and its subsidiary Value Creators & Company (VCNC), saying that the ride-hailing service Tada is a legitimate rental car service.
In a landmark decision, the district court acquitted Socar CEO Lee Jae-woong and VCNC CEO Park Jae-wook of charges of violating the passenger transportation service laws with their ride service. The verdict will likely support the mobility platform industry, which was vehemently opposed by the taxi industry.
Socar is the parent company of VCNC, which operates Tada, a van-hailing mobile app service. Tada, which means “to ride” in Korean, launched in October of 2018, rapidly growing to become South Korea’s leading ride-hailing service. The mobile app boasts over 1.7 million users.
Lee Jae-woong and Park Jae-wook were indicted in October 2019 for allegedly operating a transportation business without a license. The prosecution, last year, requested a fine of 20 million won ($16,785) fine against VCNC and a one-year jail sentence for each of the CEO.
The court stated that the Tada service is included in a contract that offers users a custom rental service via a minute-based reservation. The court added that Tada is a rent-a-car service based on a mobile application.
After the court’s ruling, Lee wrote on Facebook, “Tada is not guilty. Innovation is the future. I deeply appreciate the court’s wise decision.”
The ruling dismissed the prosecution’s earlier belief that Tada is an “illegal call-taxi service” as Tada users are not hirers of the service but the passengers. The ruling also stated that even if the rental service was considered to be illegal, it could not be seen that Socar’s CEO and VCNC’s CEO intended to violate transportation laws.
Regarding the operation of Tada, the court referred to evidence that neither the Seoul Metropolitan Government nor the Transport Ministry took administrative measures or conducted a crackdown on the service. The court also cited the fact that amid the operation of Tada, Seoul’s taxi revenues increased last year.
The district court said that the proceedings would become a learning effect for players in the mobility industry to discuss together a constructive solution regarding such issues.
Rep. Park Hong-geun, along with lawmakers from the Democratic Party of Korea, authored a revision bill to the transportation act last October, tightening services allowed for car rental businesses. The bill, which is currently pending at the National Assembly, if passed, will ultimately ban Tada’s operation.
However, a coalition of around 280 startup companies submitted a petition to the prosecution appealing that Tada’s achievement in innovation cannot be seen as a crime but should be seen as advancement in the mobility industry.
The ruling will likely lend support to the mobility platform industry, for which the government seeks to ease excessive regulations as part of its efforts to nurture the innovative growth.
However, Seoul’s taxi industry is expected to protest the ruling ardently.