The conflict between the Seoul Metropolitan Government (SMG) and car-sharing service provider Uber intensified on December, 2014 after the former stated it would reward people who report what it described as “illegal” Uber taxi operations. Up to 1 million won ($910) will be paid to citizens who submit a reward application form along with supporting evidence such as a receipt, photo or video. The measure is expected to make Uber vulnerable to bounty hunters. SMG said that it would increase its efforts to ban Uber, stating that the controversial taxi-hailing service was not part of the sharing economy. “ Uber does not go hand in hand with the city’s envisioned sharing economy since it does not abide by laws that require transportation businesses to take safety measures for the public. It only seeks profits by connecting riders with unauthorized drivers,” the city government said in a press statement. The city government said that the ride-hailing service puts the public at risk, following criminal cases involving rapes by some Uber drivers in other regional markets. However, Uber is fighting back and is not stepping back. It announced that it would continue its business against all odds. A trial involving Uber executives will soon start, and its results are expected to set guidelines on how to treat the service.
Uber is an app-based transportation network company headquartered in San Francisco, California, operating in cities of various countries. The company utilizes a smartphone application to receive ride requests, and then sends these requests to their drivers. Customers use the application to request rides and track their reserved vehicle’s location. The service is now available in 53 countries and more than 200 cities worldwide, and is valued at more than US$40 billion.
The Seoul Metropolitan Government released an official statement on July 2014 expressing its intention to ban Uber’s smartphone application. The government stated that South Korean law prohibits charged transport services that use unregistered private or rented vehicles. On December 2014, prosecutors in South Korea charged Uber Technologies Inc. Chief Executive Officer Travis Kalanick and the head of its domestic business partner MK Korea Co. with violating a transportation law. San Francisco-based Uber is facing legal challenges as it expands in Asia amid mounting protest from taxi operators.
Ⅱ. How is Uber Different from a Standard Taxi
(1) Consumer’s Side
It is unnecessary to call a dispatcher or hail a taxi on the street. You can request a ride with the push of a button on smartphone and track your driver’s progress to your location. In addition, Uber will notify you once your driver arrives so you can wait comfortably indoors. Uber application shows you where the car is and measures its arrival in minutes.
2) Reliable Service
Unlike regular taxis, Uber punishes bad service. The service ratings are reciprocal, because the drivers rate the passengers also. The customer-driver mutual rating system creates reciprocal obligations in which both sides are incentivized to be as polite as possible.
3) Vehicle Options
Uber requires drivers to have a car that is at least as modern as 2007. It allows customers to choose the type of car. The types of Uber vehicles are UberTAXI, UberX, and UberBLACK. UberTAXI uses Uber to request and pay for a taxi, at standard taxi meter rates. As for UberX, drivers use their own vehicles and provide low cost options. Drivers are no licensed chauffeurs and are not required to get “vehicle for hire” licenses. Lastly, UberBLACK is similar to a limo or metro car service. It was introduced as a premium option for customers who want to travel with licensed chauffeurs of black sedans and SUVs.
(2) Driver’s Side
1) Ultimate Flexibility Uber drivers can work as much or as little as they want. The smartphone application can be turned on at any time to work and turned off easily. Thus, the driver creates their own schedule whenever and wherever they are available.
2) Surge Pricing
Although getting a surge ride (an exponentially increased fare) can be elusive, it can also be lucrative. Especially for big events and holidays, surge can make the riders fare relatively expensive and the drivers’ shift a lot more productive for their paycheck. Drivers get 80% of the fare, regardless of the price.
3) Meeting New People Uber drivers will encounter all types of people of all ages using Uber to travel. Every person that gets in the driver’s car creates an opportunity for social interaction and exploring new areas with them.
(1) Consumer’s Side
1) Higher Cost
Uber is not always the cheapest option. Surge pricing charges higher rates during times of heavy traffic. Uber uses an automated algorithm to increase prices to “surge price” levels, responding rapidly to changes in supply and demand in the market, which contributes to attract more drivers during times of increased rider demand.
2) Insurance Ambiguity
Critics have targeted Uber because of its insurance policies. The company recently made its insurance plan public, but only after it was leaked anonymously to the San Francisco Bay Guardian. As the Bay Guardian notes, the name of the insured is not Uber but “Rasier LLC,” which the company claims is its subsidiary. This could potentially provide a loophole for the company, if accidents involving Uber drivers occur.
There were recently reported Uber accidents. However, Uber denied a driver insurance protection when the driver struck and killed a six-year-old girl in San Francisco on December 31, 2013 while driving between pick-ups. In the wake of this controversy, the company has since adopted a new policy that covers drivers while they are not carrying passengers, but questions still remain over the company’s insurance policy.
3) Absence of Regulations
Uber may be convenient, cost-effective for many customers, especially at times when public transportation does not satisfy their needs, or for those who live in areas that are underserved by public transportation. However, consumers will need to be comfortable with riding at their own risk until regulations regarding Uber become the norm.
(2) Driver’s Side
1) Wear and Tear on Car Drivers are responsible for all car expenses such as gas, tolls, and maintenance fees. This can add up significantly to added depreciation and repairs on their vehicle. Mileage adds up on the driver’s car each day as well.
2) An Ineffective Rating System Customers rate drivers from 1 to 5 stars, and unfortunately for drivers, a 4 star average is a failing grade and the drivers can be terminated. Since the standard requires relatively high ratings, drivers may feel overly pressured to achieve higher ratings from customers.
3) No Tips This is one of a few service jobs that do not allow tips. At the end of a ride, the complete fare is automatically billed to the customer’s credit card.
III. Why is Uber Illegal in Korea
- Why Uber Should be Banned
The Seoul Metropolitan Council (“SMC”) raised five points regarding why Uber must be banned in Korea. First, it claims that Uber is unsafe for both the drivers and the passengers since the vehicles are not required to get insurance, and the drivers are not verified. The second problem is the unstable rate which fluctuates depending on the time the ride is requested. Third, Uber Taxi has unfair user agreements. Fourth, the application providers themselves are irresponsible for any issues that drivers and passengers may face. Lastly, Uber Taxi operation is against the principle of shared economy.
Due to abovementioned aspects, SMC announced on December 22, 2014 that it will reward up to $1,000 to anyone who reports illegal Uber Taxi operations. In the midst of the Uber controversy, the council has been looking for ways to ban the Uber service in South Korea. The council will start receiving reports on December 30, 2014.
- Uber Founder Indicted for Illegal Business
South Korean prosecutors said they have indicted the founder of Uber on charges of operating an illegal taxi service on December 24, 2014. The Seoul Central District Prosecutors’ Office said it prosecuted Travis Kalanick, founder and CEO of Uber, and the head of MK Korea, a local rental-car service operator, identified only as Lee, both without physical detention.
The two were charged with violating a law governing passenger transport services, according to prosecutors. Under the law, rental-car service operators are banned from conducting passenger-transport business using their cars. The maximum penalty for Uber’s alleged legal violation is a two-year prison sentence or a fine of as much as 20 million won.
The authorities have stepped up their investigation into Uber taxi service in response to anger from local taxi drivers who said their income had been hit unfairly by the new application. Under the Passenger Transport Service Act in Korea governing law, Uber is said to violate the following articles.
Article 34 (Prohibition from Transport with Compensation)
(1) No person who rents a car from a rent-a-car business operator shall use such car for transport with compensation, or sublet the car to any third party.
(2) No rent-a-car business operator shall arrange a driver for a person who rents a car: Provided, That a rent-a-car business operator may arrange a driver for any persons prescribed by Presidential Decree, such as foreigners or disabled persons.
(3) No rent-a-car business operator shall use any of his/her commercial automobiles for passenger transport with compensation, or engage in brokering such activities upon request from a third person.
Article 81 (Ban on Commercial Transport by Private Cars)
(1) No motor car, other than commercial automobiles (hereinafter referred to as “private cars”) shall be provided or rented for compensation (including expenses necessary for the operation of an automobile; hereafter the same shall apply in this Article) for transport: Provided, in any following case, motor car may be provided or rented for compensation:
- Where people share the use of a passenger car for commuting;
- Where the relevant Governor of a Special Self-Governing Province or the head of relevant Si/Gun/Gu (referring to the head of an autonomous Gu; hereinafter the same shall apply) grants permission for private car’s commercial transport due to a natural disaster, emergency transport, operation for educational purposes, or any other causes prescribed by Ordinance of the Ministry of Land, Transport and Maritime Affairs.
(2) The subject matters and period of permission for commercial transport referred to in paragraph (1) 2 shall be determined by Ordinance of the Ministry of Land, Transport and Maritime Affairs.
- Regulatory Opposition in Other Countries
South Korea is not the only country instituting measures to restrict or even ban Uber’s services, following similar measures taken in Taiwan and India. Taiwanese officials are concerned about how Uber collects and manages personal data including name, credit card, location and route, as the Minister of Transportation and Communications said in an interview.
In December 2014, following allegations of rape against a Uber driver in New Delhi, India, Uber was banned from New Delhi for not following the city’s compulsory police verification procedure. Within two days of the rape incident, almost 7,000 people signed a petition calling on Uber to conduct mandatory seven-year background checks on drivers, in line with its U.S. operations. New Delhi’s transport department banned Uber from all activities related to the provision of any type of transport service in the city. Uber issued a statement stating that it would work with the Indian government “to establish clear background checks currently absent in their commercial transportation licensing programs.”
On December 12, 2014, a French court ruled that Uber could not advertise some of its services to the general public in France; if it did, it would face a $25,000 daily fine. The French government announced three days later that the company’s UberPop service would also be banned on January 1, 2015.
On December 8, 2014, Dutch judges banned the UberPop ridesharing service that was launched as a pilot project in Amsterdam between July and September 2014, followed by an expansion into The Hague and Rotterdam. The Hague-based Trade and Industry Appeals Tribunal ruled: “Drivers who transport people for payment without a licence are breaking the law”. Uber’s official response indicated that the company would continue to offer the service, despite the €10,000 fine and the €40,000 fine for drivers who are apprehended.
On December 9, 2014, a judge ordered Uber to cease all activities in Spain. Since its arrival in Spain, the company had been the target of a series of protests by the Madrid Taxi Association, which considers the app to be unfair competition. In a statement after the ruling, the Spanish court stated that drivers “lack the administrative authorization to carry out the job, and the activity they carry out constitutes unfair competition.” The company suspended its operations in Spain on December 30.
- Criticism and Alternatives for Korea’s Uber Ban
- Foreigners Criticize Seoul’s Uber Ban
Foreign residents who have been discontent with Korea’s conventional taxi services, have increasingly opted to use Uber, the smartphone car-hailing application. Those foreigners are fuming at the latest move by the Seoul government to block Uber from operating in the city, since foreigners who do not speak either Korean or English become easy targets for rip-offs. “Uber has solved every problem that foreigners and tourists have with Seoul taxi services. There is no waiting, no negotiating, and no refusal to take passengers with Uber services,” said Sam, a 45-year-old businessman, calling the city government’s ban “slightly inflammatory and prejudicial.” He added that the city, taxi unions and taxi companies are ignoring consistent problems such as overcharging, and instead are trying to shut down Uber.
- Daum Kakao Launches Kakao Taxi
While Uber Taxi is currently under attack, Daum Kakao signed a MOU with Seoul Taxi Association and Korea Smart Card to launch Kakao Taxi service. The business agreement between the three companies brings together strong points of each company to launch Daum Kakao’s O2O (online to offline) strategy under their “Connect Everything” strategy.
There are 255 different taxi service providers registered under the Seoul Taxi Association, all of which will be able to provide services for the application. Korea Smart Card is the provider of T Money, Korea’s public transportation payment card. Daum Kakao expects that the collaboration with the two companies will create a synergy effect with Daum Kakao’s technological support.
What makes Kakao Taxi legal is that the company works collaboratively with Seoul Taxi Association, which eliminates the problem that Uber faces. As all of the vehicles and drivers are registered under the association, the Kakao Taxi operation is perfectly legal. Just like Uber, both the passenger and the cab drivers can find each other.
Kakao Taxi will launch two applications-one for the passenger and one for the drivers. The mobile application for the drivers will be launched first, hoping to get as many taxi drivers to register.
- Uber Proposes Talks With Taxi Drivers
Uber has proposed meetings with taxi drivers in Seoul who have been protesting its presence in Korea. An official from the Seoul Taxi Association (STA) reacted negatively to the proposal, saying Uber will have to stop its service first.
“Uber remains open to meeting with the taxi associations to discuss how Uber can help improve the lives and economic opportunities for Seoul’s taxi drivers,” Uber Korea said in a statement released in November, 2014. The statement came after thousands of taxi drivers staged a protest in central Seoul, asking the city government to kick Uber out of the Korean market.
One Uber official said that the claims by taxi drivers are groundless, because Uber, itself, has no vehicles or drivers. Earlier, the Seoul Metropolitan Government asked the Korea Communications Commission, the communications watchdog, to block the Uber application. However, the agency rejected the request stating that the company has not violated any laws. They insisted the UberTAXI service is provided in partnership with local taxi firms. “Like every market in which Uber operates UberTAXI, Uber is committed to provide Seoul taxi drivers with tools to earn a better living,” the statement read.
In spite of the heated controversy, most private users are seemingly approving the quality of Uber services. Uber says 90 percent of users are repeat customers and have little complaints. Uber argues that its services involve innovative technology and is not simply a passenger transport service, and that they should allow market forces to settle the disputes.
Therefore, we need to broaden our perspectives to determine what is best for customers. Since the current taxi system also involves many problems and drawbacks, it is about time to adopt the advantages of Uber rather than completely disallowing it in the first place.
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