Is S. Korea a Black Hole for Transportation Start-ups?

Despite fighting aggressive (and cash-burning) battles in many Asian cities, there is one city that Uber Technologies Inc had lost rather quickly in — Seoul. Save some minor services, Uber is illegal in South Korea: In 2015, a South Korean court ruled that the San Francisco-based ride hailing giant was illegally using private vehicles for commercial purposes.

This legal setback had almost wiped off Uber’s presence in Asia’s fourth biggest economy. The U.S. firm eventually suspended its core service, Uber X, while limiting its business to its paid chauffeur service UberBlack and UberASSIST, a transportation service for elderly and people with disabilities.

Now, another transportation start-up might meet the same fate as Uber. Poolus, the first ride-sharing app in South Korea according to the company, connects people with nearby drivers travelling in the same direction. The home-grown carpooling company already attracted 22 billion won in funding as of October, according to local media reports.

The seemingly innocuous service is currently facing a police investigation for violating South Korea’s transportation law.

Illegal Service

According to Article 81 of Passenger Transport Service Act, private cars “shall not be provided or rented for compensation…for transport.” There are two exceptions to this law — in the case of people carpooling for their “commute to and from work” and in the scenarios of natural disasters, emergency transport, etc.

Since the law didn’t set the specific time for commuting hours, Poolus set their own by operating from 5 a.m. to 11 a.m., and 5 p.m. to 2 a.m. In November, Poolus expanded their operating time to 24 hours. Poolus drivers can pick four-hour slots twice a day, allowing eight hours of trips per day — the controversial rule that local taxi drivers find problematic.

Poolus’s interpretation of commuting hours is too broad, stated the Seoul Taxi Association in an official press release. In response, Kim Tae-ho, the founder of Poolus, said such thinking is outdated. “In this modern and complex world, it is nonsensical to think everyone goes to work at 9 a.m. and gets off at 6 p.m.,” said Kim in an interview with daily newspaper Hankook Ilbo.

Lee Byeong-wook from Seoul Metropolitan City’s transportation department told Korea Exposé in an e-mail, “It is inappropriate to operate car-pooling services during the daytime and the weekend when there’s no traffic congestion,” hence relatively little need for such a service.

The controversy hit its pinnacle in November, when more than 100 cab drivers marched into a parliamentary discussion between lawmakers and ride-hailing operators (including Uber), strongly objecting to being left out of the meeting.

When asked about the status of the negotiation with taxi drivers, Park Byung-sung, a member of the transportation team at Seoul Metropolitan Government, told Korea Exposé, “The Ministry of Land, Infrastructure and Transport and the National Assembly need to work together to resolve the issue by carefully reviewing and updating the current regulations.”

A South Korean lawmaker Hwang Ju-hong co-authored a motion last month banning for-profit car-pooling services to “prevent the revenue slump of the taxi industry and potential safety problems that could arise from car-sharing.”

ComfortDelgro’s share price has more than halved this year. (Source: Bloomberg Markets, as of Dec. 5, 2017)

His concern is not without precedent. In Singapore, where Uber and its rival Grab are fighting head to head, ComfortDelgro, the Singaporean taxi and public transportation operator, is feeling the heat. The once dominant operator’s share price has more than halved this year.

After Poolus rolled out its service, other local car-pooling companies like TiTiCaCa and Luxi have jumped into the market. Uber, eyeing the new opportunity, rolled out Uber Share a few months ago in Korea.

Meanwhile, Poolus’s app has a rating of 4.6 stars out of 5 on the Google PLAY store, with one to five million downloads. The app is not available in English, but foreign residents in South Korea are free to become Poolus drivers with a valid Korean driver’s license.

 

Cover image: An Uber app next to a taxi in Sao Paulo, Brazil. (Source: Fernando Oda via Flickr, CC BY 2.0)

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Juwon is a journalist at Korea Exposé covering all things business. She’s previously worked as a TV producer in Channel News Asia in Singapore and has interned for Bloomberg, AP and Google. Juwon is a proud owner of her dog Noah and a graduate of Journalism and Media Studies Centre at the University of Hong Kong.