A South Korean court on Wednesday, February 19, 2020, ruled that SoftBank Group Corp. (SoftBank) backed-South Korea’s ride-hailing service, Tada was cleared from the charge of a transport law violation. Wednesday’s court ruling was a rare feat of the ride-hailing company but a handful of taxi employees roared against the verdict. Meanwhile, Tada is likely to face challenges from taxi bobby and regulators which might lead to push away the investors from the rider company.
Tada Emerging Popularity among Koreans
Tada owned by SoCar Inc. (SoCar), a Korean eco-friendly car-sharing service, was founded in late 2018 and has now 1.7 million users as it secured attractive fundraising from a Japanese leading conglomerate group, SoftBank. “Tada”, means “ride” in Korean, had raised about 161 billion won ($135.3 million) since 2018 following the investments from SoftBank Ventures, private equity, and venture capital firms.
According to a source, the ride-hailer became very popular among the people of South Korea due to poor taxi services in the country. However, Tada was allowed to operate a limited hour for nearly 6 hours after a lawmaker proposed to revise rental rider laws in October 2019. Subsequently, SoftBank’s plan for $500 million in funding for the startup failed due to the uncertainty of laws.
Under the newly revised laws, South Korea had permitted ride-hailing to only licensed taxis and bans the use of private cars for the purpose. Reuters reported, “Tada has been exploiting a rule that allows the rental of chauffer-driven 11-seaters to operate its ride-hailing services, angering the taxi lobby and regulators.”
In addition to this, Prosecutors had also sought one-year jail terms for executives of Tada and its parent firm, SoCar by arguing that Tada was a de facto unlicensed taxi service.
Court Cleared Tada’s Charges
Globally, the ride-hailing services have been facing troubles due to the strict regulations from the authorities. However, in a rare case, Tada was acquitted of the charges of the law violation on Wednesday but the company is still facing a violent protest from a powerful taxi lobby and further regulations.
Seoul Central District Court judge, Park Sang-koo ruled in favor of Tada, “Although ride-sharing has been going through labor pains and accepted in various ways throughout the world…in South Korea, it is difficult to reach a social consensus as to the Uber incident and others have shown.” Upon the hearing of the court’s ruling that Tada had followed the rider laws, some taxi drivers among the 200 people who attended the court hearing, shouted in anger, “how can they be innocent!.”
Following the news, Lee Jae-woong, the CEO of SoCar wrote on Facebook, “A new time has come for those who dream of innovation.” Referring to the bill of new regulations, Lee added, “The bill was not expected at all, it wasn’t even in our worst-case scenario.” Responding to a question, he said that investors could be put off as “South Korea can be seen as a country where unexpected regulation can suddenly make business impossible to operate.”
Although Tada won the case in the court on Wednesday, the startup has yet to face ongoing discussions with the taxi lobby and regulators to forge a co-exist plan with the country’s taxi service groups.
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