Instead, there was an indictment. Seoul Central District Prosecutors' Office filed charges against Lee Jae-woong, the head of Tada. Prosecutors claim Tada had been operating without a proper taxi license for its 11-seater van ride-hailing service. This was the direct result of a complaint that the Seoul Private Taxi Association filed in February, accusing it of running an illegal taxi service.
The laws underlying this fight are interesting. Article 34 of the Passenger Transport Service Act states, "No person who rents a commercial motor vehicle from a car rental business entity shall use such a motor vehicle for transport with compensation," and "No person shall arrange a driver for a person who rents a commercial motor vehicle from a car rental business entity." However, the enforcement ordinance of the act permits companies to offer drivers when using rental vehicles with 11 seats or more, leading to Tada to argue that it's a legal business since it only operates 11-seat rental Kia Carnival vehicles.
This reminds me of a conversation that I had in the early 2000's with the chief operating officer of a large foreign language school in Seoul. He told me that the school had lobbied the Seoul Metropolitan Government in the 1990's to create a law that mandated a business required a certain square footage before it could be called a foreign language school in Seoul. The justification, as it often is in these types of cases, was that a large space increased the safety and wellbeing of the students.
At the same time, the mandated square footage happened to be large enough that smaller, less wealthy startups couldn't afford to set up foreign language schools. Basically, this law prevented competition from smaller schools with instructors who might have otherwise been able to draw students away with the quality of his or her teaching. When the large school wanted to branch out and set up a smaller tutoring business itself, it lobbied to have the law removed from the books.
The Tada case is analogous. Well-funded and well-connected groups with institutionalized power have used the laws and regulations as a means to proactively stave off competition. Naturally, the local entrepreneurial community is up in arms.
The Korea Times reported that, "Venture-related organizations here went all out to criticize the prosecution's recent indictment of the heads of van-hailing service Tada, Monday, claiming the indictment could put the brakes on ongoing efforts to spur innovation in Korea's economy and develop new growth engine industries. In their joint statement, the Korea Venture Business Association and 16 other organizations said, 'Moves made in the private sector to start new businesses to bring about innovation have been obstructed by the public sector, which has resulted in weakening the nation's global competitiveness.'"
I tend to side with the startup community. Innovation is all about changes to the status quo. Disruptions will disrupt. It will mean changes to the way people make a living. Institutionalized industries may hold back the flood for a while through influence and dirty tricks, but the dam will eventually break. What will the taxi industry do when self-driving taxis start rolling out?
Are they going to insist that licensed taxi drivers accompany each self-driving taxi because of the need for safety because Seoul taxi drivers are now the guardians of passenger safety? Really. This is almost as silly as London requiring Black cab drivers in the capital to learn some 320 routes through 25,000 streets off by heart in order to get their licenses. This, in an age of Google maps and Waze.
What I do want to point out is how I didn't hear a peep from this same community when Uber got run out of town several years back. The Korea Venture Business Association said that it was concerned about this indictment weakening Korea's global competitiveness. But, if that's really the case and Tada is innovative enough to deserve vocal support, why wasn't Uber equally deserving?
Pretty much everywhere I travel around the world, I use a ride-hailing service, but, in Seoul, I have to make do with Kakao taxi, which is basically a call taxi app. By driving Uber out of the country, Koreans still can't enjoy what everyone else takes for granted. Not so innovative, is it?
Part of being innovative is being open to competition and winning against the global best. Entrepreneurship is not only creating a new business but also taking a principled stance, making things work better and faster for more people, even if the solution doesn't come from Korea. More than arcane laws and institutionalized industries, internal contradiction and silent hypocrisy will be the true barriers to entry when it comes to creating unicorns in Korea.
Jason Lim (email@example.com) is a Washington, D.C.-based expert on innovation, leadership and organizational culture.