[News Focus] Controversy brews over Korea’s carpooling service regulations

South Korean authorities and the local carpooling service industry have recently locked horns over the legality of operating the service around the clock, revealing a disparity between vision and reality in the the new administration’s push to realise its “shared economy” mantra.

Last week, the Seoul Metropolitan Government asked the police to investigate Poolus, a Seoul-based ride-sharing app operator, for breaching local transportation laws after the company began offering its services at any time of the day and week instead of during selected “commute hours” on weekdays.

According to local transportation laws, unlicensed vehicles -- essentially personal vehicles that are not officially registered as taxis -- are prohibited from operating paid driving services with the exception of carpooling activities during “commuting hours.”

Poolus and other carpooling service operators had run their services from 5 a.m. to 11 a.m. and 5 p.m. to 2 a.m. on weekdays only, under a conventional interpretation of “work commute hours.”

However, Poolus recently decided to remove such time restrictions and make its ride-sharing services available at any time of day, on grounds that “commute hours” can be interpreted more broadly to account for flexible work hours and diverse lifestyle patterns.

With the change, a Poolus driver has the freedom to select eight hours out of the day’s 24 hours during which he or she will offer carpooling services, on either weekdays or weekends.

In response, the Seoul city government has officially requested the police to investigate Poolus’ 24-hour carpooling service for breach of transportation law, which prohibits the commercial operation of unlicensed personal vehicles.

“Korea’s transport law permitted carpooling in an aim to ease the heavy traffic during peak commute hours. If carpooling services are allowed without limits, including on weekends and holidays, then they become no different from commercial taxis,” the Seoul Metropolitan Government said.

It argues that licensed taxi drivers are subject to strict criminal background checks and more to guarantee the safety of riders, and that it cannot permit unlicensed individuals to provide commercial driving services during late-night hours, among other regulatory shortcomings.

The local startup community has responded with heavy criticism, claiming the municipality’s actions are out of line with its stated pledge to boost new businesses shaping the “fourth industrial revolution” -- a new, connected digital economy buttressed by new technologies.

“This accusation goes against the central government’s plans to boost the fourth industrial revolution and further discourages startups paving growth in new, innovative business areas,” the Korea Startup Forum, an association of more than 120 local startups, said in a statement.

“The government encourages startups on one hand, while weighing them down with regulations. We ask the Ministry of Land, Infrastructure and Transportation and Seoul City to rescind its actions,” it said.

The recent standoff has reignited controversy over how Korea should implement the “shared economy” business model that has struggled to take root here.

The biggest example is ride-hailing app Uber -- which links users to licensed taxis and private unlicensed cars and drivers alike. Despite its success in other markets, Uber had to suspend its flagship UberX services in Korea after being charged with breaching local transport laws.

According to the “Startup Korea!” report released by McKinsey & Company this year, 70 percent of the world’s top 100 startups that had raised the most in investment in 2016, including service providers Uber and Airbnb and financial technology firm Ant Financial, would find their business models illegal or noncompliant with Korea’s local regulations.

Poolus said it will continue offering its ride-sharing services around the clock on all days of the week until the Korean court reaches a final decision on the case.

Carpooling, or ride-sharing, refers to multiple individuals sharing a ride and splitting the costs. Apps like Poolus have become platforms connecting drivers and passengers who share simliar routes, with the participants earning or saving transportation costs through carpooling arrangements.

By Sohn Ji-young (jys@heraldcorp.com)