Korea's Transport Ministry takes issue with Kakao Taxi’s proposed pricing scheme

South Korea’s Transport Ministry said Friday that Kakao Taxi, the country’s most-used taxi-hailing app, must follow local regulations in introducing a new option to its service that allows customers who pay an extra fee via the app to catch taxis faster.

The Ministry of Land, Infrastructure and Transport said in a statement that after a review of Kakao Taxi’s proposal to add a paid option to its service, the new function is deemed the same as existing “call taxi” services where customers pay a cab driver an extra fee for a pickup.

Given this, the ministry said Kakao needs to follow local regulations that set such “call fees” at 1,000 won (90 cents), effectively putting a cap on the pricing of the fees for Kakao.

The move comes around a month after Kakao Mobility announced plans to add two paid options to its taxi-hailing service: “priority call” and “immediate dispatch.” The former would cost around 1,000 won to 2,000 won while the latter would be offered at around 5,000 won.

According to Kakao, the priority call option would send a user’s ride request to a driver who is more likely to accept it based on artificial intelligence algorithms and pickup habits, while the immediate dispatch option would match a user with an available taxi nearby.

The news had stoked concerns that the paid option would cause an effective hike in taxi fare as drivers opt to pick up passengers who choose the paid option – particularly late at night when taxis are scarce.

Critics argued that customers would eventually be faced with a situation where paying the extra fee becomes a new norm.

Kakao released a statement Friday saying that it would take the ministry’s guidance into account in finalizing its new service, the details of which will be announced early next week.

Kakao Taxi, offered via the Kakao T app, currently dominates Korea’s taxi-hailing business. It has more than 18 million subscribers in Korea. Around 96 percent of the country’s certified taxi drivers are registered with the app.

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