Uber's Asian expansion hit a snag in South Korea as Seoul's city government claims the service is illegal under current laws.
Ride-sharing app Uber hit a major bump this week when the city government of Seoul announced its plans to ban the app and strip the company of its business license. The city also announced that it would develop an app of its own for ordering taxis.
Seoul is claiming that Uber's ride-sharing app is illegal under current laws. The government's Passenger Transport Service Act states that paid transportation services cannot be legally provided using private cars and drivers without taxi licenses.
However, the problems don't stop there. According to the city, there are several risks linked to Uber's service: Firstly, the reliability of its drivers is questionable. Whereas the city's taxi drivers must undergo a thorough background check, that information cannot be verified with Uber's drivers. Secondly, should there be an accident, insurance will not cover injuries to the passenger because the passenger is legally considered a third party. Thirdly, because the app requires a credit card number, the potential for stealing private information exists. Lastly, Uber's service directly interferes with the city's extensive taxi system.
Chief of Seoul City Transportation Headquarters Eul-Gon Choi has publically stated that "as an illegal operation, we have already pressed charges against Uber and will continue to do so." He added, "Unlike Airbnb, the illicitness of Uber's services are clear and evident."
In response to these punitive actions, Uber Korea issued a statement through an official press release:
"Seoul is demonstrating how its current taxi system is not up to par with the current 'Smart City' trend. While cities like London, Washington, Singapore, and Shanghai have embraced the technology provided by Uber to broaden the service spectrum available to consumers, Seoul continues to live in the past and has shown that it cannot catch up to the advancements of today's 'Sharing Economy.'"
Uber Korea went on to say that its current crop of drivers and cars come from officially licensed limousine service companies that hold the highest standard in customer service. The user feedback system allows only the best drivers to offer rides on the platform. Users can also be assured of their safety because the app provides the driver's picture, contact information and license plate number when they get assigned a driver and car.
Furthermore, Uber Korea stated that all of the partnering limousine companies also have insurance that covers the passenger. The company also clarified that it was merely "a platform that connects drivers and passengers." No credit card information is collected by the company -- rather, the company utilizes a third-party payment system that is widely used and completely safe.
Of course, opposition is nothing new to Uber. The ride-hailing service has been met with resistance in various markets. Despite constant clashes with local taxi unions, Uber has seen its company expand and attract investors, most recently snagging $1.2 billion in funding in June after being valued at $18.2 billion.
The decision to ban the app does present a significant setback, however, for Uber's Asian expansion. Seoul was one of five targeted major Asian markets to become fully operational for the 5-year-old startup. After beginning testing phases in August of 2013, the service had only just started to gain momentum with local residents.