Franchise Withdrawal and Unmarked Destinations Thrown by Taxi Industry... Only Kakao's Decision Remains

13th Kakao Mobility and Taxi Association Meeting
Discussion on Franchise System Reform and Introduction of Destination Non-Display

The taxi industry, ahead of an emergency meeting with Kakao Mobility, has presented demands regarding the restructuring of the taxi business. These demands include reforming the franchise system, introducing a no-destination-display policy, and even withdrawing from the franchise business?requests that are difficult for operators to accept. Although these issues directly affect profitability and passenger satisfaction, Kakao Mobility, which has long been embroiled in controversy, has fallen into deep contemplation.

On the 13th, some taxi organizations participating in the meeting, such as the National Taxi Labor Union Federation and the National Private Taxi Transport Business Association Federation, pre-submitted their demands to Kakao Mobility last week. Ryu Geung-seon, CEO of Kakao Mobility, is scheduled to meet with four taxi organizations at 2 p.m. that day to discuss plans for restructuring Kakao Taxi.

The taxi industry first demanded changes to the franchise business entity and a reduction in commission fees. Kakao Mobility operates the franchise service through its subsidiary KM Solution. KM Solution takes 20% of the franchise taxi operation revenue as a franchise commission, and Kakao Mobility returns 15-17% to taxi drivers under the name of partnership (data utilization and advertising fees). The taxi industry argues that taxi organizations should take charge of the franchise business entity. They claim that if taxi organizations autonomously decide the commission fees, they can lower them compared to the current rates. A representative from a taxi organization pointed out, "So far, Kakao Mobility has refused to discuss commissions with the taxi industry on the grounds that the franchise business operator is the subsidiary (KM Solution). This structure must be changed first."

The introduction of a no-destination-display system was also included in the demands. Currently, platform companies allow taxi drivers to decide autonomously whether to display the destination. Kakao Mobility does not display destinations for franchise taxis (Kakao T Blue), but it does for regular taxis that only connect calls. The taxi industry insists that the destination display, which encourages "call cherry-picking," should be eliminated. Because the destination display differs between Kakao Mobility’s franchise taxis and regular taxis, users pay extra to use franchise taxis without call cherry-picking. As a result, taxi drivers pay higher commissions to use the franchise taxi service.

Furthermore, some organizations are demanding the withdrawal from the franchise business altogether. They are calling for the discontinuation of the Kakao T Blue franchise taxi service. Kakao Mobility has been criticized for acting as both an intermediary connecting users and taxis and as a player (taxi operator) through its franchise business. This has led to preferential call allocation to franchise taxis, resulting in a fine of 27.1 billion KRW imposed by the Fair Trade Commission.

It is uncertain how much Kakao Mobility will accept the industry's demands. Kakao Mobility has declared a "fundamental review of the business structure" through discussions with the taxi industry, judging that there is virtually no way out. This is because authorities have launched comprehensive pressure over various suspicions such as accounting fraud and discrimination against non-franchise taxis, and even President Yoon Suk-yeol has criticized "monopoly abuse." However, accepting the taxi industry's demands would inevitably lead to a decline in profitability. If profitability decreases, Kakao Mobility could face disputes with investors or be forced to return investments. On the other hand, since Kakao views this issue as a group-level challenge, it is expected to make a decisive move. Kim Beom-su, founder of Kakao and head of the Future Initiative Center, took charge as chairman of the Management Innovation Committee on the 6th to oversee Kakao Mobility’s current issues. A taxi industry official said, "Because this is directly related to business performance, it won’t be an easy decision, but since these issues have been conveyed by the industry for several years, if there is will, a quick conclusion could be reached."