"Commission Charged Even Without App Use"... Fair Trade Commission Hits Kakao Taxi with 3.88 Billion Won Fine

KM Solution, the headquarters of the KakaoT Blue taxi franchise, which collected commissions uniformly even when drivers picked up passengers without using the company's app, is set to face sanctions from the Fair Trade Commission.

On May 28, the Fair Trade Commission announced that it had imposed a corrective order and a fine of 3,882 million won on KM Solution for violating the Franchise Business Act.

KM Solution is a wholly owned subsidiary of Kakao Mobility and serves as the headquarters for KakaoT Blue franchises nationwide, excluding the Daegu and Gyeongbuk regions. It accounts for about 67.6% of all franchise taxis nationwide, excluding Daegu and Gyeongbuk.

According to the Fair Trade Commission, since December 2019, KM Solution has signed unfair contracts with franchise drivers, uniformly collecting 20% of the total fare as a franchise fee under the pretext of dispatch (call) platform usage fees, royalties, promotional and marketing costs, and vehicle management program usage fees.

Although the contract defined "20% of the total fare received as compensation for providing transportation services" as the franchise fee, it did not specify that the "total fare" would include fares not generated through the KakaoT platform.

As a result, regardless of whether franchise taxi drivers used the KakaoT app, the company uniformly collected 20% of the total fare confirmed by the meter?including the KakaoT dispatch platform usage fee?as the franchise fee.

The Fair Trade Commission pointed out, "The act of signing franchise contracts that allow franchise fees to be collected under the pretext of dispatch (call) usage fees even when franchise taxi drivers did not use KakaoT Blue calls constitutes the imposition of unfair contract terms by abusing a superior bargaining position under the Franchise Business Act."

The Commission also considered that it is difficult to conclude that franchise drivers clearly understood the franchise fee structure when signing the contracts, and that charging for services not used cannot be regarded as a standard business practice.

An official from the Fair Trade Commission stated, "By requiring KakaoT Blue, which holds about 80% market share in the franchise taxi sector, to revise its franchise fee structure so that fees are not collected for services not used, this measure is expected to eliminate the unfair collection of franchise fees and reduce the burden on franchise drivers."