Uber Faces Outright Ban in Seoul

July 21, 2014
By: Gary Kim

The Seoul city government says it will ban Uber Technologies Inc., the latest example of how legacy transportation interests and local regulators are trying to prevent Uber and similar services from disrupting existing local public transportation businesses.

In some cases, the argument is a bit less radical. The argument being that Uber has to comply with all existing regulations applied to licensed taxicab businesses, for example. In Seoul, the effort is simply to ban Uber altogether.

Uber is finding out that in regulated markets, even when new technology and business models are pioneered, regulators use a simple test, not much more complicated than captured by the phrase “If it looks like a duck, swims like a duck, and quacks like a duck, it’s a duck.”

Separately, Aereo found itself facing the same problem when courts ruled that Aereo essentially is a cable TV business, and must pay licensing fees to redistribute off-air TV signals. On the other hand, some think courts might also rule, paradoxically, that Aereo “is not a video distributor, able to pay for rights to retransmit over-the-air TV signals.”

VoIP providers found that to be true after they started to take significant market share from legacy providers.

In other words, even new technology and clever business models will long survive regulatory scrutiny and compliance when the new approaches are applied in competition with legacy businesses.

So now Uber is slowly conceding to demands that its drivers and services be subject to the same rules as apply to licensed taxicab firms, Of course, there are other issues.

It appears Seoul wants to ban Uber while allowing other existing licensed tax services to provide Uber-style booking features.

Apparently, and not surprisingly, it is illegal under South Korean law to provide fee-paying transport services using private or rented motor vehicles unregistered with the authorities.

But the city apparently plans to create its own app that will provide similar features to Uber for official taxis, such as geo-location data on cabs nearby, information about them and their drivers, as well as ratings.

Uber seems to be facing similar opposition in quite a few other nations and cities.

It’s an old story. Internet-based technology threatens to undermine existing legacy businesses. And regulators respond in ways that essentially help legacy providers do so. That isn’t to say such reactions always are “unfair.”

Many would agree that all contestants in a single market should play by the same rules. The issue for Uber and other similar businesses is whether in fact the new providers are in the same market as taxis. It’s hard to argue they are not in the same business, even if the information content and ordering process of the new providers is generally deemed “better” than current methods by many consumers.

On the other hand, it inevitably also seems "unfair" to ban a firm that might be willing to substantially comply with existing rules, while preserving the innovative elements of its service. That has proven possible in some other cases.

Outright bans never seem particularly fair. 




Edited by Maurice Nagle