Kakao T, cool, convenient and the target of criticism

A passenger gets in a Kakao Blue taxi. [KAKAO MOBILITY]

With the popularity of the Kakao T taxi hailing application growing at a rapid pace, Kakao Mobility is facing accusations of abusing its market dominance.

The company says it’s innocent of all charges, that the accusations are mainly the result of people not understanding how the system works.

Kakao Mobility, which runs Kakao T and is controlled by Kakao, has 80 percent of the taxi-hailing market, and is expanding its application to cover a wider range of services — renting electric bicycles, booking train, air and bus tickets and registering parcel deliveries.

The strategy is simple as it is deceptive, critics argue: lure users and drivers by offering free services, then add premium paid-features that are highly attractive. Despite the extra charges, both service providers and users can’t ditch the application due to its market dominance.

The company started the Kakao T Pro Membership in March, a paid membership that provides taxi drivers with a better chance at getting ride requests. A huge number of drivers rushed to sign up in fear of missing out on benefits and loosing competitiveness, and many complained that the paid service will now become a requirement.

The premium service is a 99,000 won ($86) per month. It notifies drivers of areas where there’s a large number of people hailing taxis, a feature that was once provided for free, and allows drivers to receive ride requests to areas they want.

Anger reached a fever pitch when Kakao Mobility announced that it will be able to cancel the Pro Membership for low-rated taxi drivers starting Thursday.

“Service providers and workers need to be the main body of business, but it’s now become a peculiar situation where the platform is exerting influence,” said Lee Yang-deok, a director at Korea National Joint Conference of Taxi Association.

Kakao Mobility says the change is to improve the service quality of its taxi drivers. Although low-rating drivers can be canceled, drivers with high-ratings will get benefits.

“We’ll provide additional benefits for taxi drivers who provide high-quality service,” said a spokesperson for Kakao Mobility.

Another complaint was that Kakao T's ride allocation system prioritizes premium taxi services over normal taxis. On the application, Black, Blue and Smart Call taxis — types that charge extra fee to the users — are shown on the top, while the option to hail a normal taxi is down at the bottom of the list.

The application was also accused of matching Kakao Blue taxis — taxis registered under Kakao Mobility's subsidiary KM Solutions — even if the users specifically request other rides. Following the accusation, the Korea Federal Trade Commission (KFTC) started an investigation into Kakao Mobility’s taxi hailing services last year, and is currently looking into whether the company prioritized Kakao Blue drivers when allocating rides.

"There are cases in which the application says it’s trying to find a matching taxi even though there are a lot of empty normal taxis nearby," said a CEO for one of the mobility start-ups. “Users can choose which taxi type they want to ride, but the service basically recommends premium taxi rides."

According to the company, arranging premium services at the top of the application display is to provide faster and better services to users.

“Swiftly connecting users to vehicles is our top priority, and we list the taxi types in order where there is a higher possibility for users to be matched,” said Kakao Mobility’s spokesperson. “Normal taxi drivers can choose whether they’re going to accept or deny the ride request, and premium services will be more likely to be matched with users because they're unable to decline ride requests once allocated.”

For cases when a far-away Kakao Blue taxi was assigned instead of a closer normal taxi, the company said that service ratings of drivers could have been the reason.

“Even if there is a close taxi nearby, that driver could have a history of declining ride requests or have low ratings — these exceptions seemed to cause misunderstandings,” said the spokesperson. “Intervening in the taxi booking system would lower effectiveness of our system, and there is no reason for us to do so.”

Kakao T received 516 billion won in investment this year from Google, Carlyle Group, LG Corp. and others. While other taxi companies reported declines in revenue last year, subsidiaries of Kakao Mobility, which includes KM Solutions, reported revenue of 890 billion, a 1,208 percent surge on year. The company plans to further expand its services.

“It’s very likely that [Kakao Mobility's] parcel and express delivery, car wash and maintenance reservation service and others will follow suit,” said a spokesperson working for a local taxi company, referring that the company will add extra paid features to other services as well.

BY PARK MIN-JE, LEE TAE-HEE [lee.taehee2@joongang.co.kr]