The tyranny of Kakao

A new competitive charging system Kakao Mobility has introduced for its ride-hailing fleet is causing controversy. When passengers called a taxi through the app, they were charged with 1,000 won ($0.87) in call fees or 2,000 won after midnight. From this month, the call charge went up to as much as 5,000 won. The flexible fare system is aimed at locating a taxi faster for those who offer a higher call fee during peak times. The pricing system ended up raising taxi fares for a lot of consumers.

Taxis act as a form of public transportation like buses and subways. Public interest is the most important factor in pricing. Taxi fares have been capped at the expense of cab drivers because of the public role of taxis, so as not to worsen the lives of the people. But Kakao’s hike in rates on the pretext of greater convenience wrecks the public role of taxis. Moreover, the extra fares only fatten the dominant platform, and not the drivers.

The government’s misjudgment and fixated regulations have brought about the result. It has banned van-hailing service Tada for violating the rental vehicle provision and disallowed global player Uber. Kakao has come to dominate the market due to the absence of competition. Uber withdrew its service after it was defined as illegal by the Seoul Metropolitan government and faced a probe in 2013. The government and ruling party demanded a social consensus, or approval from the cab industry, for any carpooling service in 2019.

In 2020, the government banned Tada. Instead, Kakao has enjoyed a near monopoly since then. It brought onboard 230,000 out of 250,000 licensed cab drivers. Its users total 28 million. The excessive regulations that cut off smaller or later players fed the monstrous rise of Kakao. The platform also dominates chauffeur services. It could raise the fees later once it defeats the smaller competition.

Governments around the world have been strengthening regulations to contain the excesses of big tech companies. Lina Khan, a lawyer who has called for a tougher law against big tech companies, has become the chairman of the U.S. Federal Trade Commission. She said that although she loved tech companies for their services, she found problems in their overbearing power as a citizen and worker.

The Fair Trade Commission in Korea also proposed a revised bill on platform regulation. Although overregulation cannot be desirable, a monopoly by a single dominant platform must be contained. Dominant players like Kakao and Baedal Minjok must examine whether they have been exploiting consumers or vendors. They cannot be innovative if they burden the people.