"Paying Fees Without Using the App"...TK Kakao Taxi Faces Fair Trade Commission Sanctions

The KakaoT Blue taxi franchise headquarters in the Daegu-Gyeongbuk region, which uniformly collected usage fees as franchise fees even when passengers were picked up without using the company's app, has been sanctioned by the Fair Trade Commission.

On the 15th, the Fair Trade Commission announced that it would impose corrective orders, including revising the franchise contract, and a fine of 228 million KRW on DGT Mobility, the taxi franchise headquarters of Kakao Mobility in the Daegu-Gyeongbuk region, for violating the Franchise Business Act.

According to the Fair Trade Commission, since November 2019, DGT entered into unfair contracts that uniformly collected 20% of the total fare as franchise fees from franchise taxi drivers under the names of KakaoT app platform usage fees, royalties, promotion and marketing, vehicle management program usage fees, and dedicated terminal maintenance.

Franchise taxi drivers sometimes picked up passengers by roaming without using any app or through other taxi-hailing apps, but DGT was found to have unconditionally collected 20% of the fare displayed on the meter as franchise fees based on contract provisions.

The cases of unfair collection by DGT were identified as 20.3 million rides, accounting for 28.5% of the total 71.18 million rides from January 2020 to September 2023. The total franchise fees collected during this period amounted to 98.8 billion KRW, with 28.2 billion KRW related to these 20.3 million rides.

The Fair Trade Commission viewed that among these fees, the charges for royalties, promotion and marketing, and franchise vehicle management and monitoring programs were legitimate, but the franchise dispatch call platform usage fees were unfairly collected.

The Fair Trade Commission judged that DGT’s actions constituted unfair trade practices under the Franchise Business Act by abusing its transactional position to impose unfair contract terms, thereby disadvantaging franchise business operators.

DGT holds an 89.5% market share in the Daegu franchise taxi industry (as of October 2023), with Kakao Mobility owning 26.79% of its shares.

The Fair Trade Commission believes that if drivers terminate contracts or switch to other companies, they may face disadvantages.

Park Jin-seok, head of the Franchise Transaction Investigation Team at the Fair Trade Commission, said, "Eradicating the unfair collection of franchise fees will establish a fair trading order in the franchise market and is expected to reduce the burden on franchise owners by ensuring that franchise fees are not collected for non-franchise business activities during future franchise contract negotiations."

The Fair Trade Commission plans to complete sanctions within this year against KM Solution, another Kakao Mobility franchise headquarters that has maintained similar contracts outside the Daegu-Gyeongbuk region.

Kakao Mobility plans to appeal the Fair Trade Commission’s sanctions through administrative litigation, aiming to prove that no legal violations occurred. The company stated, "We have provided all infrastructure equally even for roaming operations," and argued, "Applying lower commissions to roaming operations could create an environment conducive to selective picking, which may lead to a decline in service quality and deterioration of member companies’ profits."

This content was produced with the assistance of AI translation services.