After the so-called "Tada ban law" (Passenger Transport Service Act) was revised in Apr. 2020 and shut down ride-hailing services, the ride-hailing platform company Chacha claimed it was unconstitutional and filed a constitutional petition, but the Constitutional Court found it constitutional.
The Constitutional Court said on the 29th that on the 26th it reached a decision of constitutionality by a vote of 8-1 in a constitutional complaint case concerning Article 34, Paragraph 2, Subparagraph 2 of the Passenger Transport Service Act.
Under Article 34 of the Passenger Transport Service Act, it is prohibited to arrange a driver for a company that has rented a business-use car from a car lending operator. In the past, Tada used an exception clause in the enforcement decree and provided a ride-hailing service by using 11-seat Carnival vehicles and professional drivers dispatched from partner firms.
When the taxi industry strongly protested, calling it an "illegal call taxi," the National Assembly, led by the then-ruling Democratic Party of Korea, revised the Passenger Transport Service Act. It added subparagraphs to Article 34, Paragraph 2.
It wrote into law the enforcement decree's previous exception clause, changing "a person who rents a passenger van with a seating capacity of at least 11 and no more than 15" to "a person who rents a passenger van with a seating capacity of at least 11 and no more than 15 for tourism purposes. In this case, the lending time is limited to 6 hours or more, or when the lending or return location is an airport or port." As a result, Tada's service using Carnival vehicles became impossible.
Chacha launched a ride-hailing service in Oct. 2017 using a different method from Tada. Tada's operator VCNC was supplied vehicles by its parent company SOCAR. Chacha operated by sharing vans that rental car companies do not lend, while a separate substitute-driving company sent a substitute driver. When a passenger requested a ride in the app, a car rental contract was concluded between the rental company and the passenger for the time it took to travel to the destination, and a substitute driver was arranged.
However, Article 34, Paragraph 2 introduced by the "Tada ban law" allows arranging substitute driving "when the car renter, after renting, is unable to drive directly due to reasons such as intoxication or bodily injury." Unless the passenger is drunk or injured to the point of being unable to drive, Chacha cannot provide the service.
In Oct. 2022, Chacha filed a constitutional complaint, arguing that this clause violates the principle of clarity and the principle of prohibition of excessive restriction, thereby infringing on freedom of occupation. In addition, in Aug. 2022, a company that developed a ride-hailing platform filed a constitutional complaint for the same reason.
The Constitutional Court first found that the words "intoxication" and "bodily injury" do not violate the principle of clarity under the nullum crimen, nulla poena sine lege doctrine. On the claim that it infringes freedom of occupation, it said, "The public interest of the comprehensive development of the passenger transport business and the provision of appropriate transportation services outweighs the restriction on the petitioners' freedom of occupation."
The court also said, "If cases arise in which one effectively engages in a passenger transport business overlapping with the taxi transport business while evading the strict regulations applied to taxis by using devious means, there is a risk of disorder in market order due to oversupply and excessive competition."
Constitutional Court Justice Kim Bok-hyeong dissented. Kim said, "In a reality where new modes of transportation using new technology are emerging as IT advances, the provision under review can hinder the achievement of the public task of technological innovation and block the entry of new businesses."
Earlier, Tada filed a constitutional petition claiming the "Tada ban law" was unconstitutional, but in June 2021 the court dismissed it in a unanimous decision.