South Korean prosecutors found the rental van-hailing service Tada illegal and indicted its managing chiefs, dealing another blow to the country’s ride-sharing business that has failed to take off due to multiple regulations and die-hard opposition from cab drivers.

Lee Jae-woong, chief executive of the car-sharing platform SoCar, and Park Jae-uk, chief executive of Value Creators & Company (VCNC), subsidiary of SoCar and operator of Tada, were indicted without detention on charges of illegally running a transportation business as a van rental service, the Seoul Central District Prosecutors’ Office said Monday.

The move is the biggest challenge yet to the country’s fledgling mobility sector, which has been weighed down by regulatory setbacks and fierce resistance from the taxi industry.

Uber suspended most of its Korean operations in 2015 after a court ruled that the ride-sharing giant illegally used private vehicles for commercial purposes in violation of the country’s transport law. Earlier this year, Kakao Mobility had to delay the launch of its new carpool app and was only able to release it under significantly curtailed conditions after three taxi drivers died by self-immolation in protest.

Founded in October 2018, Tada picked up in popularity by offering a new type of ride-hailing service in 11-seat vans. Local laws allow rental vans with 11 to 15 seats to be legally leased with a driver. Tada is now the country’s top ride-offering service, securing 1.3 million subscribers and 9,000 registered drivers in just a year of its launch.

“The world is changing in response to public demands and new technologies,” SoCar said in a statement after the indictment. “We look forward to a new court ruling (on this matter).”

Lee also condemned the sudden move, arguing that Tada has been operating legally for over a year under de-facto authorization from the police and the transport ministry.

The decision comes at a time when SoCar and other mobility platform operators are still in talks with state officials after the government in July outlined a new set of regulations for car-hailing services and measures to support the taxi industry. The proposal sought to cap the number of ride-hailing services within the boundary of total taxi driver licenses. The operators were also required to shell out a portion of their earnings to assist the taxi industry.

To help ease the conflict with taxi drivers, Tada had agreed to raise its fare by 800 won ($0.69) from next month and put off its fleet expansion plans.

By Oh Dae-seok, Hong Sung-yong, Kim Hee-rae and Kim Hyo-jin

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