Kim Beom-su, “Review all businesses including Kakao Taxi from square one and prepare a plan by the end of the year”

Kakao founder Kim Beom-su, director of the company’s Future Initiative Center. Yonhap News Archives

“We will review all businesses from square one and do our utmost to become a company that meets the expectations of the people,” said Kakao founder Kim Beom-su, director of Kakao’s Future Initiative Center on November 13.

Kim made the announcement when he met with the press on his way to attend the third emergency management meeting at the Kakao Mobility head office in Bundang-gu, Seongnam-si, Gyeonggi Monday.

“As the founder of Kakao, I have painfully accepted rebukes from many people,” said Kim, adding, “We will quickly renovate the company, receiving outside control through the compliance and credibility committee and the management reform committee, and do our utmost as a company loved by the people to become a new Kakao with our original intentions in mind.”

When a reporter asked the specific schedule for reforms, the Kakao founder said, “We will present a concrete plan by the end of the year and work so that many plans can be executed next year.”

Unlike the first two meetings, which were held in the Kakao Pangyo Agit, Kakao moved the third meeting to Kakao Mobility. The Kakao founder personally rolled up his sleeves and displayed determination to resolve problems concerning Kakao Taxi, which President Yoon Suk-yeol openly criticized.

Kakao Mobility will have a private meeting with four taxi organizations (Federation of Korean Taxi Workers’ Union, Korean Taxi Workers’ Union, National Joint Conference of Private Taxi Associations, and the Korea National Joint Conference of Taxi Associations) in Yeoksam-dong, Gangnam-gu, Seoul at 2 p.m. Monday. Later at 5 p.m., the company will meet with representatives of Kakao Taxi affiliates and discuss improvements in the current taxi-hailing and commission system.

Ryu Gung-seon, CEO of Kakao Mobility will attend the two meetings instead of Kim Beom-su. Kakao Mobility’s taxi business is based on a two-contract system: under the franchise contract, the taxi driver pays Kakao Mobility 20% of the taxi fare, and under the partnership contract, the company then pays 15-17% of the fare revenue to the taxi drivers or corporate taxis.

Lawmakers pointed out problems in the dual structure in the parliamentary inspection, and this year, the Financial Supervisory Service regarded this as accounting fraud and is currently investigating Kakao Mobility.

Kakao Mobility announced that it would review its taxi business structure from square one after it came under attack following the president’s rebuke.

The company submitted an “agreement decision” to the Fair Trade Commission claiming it would voluntarily correct the problem of not connecting calls to taxis affiliated to other competitors. An “agreement decision” is a policy that allows a case to be swiftly concluded without determining the existence of any irregularities if the company subject to the investigation and review by the Fair Trade Commission presents appropriate corrections, such as voluntarily restoring the original state and redressing consumer damage.

Kakao Mobility further announced that it would open the Kakao T platform to other taxi platforms and completely improve its operating methods and system. However, the company is expected to face challenges in changes to the taxi commission, which is expected to be a key issue in Monday’s meeting, because the company and the industry have huge differences on this issue.

“When it comes to the franchise taxi commission, unlike the widely known 20%, what the drivers actually pay is not that much,” said Kakao CEO Hong Eun-taek during a recent conference call announcing the company’s third quarter performance.

Kakao and Kakao Mobility do not receive commissions from general taxis, which account for 90% of its members, and in the case of franchise taxis, they exclude the amount the company pays in exchange for the partnership from the 20% commission. Thus, the company argues that the actual commission is much lower compared with that of other global ride-hailing platforms.