- Corrective orders and fines imposed on DGT Mobility for unfairly including app usage fees in franchise fees, even when franchise taxi drivers did not use the Kakao app to pick up passengers -
The Korea Fair Trade Commission (hereinafter referred to as "FTC") has decided to impose corrective orders and a fine of 228 million KRW on DGT Mobility Co., Ltd. (hereinafter "DGT"), the headquarters for the Kakao T Blue taxi franchise in the Daegu and Gyeongbuk regions. This decision was made for setting unfair contractual terms and unilaterally collecting dispatch platform fees as franchise fees from franchise taxi drivers, even when they did not use the Kakao T platform. Kakao Mobility Co., Ltd., which operates the Kakao T app, owns a 26.79% stake in DGT.
Kakao T Blue is a franchise taxi service launched by Kakao Mobility in September 2019. It recruits corporate taxi companies and individual taxi drivers as franchisees, collects franchise fees, and allows them to operate under the Kakao Taxi brand while providing services such as passenger calls and dispatch through the Kakao T app. DGT, as a partner of Kakao Mobility, operates as the franchise headquarters for Kakao T Blue in the Daegu and Gyeongbuk regions.
DGT currently operates 5,701 franchise taxis in Daegu, accounting for 89.5% of all franchise taxis in the city (6,372 vehicles as of October 2023).
Kakao T Blue franchise taxi drivers can pick up passengers not only through the Kakao T app but also by using other taxi-calling apps or by picking up passengers waiting or roaming on the streets without using any app.
However, since November 9, 2019, DGT has entered into contracts with franchise taxi drivers that uniformly charge 20% of their total fare as franchise fees. These fees are categorized under various items, including dispatch platform usage fees, royalties, marketing expenses, vehicle management program fees, and maintenance costs for dedicated terminals.
This contract structure means that DGT collects fees even for fares earned through other taxi-calling apps or street pickups, unrelated to the use of the Kakao T app. Based on these terms, DGT has been deducting 20% of the total fare displayed on the taxi meter, regardless of whether the Kakao T app was used.
Franchise taxi drivers were thus burdened with dispatch platform fees even when they did not use the Kakao T app. From January 2020 to September 2023, approximately 28.5% (20.3 million trips) of the total 71.18 million rides were conducted via other apps or street pickups. Despite this, DGT still imposed franchise fees on these trips.
DGT's actions of establishing contractual terms to collect franchise fees under the guise of app usage fees, even when its platform was not used, constitutes an unfair trade practice under the Franchise Business Act. This practice unfairly exploited its dominant position to disadvantage franchise taxi drivers.
This ruling is significant as it clarifies that it is an unfair trade practice for franchise headquarters to use their market dominance to impose franchise fees on earnings from non-franchise activities.
The measure aims to eradicate the practice of unjustly collecting franchise fees, establish a fair trading order in the franchise market, and reduce the burden on franchisees by ensuring that fees are not collected for non-franchise activities during contract negotiations.
The FTC will continue to monitor unfair practices by franchise headquarters that undermine fair trading order and infringe upon the economic interests of franchisees. Violations will be strictly addressed upon detection.