Would iconic ride-hailing startup Uber Technologies CEO still be worth its US$40 billion valuation if founder and CEO Travis Kalanick were in prison?
That’s a question the company may have to face following reports Wednesday that South Korean prosecutors have indicted Kalanick for flouting local taxi laws.
Uber has raised $1.4 billion this year to expand its ride-hailing operations to new places. Using a mobile app, it puts passengers in 250 cities in contact with drivers for hire, and takes payment for the ride. The vehicles available vary from place to place, and can include “black cars” or limousines, licensed taxis, or private vehicles driven by their owners without a business license.
The company’s business model has run into criticism for many reasons, including flouting local taxi laws by allowing limousines to be “hailed” via the app and providing unfair competition to licensed taxi services by using unlicensed drivers. It has also been accused of performing insufficient background checks on drivers following a number of alleged assaults or rapes by Uber drivers. Uber promised to improve driver screening following one such incident in Delhi.
South Korean authorities, like those in many other countries, are taking a hard line against the company’s disruptive approach, which has been described as seeking forgiveness rather than permission for the way it operates.
On Wednesday, prosecutors there indicted Kalanick on charges of operating an illegal taxi service, Korean news agency Yonhap reported. The head of local car rental operator MK Korea was also indicted, accused of operating an illegal passenger transport business using the company’s cars, the report said. Neither of the two has been detained by authorities. The indictments mean they could face up to two years in prison.
The indictments are the result of an investigation triggered by a complaint from city authorities in the country’s capital, Seoul, about the company’s unfair competition with local taxi services. On Friday, according to Yonhap, the city’s government voted to reward those reporting illegal activities by Uber with a payment of up to 1 million won (US$907).
The company was unperturbed by the indictment, expressing confidence that the Korean court will uphold a fair and sensible judgement on the case. “Uber Technologies respects the Korean legal system and will provide its full cooperation,” it said in a statement, adding: “We firmly believe that our service, which connects drivers and riders via an application, is not only legal in Korea, but that it is being welcomed and supported by consumers.”
Uber’s UberPop service, which puts unlicensed drivers in touch with passengers, faces a total ban in France from Jan. 1, when a new taxi law comes into effect. Spain has already banned UberPop, and a Belgian government minister has said he will file criminal charges against Uber for operating the same service.
A number of U.S. cities are also at loggerheads with the company over its flouting of local taxi ordinances. Last week Uber suspended its service in Portland, Oregon, for three months while it seeks to negotiate a settlement there.
(With additional reporting by Yewon Kang in Seoul.)