Innovators are in the midst of a legal war -- the "Bermuda Triangle" hampering digital innovation
Innovators are in the midst of a legal war -- the "Bermuda Triangle" hampering digital innovation
  • By Lawyer Koo Tae-eon
  • 승인 2018.12.18 03:29
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National competitiveness in the era of the 4th industrial revolution depends on how many global platforms it has.
Lawyer Koo Tae-eon/TEK & LAW CEO
Lawyer Koo Tae-eon/TEK & LAW CEO


The mankind has regarded strange phenomena that they cannot understand in common sense as a divine posting or the work of aliens. However, with advances in science technology and a raise in the standards of common sense, it came to the conclusion that most mysteries are a physical result of natural phenomena. However, there is still a mystery that cannot be solved even with the current state-of-the-art science. One of them is the "Bermuda Triangle."
The Bermuda Triangle refers to a sea area within a triangular range that connects the Straits of Florida in the south of the U.S., the island of Bermuda, and Puerto Rico. It doesn't look much different from other sea areas. However, ships and aircraft operating here often disappeared without trace.

In December 1945, a torpedo attack plane formation belonging to the 19th air wing of the U.S. Navy's Air Force went missing while passing the waters of the Bermuda Triangle. After that, the rescue aircraft that flew to search for the missing one also disappeared completely. In general, if a ship or airplane accident occurs, debris, missing persons, and even large oil slick should be found in areas near the accident.

But all the accidents occurred in the Bermuda Triangle disappeared without a trace. Since then, more than 15 accidents have occurred in the same locations, including aircraft star Ariel in 1949, cargo ship Al Snider in 1950, U.S. Navy aircraft in 1954, Norwegian freighter Anita in 1973, and aircraft Air France in 2008. There was no sign of an accident at that time.

But such matters did not happen only in other countries. Although the fields are different, Korea also has the Bermuda Triangle. It is the so-called "Bulmuda Triangle," a mysterious area where innovative startups disappear without a trace due to triple regulations, and a black hole of regulations that will cause future innovations to disappear.

Mystery of startups that disappear without a trace

South Korea's online used car platform HeyDealer announced that it would close its business In 2016, one year after its establishment, HeyDealer, a domestic online used car dealer, declared the closure of its business. The reason is as follows. HeyDealer provides brokerage service by receiving comparative quotations from dealers of used cars in the country when selling used cars owned by individuals so that transactions can be made at the most reasonable price. By introducing a strict dealer system, it has enhanced price transparency and secured convenience by allowing them to deal with each other without having to visit the company.

As a result, it drew attention as a revolutionary start-up with the number of downloads and the accumulated transaction amount exceeding 300,000 cases and 30 billion won, respectively, in just one year after establishment. Customers could buy a used car of the same condition at a much lower cost. Unlike offline operators, the company did not have to own land such as parking lots or security rooms. Accordingly, it could reduce the commission fees and the benefits went to the service users.

However, there was a strong backlash from offline used car dealers. The offline used car dealers, who feared of losing the market, coaxed lawmakers from local constituencies and enabled them to submit a revision bill to the National Assembly. The revision bill required online used car operators to have various facilities and manpower, including parking lots of 1,000 pyeong and security rooms with more than 100 pyeong, likewise offline dealers, and the bill was passed at the National Assembly without modification in January 2016.

Applying the same regulation to online businesses as existing offline operators is as absurd as having the mobile real estate app, "Zigbang," to run offline real estate office. It is also unusual to prevent entry into the market by creating new regulation. It is also different from the Uber case to which the original regulation is applied. However, common sense and rational problems raised have disappeared due to the influence of vested interests like the Bermuda Triangle.

The only option left for HeyDealer who lost their competitiveness in a moment was closure. To comply with the regulation, a start-up company with only one year of business experience needs a huge amount of money to buy land. But, it has no money to do it. Even if it is prepared, there is no way to purchase more than 1,000 pyeong of land near Seoul.

Meanwhile, a headwind began to blow when the innovative company was on the verge of disappearing. News media that heard of the news on HeyDealer's closure began to produce articles criticizing the National Assembly. A growing number of news media pointed out that the revision of the automobile management law is an excessive regulation that failed to understand the difference between online and offline platforms. As many people expressed their sympathy, the public opinion began to move in favor of HeyDealer. In the end, the government, which was overwhelmed by the public opinion, raised its hands and declared a white flag. The National Assembly, which passed the law, and the Ministry of Land, Infrastructure and Transport, which is in charge of the bill, decided to remove the remaining regulations, leaving the minimum terms and conditions for consumer protection. It is an unprecedented case in the constitutional history that turned back the law, which was passed at the National Assembly, in just a month.

HeyDealer resumed operations 50 days after it was declared out of business. It almost disappeared due to the Bermuda Triangle, but it was able to survive thanks to the strength of the media and public opinion. However, most startups are still forced to close down due to excessive regulations in the strong Bermuda Triangle.

Regulated black hole that prevents start of start-ups

Callbus Lab is a late-night bus service called by a smartphone. Passengers who have the same destination are safely escorted to their destination by a 10 to 13 passenger boarding bus that do not operate at night. The model was created after seeing Uber actually being expelled from Korea and thinking about possible transportation projects within the legal framework. After the subway was cut off in December 2015, the company conducted a pilot service in Gangnam and other areas, which are in chaos owing to many people trying to catch a taxi.

The reaction was explosive. Since there were no refusal of passenger and the fare was half cheaper than the taxi, a number of people expected the implementation of the official service.

However, the Land, Infrastructure and Transport Ministry gave a notice on a revision of the rules for the enforcement of the Passenger Transport Business Act in February 2016. According to the revision, late-night call buses are legal, but only existing bus and taxi operators are allowed to participate in the project. The call bus service developed after a long discussion with the law firm became illegal overnight. Eventually, Callbus Lab changed its business model to a platform that is used to broker chartered buses in April 2017.

Luxi is a carpool app that started its service in August 2016. If one enters a destination for the Luxi app, it connects a car owner (driver) and a customer (passenger) of the same destination. The fare is calculated by distance and about 40 percent cheaper than a taxi. Passengers use car services at a much lower price, and drivers generate revenue without wasting the driving route.

In return for the match, the company will also collect part of the fee as a commission. According to the Article 81 of the Passenger Transport Business Act, a charged transport like Uber using a car is illegal, but it is allowed to drive a car together to commute. Luxi turned the exception rule into a business model and enjoyed explosive popularity as a crowd of people flocked to use the car pool for commuting. As of November 2017, the number of exploitation surpassed 4 million and the number of users reached 700,000. It is no exaggeration to say that an average of 5,000 people commute to and from work on Luxi.

However, the government made Luxi's car pool service illegal. The original purpose of the law is to carpool people who are acquainted with each other during the rush hour when traffic demands are high, but Luxi is operating against an unspecified majority by using a smartphone platform. Accordingly, it is an illegal act, according to the government. In fact, police booked dozens of car pool drivers, saying it was illegal to gain profits through the car pool services more than three times a day.

Under the current law, there is an article that carpool is possible for commuting, but there are no specific regulations on the time of commuting and the frequency of carpool, such as when commuting hours are and how many times a day carpool is available. The attack began immediately. However, the Seoul Metropolitan Government is calling for the revision of the law, saying, "The carpool is aimed at eliminating commuting cars and improving traffic congestion, not the system that helped companies and drivers to earn 24 hours a day for 365 days." In keeping with this, lawmakers proposed a revision that specifies commuting hours so that carpool services can be more strictly regulated.

National competitiveness in the era of the 4th industrial revolution depends on how many global platforms it has. The global platform starts with startups that have innovative services like Google or Amazon. However, traditional industries that do not want to lose their vested interests reject innovation and attack start-ups with the law as a weapon. Based on a single line of laws, the new regulation is preventing innovative companies from growing by creating hundreds of regulations through enforcement ordinance or changing laws to benefit existing offline industries. As a result, domestic startups are suffering from triple regulations and are facing a difficult situation to survive, not to say the original goal of becoming a global platform.

No matter how good the medicine is, it becomes a poison when you overdose it. Regulations are necessary for the balanced growth of industry. However, regulations that focus too much on start-ups pose a threat to economic growth. What startup companies need now is "support," not "regulation." If Korea wants to create a global platform like Google and Amazon, it should remove the Bermuda Triangle, a black hole in regulations, as soon as possible, laying the foundation for innovation in all industries.

Lawyer Koo Tae-eon/TEK & LAW CEO(

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