Prosecutors in South Korea charged Uber Technologies Inc. Chief Executive Travis Kalanick and the head of its domestic business partner MK Korea Co. with violating a transportation law.
Uber's South Korea unit and MK Korea illegally operated rental cars as taxis, an official with the Seoul Central District Prosecutors' Office said by phone Wednesday, asking not to be identified, citing internal policy. The official declined to comment on whether prosecutors expect Kalanick to appear for questioning. Uber said it will fully cooperate with the investigation and is "confident" that the court will uphold a fair and sensible judgment'' in the case.
"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," the company said in an email distributed by its South Korean public relations representative.
The maximum penalty for Uber's alleged legal violation is a two-year prison sentence or a fine of as much as 20 million won, Yonhap News reported Wednesday.
San Francisco-based Uber is facing growing legal challenges as it expands in Asia amid mounting protests from taxi operators.
The company, which raised $1.2 billion this month at a valuation of $40 billion, said in August that it had sought a legal opinion and that its Seoul service was not in violation of the law. Opposition to its operations stems from outdated regulations that precede smartphone and wireless technology, Allen Penn, the company's head of Asia, told reporters at the time.
Paid transportation with unregistered vehicles is "clearly illegal activity," South Korea's Ministry of Land, Infrastructure and Transport said later that month.
Uber, which according to its website operates in 53 countries, started its service in Seoul in 2013. It competes with local taxi-hailing apps such as NaviCall, run by a unit of the nation's largest mobile phone carrier SK Telecom Co., which connects users with registered taxis.
Seoul's government has said it will launch its own smartphone-based cab-hailing service using taxi operators.