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Kyoto-based taxi company battles regulatory mess

Sadao Aoki, the owner of Kyoto-based taxi company MK Corp who has fought against Japanese red tape for 30 years, is set for a fresh victory over bureaucracy when his free taxi scheme gets the expected green light.

Barring a last-minute appeal by the Nagoya District Bureau of the transport ministry Monday, Aoki's company -- which prides itself on being the cheapest in any region where it operates -- should be able to operate the nation's first free taxi service within weeks.

It marks the end of a year-long battle to expand MK Taxi's operations into Nagoya, some 250km west of Tokyo, and another notch in Aoki's belt against burdensome regulation and constraints on competition in the taxi industry.

"Japanese society is one that developed under the protection of a mass of regulations," Aoki, whose company runs taxis in Kyoto, Osaka and Tokyo, said in an interview Friday. "But Japan has stopped moving forward, so we have to do away with all those rules."

The watershed also comes just months before the enactment next February of a new law that will lift the current cap on the number of taxis that operate in the country.

It will also relax the restriction on competition in fares, which are currently contained to a 10 percent range from highest to lowest around the flag fare of ?660 (US$5.45).

"We had a policy of `one region, one fare,' but there was a company in Kyoto who wanted to operate with lower fares," said Kazuyoshi Sato, an official with the transport ministry's automobile traffic division, referring to MK Taxi.

"There were various legal battles over that and we decided to change the policy."

The 73-year-old's battle with the transport ministry dates back to 1971, when the South Korean immigrant, whose real name is Bonsig Yoo, first applied for permission for his drivers to park their taxis at home to dispense with the time-wasting commute to the office.

Regulatory distinctions between commercial and non-commercial vehicles meant even such a minor issue took a year to resolve.

In 1982, when the company bucked an industry trend by applying to reduce its fares, it faced the wrath of the ministry again.

"The taxi industry is based on the principle of one region, one fare," then Transport Minister Masajuro Shiokawa -- currently finance minister -- said at the time. "They should fall in line with others and apply for an increase."

It took another three years before the Osaka District Court ruled the rejection of MK's fare-reduction application was unfair with no basis in law.

The government appealed, but in 1988 the sides settled, with the government having to admit in a statement that it "acknowledged the role MK Taxi has played in energizing the taxi industry and improving customer convenience," according to contemporary press reports.

"That was our biggest win," Aoki said.

The company's latest battle began last November when MK tried to expand its taxi business into Nagoya, the nation's fourth largest city.

The transport bureau turned down the application in May but MK immediately applied again -- this time to operate 25 cabs for free, in protest at the refusal and to promote its brand, which is not well-known beyond its Kyoto base where it operates 600 of its 775 vehicles.

The bureau again turned down the request because "the free service would cause confusion among passengers," bureau official Kazuhisa Sasaki said.

But the Nagoya District Court ruled on Oct. 29 that the bureau's rejection was illegal. It reversed the decision on the grounds that the promotional offer -- for 25 taxis to provide a free service up to a ?1,500 fare until next February -- fell under the category of free business designated under the road transport law, Kyodo News agency reported.

"We can't tolerate the government's one-sided interpretation of the law," Aoki said. "It used to be the government's interpretation was what stood, but that's changing now. It's the people's law now."

Japan's Fair Trade Commission has said for years that the ministry's fare restraints were not based on law and should be abolished as an affront to fair competition, Toshihiro Hara, a senior FTC official said.

He dismissed suggestions MK's limited promotional free taxi service in Nagoya would hurt its competitors.

"If they were trying to steal existing passengers from other companies and put others out of business, then that would be a violation of the Anti-Monopoly Law," Hara said. "But in MK Taxi's case, they only have 25 taxis [in Nagoya], and with Nagoya's [2.2 million] population, you can't imagine a situation where they could steal all the customers and put others out of business."

He added: "Until now, the regulations have made it very difficult to break into the taxi business. The Fair Trade Commission has always felt that those regulations should be changed."

"Why should they be scared of us?" Aoki asked, referring to his competitors. "It's called competition, and if they wanted to, they could do the same."

Aoki's message is finally being heard around Japan, which is trying to dig itself out of a decade-long economic slump partly blamed on the regulatory maze that hampers competition and stifles innovation.

The owner of what is now a 3,500-employee company with an annual turnover of more than ?12 billion (US$100 million) is preaching his competitive credo to bankers and company bosses once a week -- for a fee of ?300,000.

Starting after next February's deregulation, MK plans to increase the number of taxis it operates to some 6,000 in Japan's six biggest cities and is considering lowering fares another 10 to 15 percent, Aoki said.

"From now on, you're going to see taxi service get better," he said.

"We're entering the age of competition, and the companies that don't improve will be weeded out."
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