The Seoul Central District Prosecutors’ Office on Wednesday indicted Uber Korea’s chief executive Travis Kalanick and the head of MK Korea ― a rental car business that is partnering with Uber ― on the grounds that Uber’s ride-hailing service is illegal.

The prosecution’s decision to press charges against Uber Technologies is further fueling a controversy over the ride-sharing service in South Korea.

The prosecution said in the indictment that the California-based firm and its local partner breached local transportation laws that bar rental businesses from using their rental vehicles for transport businesses. Those violating these laws are subject to a maximum of two years in prison or a fine of up to 20 million won ($18,000).

“The prosecution judged that Uber utilized rental cars and private vehicles for operating a commercial transportation business, which goes against related local laws,” an official from the prosecutors’ office was quoted as saying by the local news media.

According to the prosecutors’ office, through a partnership deal with MK Korea struck in August last year, Uber took a 20 percent commission from the rental car company for connecting drivers with customers.

In a statement released after the indictment, Uber said that the app was legitimate. However, it also said it respected the Korean legal system and that it would fully cooperate with the authorities.

“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.

The company also asked the Korean courts to “uphold a fair and sensible judgment on the case.”

The prosecution’s indictment came on the heels of the passage of an ordinance at the Seoul City Council last week, which will allow the authorities to fine Uber drivers up to 1 million won from January 2015.

Since its launch last year, Uber has been pressed by the Seoul City government and taxi associations to end its ride-booking service in the local market.

They argue that the Uber app is illegal on the grounds that the Uber services not only breach transportation laws, but also put the public at risk due to the lack of thorough screening processes for Uber drivers.

The Seoul City government also recently announced a plan to team up with mobile messenger operator Daum Kakao to launch a taxi-hailing service for Seoul taxi firms.

Some market watchers have expressed concerns that the city government’s moves to prevent Uber from operating in the city could hamper the growth of budding start-ups and the birth of innovative technologies.

Baidu, the largest search engine in China, has reportedly invested around $600 million in Uber to expand the market for taxi-hailing businesses, posing challenges for its rivals Alibaba and Tencent.

The latter two Chinese firms have made investments in the local car-sharing apps Kuaidi Dache and Didi Dache, respectively.

By Kim Young-won (wone0102@heraldcorp.com)