HONG KONG – China’s market regulator has launched an antitrust investigation into Didi Chuxing, said three people with knowledge of the matter, just as the rideshare giant is moving forward with what could be the largest initial public offering in the United States this year. .
The investigation, reported here for the first time, is the latest in a radical crackdown on China’s so-called “platform” companies, including Alibaba Group Holding Ltd and Tencent Holdings Ltd.
China’s market regulator, the State Administration for Market Regulation (SAMR), is investigating whether Didi used any competitive practices that unfairly eliminated smaller rivals, two of the three sources said.
The regulator is also examining whether the pricing mechanism used by Didi’s main ride-sharing business is transparent enough, the three sources said.
“We do not comment on unsubstantiated speculation from unidentified sources,” Didi said in an emailed statement. SAMR did not respond to requests for comment.
In her IPO prospectus released last week, Didi revealed that she and more than 30 other Chinese internet companies had met with regulators, including SAMR, in April. Regulators asked companies to conduct a “self-inspection” and submit compliance commitments, he said.
The companies were asked to identify and correct possible violations of antitrust, unfair competition, tax and related laws and regulations, Didi said in the filing.
Didi said it had completed the self-inspection and that “the relevant government authorities have carried out on-site inspections.”
He warned that regulatory bodies may not be satisfied with the results of the inspection and the company could be subject to possible penalties.
Two of the sources familiar with the situation said the market regulator’s investigation was in the initial stages and that the regulator had not yet provided detailed instructions to the company.
The impact of the investigation on the company’s IPO, which is expected to be the largest Chinese IPO in New York since Alibaba’s $ 25 billion float in 2014, remains to be seen.
One of the sources said Didi believed that pricing and unfair competition would be considered relatively minor offenses, which had given the company enough confidence to go ahead with plans for the IPO.
Didi is also highlighting its job creation for regulators, a key factor that could merit a more lenient attitude from Beijing, the source said.
The company now employs around 13 million active drivers annually in China, according to its prospectus.
In recent months, China has sought to curb the economic and social power of its once poorly regulated internet giants, a crackdown backed by President Xi Jinping. In April, SAMR imposed a $ 2.75 billion fine on Alibaba, a record for the agency.
In March, SAMR fined the registered company behind Didi’s group buying community platform, Chengxin Youxuan, 1.5 million yuan ($ 233,656) along with four other companies, citing “inappropriate pricing behavior.”
Didi, the world’s largest mobility technology platform, operates in 15 countries and has more than 493 million annual active users worldwide, according to its prospectus.
It achieved its dominant position in China’s online ride-sharing business after years-long subsidy wars with Alibaba-backed Kuaidi and Silicon Valley-based Uber’s China unit, which merged into Didi when investors they got tired of burning cash and demanded benefits.
In 2016, Uber Technologies Inc sold its operation to Didi in exchange for a 17.5% stake in the Chinese company, which also made a $ 1 billion investment in Uber.
The US firm currently owns a 12.8% stake in Didi, according to the Chinese company’s prospectus. Some of the largest technology investment firms in Asia, including SoftBank Group Corp, Alibaba and Tencent, have also invested in Didi.
In addition to carpooling, Didi operates different mobility-related businesses, including electric vehicle charging networks, fleet management, car manufacturing and autonomous driving.
($ 1 = 6.4197 Chinese renminbi yuan) (Report by Julie Zhu, Pei Li in Hong Kong and Beijing Newsroom; Additional report by Kane Wu; Edited by Sumeet Chatterjee and Stephen Coates)