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China Tells Meituan, Didi, and Other On-Demand Transport Companies to Curb Antitrust Violations

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A Didi Chuxing autonomous taxi during a pilot test drive on the streets in Shanghai.

Hector Retamal/AFP/Getty Images

China’s summoning of tech-industry giants over alleged bad behavior continues, this time with transport-related firms including ride-hail leader Didi Chuxing and food courier Meituan among the targets.

The move on Friday is the latest in a string of meetings or investigations in which regulators have called tech firms to government offices to warn them of violations ranging from monopolistic practices to poor treatment of workers.

Multiple high-level state agencies led by the Ministry of Transport criticized Didi, Meituan (ticker: 3690: Hong Kong), and eight other transport-related companies for unfair pricing, violating drivers’ rights, and monopolizing freight data, among other infringements.

The news was originally reported by China Transportation News, which is run by the Ministry of Transport.

Broadly, the move appears to widen the government’s campaign to lasso what it deems unruly corporate behavior. But in particular, it may augur poorly for Meituan, which was among a previous group targeted last month, and soon after fell under investigation for alleged monopolistic practices. Meituan said it is cooperating with that investigation.

The eight other companies summoned were ride-hail firms Shouqi Yueche, Caocao Chuxing, Dida Chuxing, and T3 Mobile Travel Services, the latter of which was founded by three of China’s largest auto makers and has backing from Alibaba Group Holding (BABA.NYSE) and Tencent (700.Hong Kong); mapping and navigation firm AutoNavi, or Gaode, which was acquired by Alibaba in 2014 and itself has ventured into ride-hailing; on-demand freight transporters Huolala and Kuaigou; and Full Truck Alliance, which Bloomberg said in February had confidentially filed for a U.S. IPO that could fetch up to $1 billion, but which the company denied.

None of the companies responded to Barron’s requests for comment .

A previous group of firms summoned last month focused more on payment and e-commerce platforms. On April 29, China’s central bank led a group of top government agencies in looking at 13 leading financial technology companies to warn them against monopolistic practices and poor corporate governance, the People’s Bank of China said in an official statement after those meetings.

Those firms included Tencent, which runs the ubiquitous payment and lifestyle app WeChat; ByteDance, which owns the popular video app TikTok; as well as the finance arms of Meituan, Didi, search engine Baidu (BIDU); e-commerce giant JD.com (JD), and travel-booking platform Trip.com Group (TCOM), formerly known as Ctrip.

Weeks later, China’s market regulator announced the imposition of fines on 12 of the companies.

The whirlwind of corporate sit-downs comes after President Xi Jinping late last year reportedly personally halted the IPO of Jack Ma’s Ant Group, which was set to be the world’s largest public listing ever, and regulators last month slapped a record $2.8 billion fine on Ant’s former parent company, Alibaba, for what officials said was abuse of its market dominance.

Friday’s meetings “concentrated on the high use of online car-hailing platforms, their nontransparent allocation mechanisms, arbitrary adjustment of pricing rules, the monopoly of freight information by on-demand transport platforms, the maliciously lowering of freight rates, arbitrary increasing of membership fees, and alleged infringing on the legitimate rights and interests of employees,” wrote official state-run news outlet Xinhua.

“The meetings require that each company face up to its own problems, earnestly implement the main responsibility of their enterprises, and immediately carry out rectification,” Xinhua said.

Wendy Ng, senior lecturer and director of the Competition Law and Economics Network at the Melbourne Law School, told Barron’s: “This new slate of antitrust investigations focusing on ride-hailing and delivery is interesting because workers’ rights (such as their working conditions and pay) have also become part of the narrative.”

One development to watch for is whether regulators scrutinize the data practices of digital platforms, “especially as this is where competition law overlaps with other areas such as cybersecurity and privacy, and the Chinese government also has a keen interest in getting control over the massive amounts of data that digital platforms have,” Ng said.

Didi recently began working with the U.S. Securities and Exchange Commission toward an IPO on the New York Stock Exchange, several news outlets have reported, citing sources familiar with the matter. The company is reportedly eyeing a valuation of up to $100 billion.

Shares of Hong Kong-listed Meituan fell after news of the Friday meetings, but bounced back sharply Monday, closing up 4.2%.

Tanner Brown covers China for Barron’s and eLesor.