Chinese Officials Fine Digital Platforms Like Didi Over Unapproved Deals

Didi, Tencent and Alibaba are among Chinese digital companies being fined by China’s official market regulator — the State Administration of Market Regulation (SAMR) — over merger and acquisition deals, Reuters reported on Wednesday (July 7).

The companies were fined 500,000 yuan per incident for neglecting to get approval in 22 deals, which is in violation of China’s anti-monopoly laws. Eight Didi subsidiaries were caught up in the investigation. Other digital companies levied with fines included Beijing Sankuai Technology and Suning.com.

By way of example, one of Didi’s units was established as a joint venture company with China FAW Group Corporation. The 2018 transaction was completed before the transaction was cleared by antitrust authorities.

In a related issue, ride-hailing giant Didi saw share prices decline on its upcoming public offering on the New York Stock Exchange (NYSE) following the removal of its presence from app stores in China.

China is upping the oversight of companies that are seeking a public listing in the U.S. and those that are already listed. New guidelines have been instituted that cover the flow of data and security cross-border, including additional “confidential information management.” 

David Roche, president and global strategist at Independent Strategist, indicated that it’s a risky endeavor to own stock in Chinese technology companies due to the geopolitical landscape. 

China’s investigation into Didi comes as the company is readying its initial public offering (IPO), expected to be the biggest in the U.S. The move is part of an overall crackdown on digital firms in the country. In Didi’s case, SAMR intends to figure out if Didi unfairly squeezed out smaller competitors.

Didi’s public filing documents filed with the Securities and Exchange Commission (SEC) indicated that the company has 493 million active users annually with about 15 million annual active drivers and 41 million average daily transactions.