Didi reported to be facing series penalties from China after IPO push through

The Chinese government is considering handing Didi Chuxing serious penalties after its initial public offering (IPO) in the US last month, while the authority is reportedly weighing a range of potential punishments already, according to a report from Reuters. 

Reuters reported that Didi Chuxing's decision to launch its IPO in the US market despite pushback from the Cyberspace Administration of China (CAC) was viewed as a challenge to Beijing's authority, the report quoted sources from Bloomberg. Currently, regulators in China are considering a range of potential punishments, including a fine, which is likely bigger than Alibaba's record of US$2.8 billion earlier this year, suspension of certain operations, introduction of a state-owned investor for Didi Chuxing, and even delisting or withdrawal of Didi’s US shares.

The news caused it's stock price to drop significantly. It closed at US$10.2 a share, down 11.3% on Thursday. It shares have dropped about 25% since its debut on 30 June when it started trading at US$14 a share.

Last week, officials from seven Chinese government departments, including the Cyberspace Administration of China (CAC), the Ministry of Public Security, the Ministry of State Security, the Ministry of Natural Resources, the Ministry of Transport, the State Taxation Administration, and the State Administration for Market Regulation, visited the company's offices to conduct a cybersecurity review. Prior to that, the Cyberspace Administration of China said that Didi had illegally collected users’ data.

Earlier this month, China asked Didi Chuxing to remove from app stores due to serious violations on Didi Global's collection and usage of personal information. The CAC announced the ban on 4 July, just two days after the regulator said it was starting a cybersecurity review of the company. However, currents users downloaded that app before that day can still continue to order rides and other services.

The authority said that it ordered Didi Chuxing to rectify its problems following legal requirements and national standards, and take steps to protect the personal information of its users. On the same day, Didi Chuxing said it had halted new user registrations as of 3 July and was now working to rectify its app in accordance with regulatory requirements.

Apart from this, the company suffered from another heavy blow from the Chinese government as 25 apps operated by the Didi Chuxing in China, including the apps used by users and drivers, had the problem of collecting personal information in serious violation of relevant laws and regulations. It expected that the app takedown may have an adverse impact on its revenue in China.

Previously, the State Administration for Market Regulation said that Alibaba's "choice of two" behaviour "eliminates and restricts competition" in China's eCommerce market and "hinders the free circulation of commodity services and resource elements". It added that this also "affects the innovation and development of the platform economy".

The company was fined with US$2.8 billion imposed by China's State Administration for Market Regulation in April. After that, Alibaba said it would operate in accordance with the law and continue to strengthen compliance systems and build on growth through innovation.

Related articles
Didi Chuxing's app removed from app stores after IPO
China's market regulator reportedly hits Didi Chuxing with anti-trust probe amidst IPO-filing