SoftBank-backed Didi had enjoyed absolute dominance in China's ride-hailing market after it ousted most domestic players years ago in a brutal price war and acquired Uber's China business in 2016 until July of 2021, when China's cyberspace regulator blocked the company from signing up new customers and drivers, and removed most of its programs from mobile app stores. The company effectively controls 90% of the massive ride-sharing business sector in China, and competitors saw an opening.
Rival providers, including Meituan and T3, scrambled to take advantage. One employee of T3 posted on Maimai (a Chinese version of LinkedIn): "In the face of the rare growth opportunity, we've decided to adjust our strategy after an urgent management meeting ... We are now planning to enter 15 cities within this month and achieve a daily transaction volume of more than a million".
Barely a month later, Chinese regulators are reacting in alarm to a swarm of recruitment activities across the providers that have pushed the bounds of ethics and legality: "These platforms should check their own problems, rectify illegal behavior, safeguard market orders of fair competition, and create a sound environment for the healthy development of the ride-hailing industry," the Ministry of Transport said.
Summoning the 11 largest providers, the government demanded that they cease “disorderly expansion” and “vicious competition” tactics, and have focused particularly on the companies' recruitment tactics.
"The interview pointed out that recently, some platform companies have adopted a variety of marketing methods, vicious competition, and recruited or induced unlicensed drivers and vehicles to 'bring cars to join' to carry out illegal operations, disrupt the fair competition market order, and affect the safety and stability of the industry," the department said in the statement, translated from the original Chinese.
The authorities stressed the fact that all platforms should make sure they have the necessary approvals for cars and drivers. Firms should not hire drivers through fake promotions or transfer any business risks to drivers.
They also added that drivers should also have enough rest time and companies should reduce the commission they take from each ride.
Didi has been on a rollercoaster ride for the last 3 months. In June Didi raised USD 4.4 billion in a behemoth US IPO. Two days after the IPO, China's cybersecurity regulator announced an investigation into the company. Then, less than a week after Didi went public on the New York Stock Exchange, the regulator asked app stores in China to remove Didi's app.
As Chinese President Xi Jinping pushes the idea of “common prosperity” - a bid to support moderate wealth for all - workers rights, particularly in the technology industry and gig economy have come under scrutiny.
Didi and Chinese e-commerce giant JD.com set up unions for their workers, according to Reuters. That’s a big move given organized labor is very rare in China.