MoT Asks Didi to Conduct Rectification for Price Increases

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MoT Asks Didi to Conduct Rectification for Price Increases

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The Ministry of Transport (MoT) held a meeting with ride-hailing giant Didi Chuxing on March 5, as reported by Caixin on the same day. Didi recently had adjusted its pricing system in some cities like Chengdu, where the firm raised prices at the passenger side while cutting payments to drivers, in order to make higher profits. Such a price adjustment caused strong dissatisfaction of drivers with many of them exiting, which made it difficult for passengers to get a service. At the meeting, MoT pointed out that Didi’s practices were lack of sufficient preparations, assessment, and communication, suspected of infringing the legitimate rights of drivers and consumers. The ministry ordered Didi to conduct rectification immediately and fulfill its social responsibilities, such as improving the income distribution system and adjusting the commission proportion.

Due to the impact of the COVID-19 pandemic, the order volume of Didi has not fully recovered up to now. In April 2020, Cheng Wei, CEO of Didi, said in the company’s strategy conference that Didi would achieve 100m daily service orders globally within three years and over 800m monthly active users (MAU) worldwide. To achieve the goals, over the last year, Didi expanded to several other businesses, such as the urban instant delivery and community group-buying services. Moreover, the firm launched a bargain-priced ride-hailing product called Huaxiaozhu in March 2020, trying to obtain more orders. However, as Huaxiaozhu depends on large subsidies from Didi, it is doubted whether the business model could continue without subsidies.

In addition, China Taxi Industry Alliance in December 2020 appealed to the State Administration for Market Regulation (SAMR) and MoT for continuous antitrust investigation on the Didi-Uber merger case in China, as well as Didi’s other monopolistic behaviors, like low-price strategies. For example, Didi has been distributing orders to unqualified cars and drivers, which resulted in administrative punishments by multiple cities, such as the combined RMB10m penalties imposed by the Shanghai transport department from July to September 2019. Notably, since its launch, Huaxiaozhu has received admonitions from traffic regulators in Tianjin, Nanjing, Qingdao, Hefei, and other places for unfair competition, and suspended local operations.