It’s one of the biggest tech deals in China’s history, and now it’s being investigated by the country’s antitrust authorities.
China’s commence ministry has launched an investigation into Didi Chuxing’s milestone acquisition of Uber, because the Chinese ride-hailing company failed to declare the transaction.
The recent deal bring’s Didi’s total value to approximately $36 billion USD, however they failed to declare the deal to antitrust authorities because their revenue is below the threshold required for a review, the Wall Street Journal first reported.
It highlights the challenging regulatory space that tech companies occupy. Like Uber, Didi has been engaged in an aggressive campaign to increase their market share by massively subsidizing ride prices, so much so that neither company has turned a profit.
The tactic proved successful for Didi which eventually outpaced Uber to win the market through the acquisition. The resulting company’s high valuation and low revenue pose a complex question for regulators.
It’s not the first time the ride-hailing model has attracted regulatory attention in China. Until July, ride hailing was not officially legal in the country, creating uncertainty for companies like Uber and Didi who were attracting billions from investors, including state-backed institutions.
The latest antitrust review could potentially set a precedent for assessing companies in the fast-growing on-demand sector in China, including AirBNB-style startups and food delivery startups (of which there are many).
While the Didi-Uber deal is still expected to go through, the structure of the resulting company will be scrutinized by China’s Ministry Commerce. The ministry’s antitrust unit has already held two meetings with Didi officials, according to a ministry spokesperson.