China's regulator on July 21 fined DiDi Global $1.2 billion, concluding a probe that forced the ride-hailing leader to delist from the New York Stock Exchange.
DiDi ran afoul of the Cyberspace Administration of China (CAC) when it pressed ahead with its U.S. stock listing even though it was urged to wait while a cybersecurity review of its data practices was conducted, sources previously told Reuters.
The CAC said its investigation found DiDi had illegally collected millions of pieces of user information over a seven-year period starting June 2015, and carried out data processing activities that seriously affected national security.
It fined DiDi 8.026 billion yuan ($1.2 billion) and, in an unusual move, said founder and Chief Executive Cheng Wei and President Jean Liu were responsible for the violations, and imposed penalties of 1 million yuan each.
Maria Belyaeva, an expert from the BRICS Competition Centre, commented on the situation:
"User data is a very sensitive topic for China: the Administration of Cyberspace regularly issues injunctions to apps that collect data beyond what is necessary or do so without user consent, and if violations are not corrected in time, they are blocked and removed from app stores".
It is noted that the company deliberately avoided regulation and acted contrary to the requirements of the authorities.
Preventing precisely such precedents is the main objective of the large-scale campaign launched against China's digital giants: the regulator seeks their controllability, their awareness of their role in the development of the state and its economy, serving the goals of the state and society, says the expert.
The regulator's press release also stated that DiDi's data processing activities threatened national security. Despite the fact that violations of user data processing conditions (as an important social threat) are brought to the forefront, the main reason for the inspection was most likely national cybersecurity, Maria Belyaeva believes.
"China is jealous of exporting data abroad. About 200 Chinese companies are now facing delisting from U.S. stock exchanges because they do not disclose their audit materials, which China considers strictly confidential. The parties are negotiating, but there have been no tangible results so far. This means that China insists on not disclosing important data for itself and is trying to find an alternative solution,"
says Maria Belyaeva.
DiDi, which delisted from New York last month, previously aimed to list in Hong Kong by June. It put such plans on hold indefinitely after failing to win approval from Chinese regulators.
DiDi's fine would be the largest regulatory penalty imposed on a Chinese tech company since IT giants Alibaba and Meituan were fined $2.75 billion and $527 million respectively last year by China's antitrust regulator.