China has imposed a heavy fine on its ride-hailing giant Didi Chuxing without a legal basis.
According to SecretChina, the Cyberspace Administration of China issued a huge fine of more than $1.2 billion (8 billion yuan) to Didi.
After a yearlong investigation into Didi, the administration claimed that it found conclusive evidence against the company. Apparently, Didi violated China’s cyber security laws, data security law, personal information protection law, and other laws and regulations.
Didi has still not turned a profit. Based on the company’s cash flow of less than $7.44 billion, (50 billion yuan), the 8 billion yuan fine is not a small number.
In April 2021, Chinese authorities slammed a fine of $2.7 billion (18.2 billion yuan) on e-commerce giant Alibaba, which set a record for a penalty. That number was equivalent to about 4% of Alibaba’s sales revenue in mainland China in 2019.
In comparison, Didi’s fine represents more than 5% of its revenue.
In addition, Didi founder Cheng Wei and President Liu Qing each received a fine of about $150,000 or 1 million yuan. This amount may not be a big number, but the fine itself is extremely insulting.
Didi came under the Chinese authorities’ scrutiny after the company listed its shares on the U.S. stock exchange last year. Its listing angered the communist regime that worried about national security, because listing abroad meant those companies must follow information disclosures required by other countries’ regulators.
Soon after, the regime announced a crackdown on all companies listed abroad, forcing Didi to announce last December that it would delist from the U.S. market.
The apparent reason for Didi’s penalty is the national security issue of big data, especially the loopholes in the protection of personal information.
Chinese authorities claimed that Didi collected information without the consent of users, and that “the circumstances are serious and the nature is bad.”
But Didi’s sky-high fine is untenable.
A mouthpiece for the Chinese Communist Party interpreted Didi’s fines as a lawful punishment on Didi would allow internet companies to achieve longer-term development in the standardization.
Didi was punished after July 2021. But two key laws used to penalize Didi came into effect after the start of the investigation into the company. The Personal Information Protection Law was passed by the Chinese congress in August 2021 and came into force in November of that year. The Data Security Law came into effect in September 2021.
It is reasonable to say that the authorities had no grounds to punish Didi.
However, the Chinese Communist Party rarely abides by the rules, and Didi has struggled for a year but it could not escape the sky-high fine.
Didi went public last year at the time the authorities were calling on U.S.-listed companies to return to the Hong Kong stock exchange. Didi’s actions amounted to a slap in the face to the communist regime.
But according to SecretChina, the key reason why Didi was punished so heavily is that the CCP can’t tolerate a monopoly power outside its system.