Meituan warned about rule violations as ride-hailing app launches in Shanghai

Authorities in Shanghai warn the technology giant about a range of pricing and advertising breaches as it tries to take on Didi Chuxing

PUBLISHED : Thursday, 22 March, 2018, 8:33am
UPDATED : Thursday, 22 March, 2018, 8:32am

It was hardly the ideal start.

No sooner had Meituan Dianping’s fleet of cars hit the roads of Shanghai on Wednesday than it was summoned by the authorities and told to rectify rule violations involving its new ride-hailing business.

One of the mainland’s most valuable technology companies, Meituan had been hoping to challenge the monopoly of ride-hailing giant Didi Chuxing by rolling out its own service in the most populated Chinese city.

But its favourable pricing policies and advertisements appear not only to have grabbed the attention of potential customers, but also that of the authorities.

Shanghai’s public transport, police, and pricing supervision authorities jointly summoned Meituan’s senior management on Wednesday, asking them to provide data on its vehicles and staff and to register immediately with a citywide ride-hailing supervision platform. Local regulations stipulate that all players in the ride-hailing business must make sure their vehicles and drivers are properly licensed and that their data system is connected with the industry supervision platform.

A joint statement said Meituan has been told to “set reasonable pricing” for its services, and must not employ “lower-than-cost” pricing policies to gain a competitive advantage. It must not accept tips, or “thank you fees” that add onto the prices, or show a user’s destination to a taxi driver in advance – a practice that can lead to drivers declining to pick up passengers travelling shorter distances.

References to “low pricing” are also not to appear in its advertisements, according to the statement.

Meituan said on Wednesday night that it attaches great importance to the guidance from the Shanghai authorities and will implement all the stated requirements.

Shanghai is the second city in which Meituan has offered its ride-hailing service. The Beijing-based firm, known as China’s answer to Yelp for its online-to-offline business model offering everything from restaurant reviews and food delivery to film ticketing and travel bookings, first forayed into the ride-hailing business in Nanjing in December.

Analysts said an increase in the number of challengers to Didi Chuxing could benefit consumers by giving them more options. Didi has been the dominant player in the mainland’s ride-hailing market since pushing Uber out of the country in 2016.

“It seems that a simple price war is discouraged by the authorities in Shanghai, and Meituan must think of smarter moves to attract and retain consumers, who are getting more and more sophisticated,” said Ye Han, a director at brand consultancy Kantar Consulting.

Subsidised prices may act as a short-term incentive for users and drivers, but ride-hailing companies must compete through better services too, she said.