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The Next Big Thing

Chinese transport officials raid Uber’s Guangzhou office in smartphone taxi-app crackdown

Legal status of private car services in doubt since ban on use of taxi-hailing apps in January, but Uber says working with vehicle-rental firms means it can still operate

PUBLISHED : Friday, 01 May, 2015, 5:20pm
UPDATED : Monday, 17 August, 2015, 10:16am

Authorities have raided the offices of Uber in the city of Guangzhou as the transport authority said it had started a crackdown on web-connected private-car taxi companies allegedly offering illicit services, mainland media reported.

The legal status of such services has been in doubt since the national transport authority banned taxi-hailing apps in January, but Thursday’s move appears to be the first time the ban against such services has been enforced.

Officials from the city’s transport, public security and industry and commerce bureaus raided Uber’s office over claims that was organising an illegal taxi service, the Guangzhou Daily reported, citing a statement released on Thursday night by Guangzhou Municipal Transport Commission.

The commission’s statement said the authorities suspected that the company, which has its headquarters in San Francisco, in the US, did not have the necessary business registration.

“The authorities ... seized relevant operational tools, including mobile phones and other terminals,” it said. “The investigation is ongoing.”

Pictures of the raid published online show uniformed officers apparently inside Uber’s office, seizing cartons full of mobile phones.

The statement also said the commission had investigated more than one case of smartphone apps being used to carry out illegal taxi operations, and those found guilty had been fined 30,000 yuan (HK$38,000).

The Ministry of Transport had said repeatedly that such companies were required to adhere to regulations and that private cars were forbidden from taking part in such businesses, the commission said.

“As long as private cars offer booking services, they are suspected of being illegal, and the transport authorities will enforce the law,” it said.

In January, the Ministry of Transport banned taxi-hailing apps being used by car drivers that did not have taxi licences in an attempt to regulate the rapidly expanding sector.

Since then, the status of web-connected private car taxi companies, including Uber, Didi Dache and Kuaidi Dache has been uncertain.

Uber said its strategy of working with vehicle-rental companies in China, instead of individual car owners, had allowed it to continue its operations after the government ban on unlicensed private-car hire.

Guangzhou’s transport authority also said in yesterday’s statement that it had agreed that traditional taxis could no longer satisfy people’s needs and that the city’s government had been studying an idea to offer its own internet car-booking services. It said it had discussed the idea with internet companies.

Uber’s troubles in Guangzhou are the latest in a string of legal obstacles it has faced in countries around the world, including India, Spain, Thailand and in its home state of California.

In December, Chongqing police raided a training session organised by Uber which had been attended by more than 20 drivers.

Problems have occurred with taxi services using such apps, including concerns that the exact responsibilities of the operators were unclear, that the safety and legal rights of passengers were not protected, and that their use had led to unfair competition.

Uber, whose investors include the Chinese web services company, Baidu, operates in seven other mainland cities besides Guangzhou and Chongqing – Beijing, Shanghai, Tianjin, Shenzhen, Wuhan, Chengdu and Hangzhou .

It offers four levels of service, including the cheap ride-sharing “Uber Peoples” and the luxury “Uber Black”.

The private car-booking market is dominated by Kuaidi Dache and Didi Dache, which agreed to merge in a US$6 billion deal in February and now control more than 90 per cent of the market.

Prior to the merger, Didi was backed by Tencent, DST Global, GGV Capital, and Temasek Holdings. Kuaidi had backing from SoftBank, Tiger Global Management, and Alibaba Group.

A spokesman for Uber said on Friday that its services remained operational.

It said it aimed to offer more alternative means of transport to ease traffic congestion and air pollution in cities, and would continue to cooperate with the relevant authorities.