China fines Meituan $ 530 million in second tech antitrust case

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China fined food delivery giant Meituan $ 530 million on Friday for violating antitrust rules, the second major sanction this year in Beijing’s efforts to bring the nation’s big internet companies under control.

The government’s campaign has been blessed by the highest levels of the Communist Party leadership. He has involved a wide range of regulatory agencies and decision-making bodies. And it has wiped out hundreds of billions of dollars in wealth for the shareholders of some of the most successful tech companies in China and the world.

Like regulators and politicians in the United States and Europe, Chinese leaders have watched with concern as Internet companies gain ever greater influence over commerce, society and daily life. They want to ensure that these companies do not use their power to gain unfair advantages over their competitors or to exploit captive consumers.

But Beijing can act with a speed and determination Western officials can hardly imagine, toppling businesses and industries in a few quick strokes.

Investors are still waiting to hear about the fate of another of China’s most valuable internet companies, ride-sharing giant Didi. Days after Didi listed its shares on the New York Stock Exchange at the end of June, Chinese regulators ordered the company to stop registering new users and removed its apps from mobile stores, citing cybersecurity concerns and confidentiality.

In a statement posted on Chinese social media, Meituan said he would accept the sanction “with sincerity” and “take this lesson to heart.”

Chinese leader Xi Jinping has rocked the business world this year with a far-reaching campaign to strengthen state control over the economy. The Communist Party wants to curb business activities it considers unfair or corrupt and push entrepreneurs and tycoons to share their wealth more with the rest of society.

Beijing’s first major antitrust sanction against a tech company was imposed in April on Alibaba, the e-commerce titan co-founded by Jack Ma, one of the richest people in the world. The government’s market watchdog, the State Administration for Market Regulation, fined Alibaba $ 2.8 billion for preventing traders from its shopping sites from selling on other platforms.

That amount – a record fine for violating China’s antimonopoly law – represented 4% of Alibaba’s domestic sales in 2019.

On Friday, the same agency fined Meituan for similar anti-competitive practices, namely using exclusivity deals to prevent restaurants from offering take-out on other platforms.

The penalty imposed by the regulator on Meituan represents just 3% of the company’s sales in China last year. But the agency also ordered Meituan to reimburse more than 1.6 million restaurants and other merchants for down payments they made as part of their exclusivity agreements with the platform. The regulator said if a restaurant violates the agreement, Meituan will demand the right to deduct from the bond.

These refunds total around $ 200 million, the regulator said. This is the equivalent of just over 1% of Meituan’s sales in 2020.

Meituan was founded in 2010 as a Groupon-like service for purchasing vouchers from local merchants. Mr. Wang previously started and managed two social media sites. More than 510 million people used Meituan’s platform last year to order take out and groceries and book hotels and travel.

Earlier this year, the Chinese market watchdog penalized Meituan and four other “group buying” sites, where people join friends to place bulk orders for groceries and other products. By burning money to sell goods at a lower price, the platforms had harmed small retailers and “violated the normal order of market prices,” the agency said. Meituan was fined approximately $ 230,000.

In July, national regulators ordered food delivery companies to ensure their drivers earned at least the local minimum wage. In metropolises like Beijing, Shanghai and Guangzhou, the minimum wage is around $ 300 to $ 400 per month.

Investors have been on edge about further government action. In May, Meituan founder and CEO Wang Xing posted on social media a centuries-old Chinese poem about a powerful emperor who fails to anticipate the threats that will eventually overthrow him. Amid Beijing’s technological crackdown, it looked like a veiled shot at the government. Meituan’s stock, which trades in Hong Kong, plunged.

Mr. Wang later explained, in another social media post, that he pondered the poem as he envisioned how the biggest challengers of successful companies might come out of nowhere.

Soon after, Mr. Wang donated a block of Meituan shares to his charitable foundation. Several Chinese tech moguls have recently felt the lure of philanthropy – a way, perhaps, to deflect growing skepticism about their wealth and power. Others have given up high-level positions or are keeping a low profile.

Colin Huang, founder of e-commerce giant Pinduoduo, pledged $ 100 million for scientific research through his foundation in March, a day after he stepped down as chairman of the company. In June, Zhang Yiming, the founder of TikTok’s parent company, ByteDance, spent $ 77 million on education in his hometown in Fujian Province. It was shortly after Mr. Zhang announced that he would be stepping down as managing director of ByteDance to focus on long-term strategy.

Albee zhang contributed research.


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