China Said to Plan $1 Billion Antitrust Fine for Meituan

(Bloomberg) -- China plans to levy a roughly $1 billion fine on Meituan for abusing its market position as antitrust regulators wrap up a four-month-old investigation into the food delivery giant, according to a person with knowledge of the matter.

The State Administration for Market Regulation could announce the penalty in coming weeks and the figure could still change ahead of the final decision, the person said, asking not to be identified discussing private deliberations. The company will be required to revamp its operations and end its exclusivity arrangements with merchants known as “pick one from two,” the person added. The Wall Street Journal earlier reported the potential fine.

Meituan representatives didn’t immediately respond to requests for comment. The antitrust watchdog had announced an investigation into the company in April, weeks after slapping a record $2.8 billion fine on fellow internet giant Alibaba Group Holding Ltd. for abusing its market dominance. Since then, the tech crackdown has extended to other aspects of the industry, including the launch of a cybersecurity investigation into fellow giant Didi Global Inc. days after the firm’s blockbuster U.S. listing.

In July, authorities posted regulations ordering China’s online food platforms -- of which Meituan is the largest -- to ensure workers earn at least the local minimum wage while the internet industry regulator announced a six-month campaign to root out illegal online behavior, further exacerbating a sell-off in tech shares that began with a wide-ranging crackdown on online education.

Nomura analysts Jialong Shi and Thomas Shen had previously estimated Meituan will have to fork over 4.6 billion yuan ($711 million), based on the Alibaba’s punishment, which was roughly 4% of the larger firm’s 2019 sales. Under antitrust laws, Meituan could have faced a penalty of as much as 10% of its revenue if it’s found to have violated regulations.

Meituan has lost more than half of its value since reaching a peak in February, dragged down by concern over increasing oversight and after the company forecast continued losses because of its investments in new businesses like online groceries. Founded by 42-year old billionaire Wang Xing, the company has long been criticized by rivals and merchants for alleged excesses like forced exclusive arrangements.

The firm, which competes against Alibaba’s Ele.me in food delivery, had previously been found guilty of unfair competition in at least two legal cases this year and ordered to pay compensation, local media has reported. The corporation had also rejected allegations that it charged onerous commissions to restaurants during the Covid-19 outbreak last year.

Alongside Ele.me, Meituan also faced an online backlash after several delivery riders were killed or injured while trying to meet strict deadlines. It was among a handful of operators fined by the antitrust watchdog in March for giving improper subsidies to expand in the red-hot arena of community e-commerce. The Shanghai Consumer Council criticized Meituan in May for practices that hurt consumers’ rights, including problems with refunds and misleading content on its mobile app.

Rules announced by the SAMR on July 26 required food delivery platforms to improve workers’ working conditions, including optimizing routes, setting reasonable delivery times and enabling the drivers to participate in social security. Even before the new guidelines, executives have outlined plans to work with regulators and improve compliance standards, as well as provide insurance for millions of its delivery drivers.

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