Chinese food delivery group Meituan fined ¥3.4 billion for monopolistic behaviour

Chinese food delivery group Meituan was fined ¥3.4 billion (US$530 million) for abusing its market position such as forcing restaurants to exclusively sell food on its app. 

The State Administration for Market Regulation (SAMR) said since 2018, Meituan had forced its merchants into exclusivity agreements by charging higher commissions to merchants who resisted and slowing down their approvals to list on its app. SAMR added that Meituan used deposits, algorithms and data to ensure restaurants remained loyal. A Financial Times report said from 2018 to 2020, Meituan took in RMB 1.3 billion in deposits from 1.6 million merchants to guarantee their compliance with the exclusivity agreements.

Over that period, Meituan grew its share of China’s total food delivery orders from 62.4% in 2018, to 64.3% in 2019 and 68.5% in 2020, According to SAMR. Meituan was ordered to return the deposit money to merchants.  However, the fine ¥3.4 billion, or 3% of the company’s revenue generated in China in 2020, was lower than expected and that of fellow tech company Alibaba as it was fined RMB 18.2 billion in April for similar antitrust abuses. SAMR said Meituan had quickly admitted its faults, cooperated with the probe and provided evidence to investigators. All of these were taken into account when deciding the size of the fine. Also, SAMR has ordered Meituan to comprehensively rectify its operations.

In a statement, the company's chairman Wang Xing said, "The company accepts this with sincerity and is determined to ensure compliance. The company will implement a comprehensive and in-depth self-rectification programme according to SAMR's decision and administrative guidance, and prohibit the 'pick-one-from-two' conduct. The company will also take this lesson to heart, operate in accordance with law, consciously maintain orderly fair competition, earnestly fulfill its responsibility to society, better obey and serve the socioeconomic development, and contribute more towards the high-quality development of the national economics."

Meanwhile, Meituan was also required to treat its delivery riders more fairly as it was accused of not paying them enough and offering them benefits.

The company will be required to report back on all the rectification actions it had taken within 15 days, and is required to continue filing reports on its compliance for the next three years.

Earlier this year, Alibaba was fined US$2.8 billion imposed by SAMR. The regulator said in a statement that since 2015, the group "has abused its dominant position in the market" and imposed a "Choose one out of two" requirement for its merchants. It also claimed that this had prohibited Alibaba's merchants from opening stores or participating in promotional activities on other rival platforms.

The investigation, which began last December, concluded that Alibaba's "choice of two" behaviour "eliminates and restricts competition" in China's eCommerce market and "hinders the free circulation of commodity services and resource elements", SAMR said. It added that this also "affects the innovation and development of the platform economy".

On the same day that Alibaba was hit with the fine, the company issued a statement saying that it "[accepts] the penalty with sincerity and will ensure [its] compliance with determination". It also expressed gratitude to the trust and patience that its merchants, consumers, partners and shareholders have given the company.

Recently, Tencent was ordered by SAMR to give up its exclusive music licensing rights. It has also been fined for unfair market practices in the online music market after acquiring China Music Corporation in 2016. In a statement, SAMR said after investigating the tech giant's activities in the online music broadcasting platform market in China and the acquisition of China Music five years ago, as Tencent currently owns more than 80% of exclusive music library resources, such dominance offers Tencent an advantage over its competitors while it is able to reach more exclusive deals with copyright holders as music copyright is the core asset. 

Photo Courtesy: 123rf

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