Internet & Tech

Who’s next?

Meituan hit with antitrust probe days after its $10 billion fundraising


Meituan: next in line for a fine?

Meituan’s boss Wang Xing has personal experience of the ‘pick-one-out-of-two’ tactics now being targeted by China’s antitrust regulators. The current campaign is part of a clampdown on internet companies that have demanded exclusivity from merchants on their platforms. Alibaba has just been given a record Rmb18.2 billion ($2.8 billion) fine for the practice by the State Administration for Market Regulation (SAMR). But Wang was presented with a slightly different version of the choice when Meituan was a much smaller player in its sector. Would he choose Alibaba or Tencent as Meituan’s senior investor?

Wang picked Tencent, primarily because he didn’t want Alipay as Meituan’s only payment gateway, says news portal Huxiu. Of course, since then Meituan has become an internet heavyweight in its own right and its rift with Alibaba has been much discussed in the media (see WiC498).

Still, there was no gloating from Wang when his rival fell foul of SAMR this month. Perhaps that was because he was preparing for a similar fate. Meituan was one of 34 peers in the internet sector that pledged this month to comply with SAMR rules and news broke this week that regulators are now formally investigating it for it own “pick-one-out-of-two” tactics.

Meituan has been coping with bad press for quite a while. High-pressure working conditions for millions of drivers on its food delivery platform have been much discussed in the media and online. The debate was still raging this week after an official at the Beijing municipal government reported back on a single day’s work going undercover as a deliveryman, where he earned just Rmb41 ($6.32) for a 12-hour shift. On Wednesday Meituan responded, saying that it was reviewing how to improve to working conditions, including giving its delivery people extra holidays.

Probably worse in the current context, the company also has a history of being taken to task for anti-competitive behaviour. In 2017 the local government in Jinhua, a major city in Zhejiang province, fined it for pressuring restaurant owners to sign contracts forbidding them from cooperating with rival platforms, including Alibaba’s Eateries that agreed to the terms were charged lower commissions on food orders and granted higher positions in Meituan’s recommendation rankings.

According to, this was not an isolated case. After a similar complaint by, a court in Jiangsu ordered Meituan to pay Rmb352,000 to its Alibaba-backed rival in compensation.

So it seemed like more of a fait accompli when Meituan announced that it was also being investigated by SAMR this week.

The fine imposed this month on Alibaba for similar behaviour was apportioned at 4% of its sales in 2019. By law, companies in China can be fined between 1% and 10% of annual revenues for antitrust violations. So the full extent of the punishment could cost Meituan as much as Rmb11.5 billion (10% of 2020 sales), Sohu Finance estimated. However, the consensus in the media is that Meituan isn’t likely to be punished quite as severely and will probably pay a lower fine than Alibaba because of its smaller operational scale.

That would be a relief for company bosses as Meituan has a weaker cash position than the more established internet titans Tencent and Alibaba. In December it reported Rmb17 billion in cash and equivalents, compared with Alibaba’s $70 billion, for instance. Core businesses such as food delivery and community group buying also demand continuing cash commitments (often in the form of subsidies to entice customers).

This helps to explain why Meituan raised $10 billion last week, through the sale of new shares and convertible bonds in Hong Kong.

The proceeds were almost twice the amount raised by its IPO – which occurred barely two years ago – with investors showing strong support for Meituan’s growth plans. However, some of these funds may now go towards paying the SAMR fine.

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