Food Delivery Giant Meituan Fined $534 Million For Violating Antitrust Law

Chinese regulators fined food delivery giant Meituan 3.44 billion yuan ($534 million) for violating the country’s anti-monopoly regulations, the latest fine in Beijing’s campaign to clampdown on the country’s internet companies.

The State Administration for Market Regulation levied the fine, which equates to 3% of the company’s domestic revenue for 2020 because it had been engaging in antitrust practices known as “er xuan yi,” which means choose one out of two, since 2018, according to a statement issued by the regulator on Friday.

Meituan forced merchants to do business exclusively on its platform by asking for deposits and charging different rates, SAMR said. Regulators also ordered the company to return 1.3 billion yuan in deposits to merchants that were charged to guarantee they wouldn’t use rival platforms.

A company spokesperson said Meituan would comply and accept the fine “with sincerity.”

“Meituan will take this lesson to heart, operate in accordance with the law, and consciously work to ensure fair competition in the industries we operate in,” the spokesperson said in an emailed statement.

Ke Yan, head of research at Singapore-based DZT Research, said the amount was within expectations. Chinese e-commerce giant Alibaba had been hit with a record fine of $2.8 billion in April, which is about 4% of its 2019 domestic revenues. Meituan’s fine removes a key overhang for investors and allows the company to move forward, Ke said.

Still, it comes at a time when the company is faced with deepening losses from investments in various new businesses, such as grocery delivery and community group-buying. Meituan said it lost 3.4 billion yuan for the quarter ended June 30—marking its third straight quarter of losing money—compared to a profit of 2.2 billion yuan for the same period a year ago.

In the meantime, the company’s billionaire founder Wang Xing has vowed to improve the working conditions of its delivery riders. The company was told in July to ensure its workers are paid above minimum wage, get basic social insurance and a relaxation in delivery deadlines. China has launched a slew of regulatory actions against Meituan and others to tighten its grip over the country’s long free-running internet sector. President Xi Jinping also plans to achieve “common prosperity” by helping low-income communities and reducing the widening wealth gap.