Meituan Receives $533.8 Million Fine for Monopolistic Behavior in Online Food Delivery Service Market

meituan
(Source: VCG)

China’s State Administration for Market Regulation on October 8 reached a decision to penalize domestic food delivery giant Meituan. In accordance with the country’s Anti-Monopoly Law, the firm has been ordered to stop its illegal activities and give back the “exclusive cooperation deposit” from all merchants, worth 1.289 billion yuan ($199.9 million) in full. The regulatory authorities also imposed a fine worth 3% of Meituan’s domestic sales – which totaled 114.748 billion yuan in 2020 – accounting for 3.442 billion yuan ($533.8 million). Authorities then called for the platform to strengthen internal rectification.

In April 2021, according to the country’s Anti-Monopoly Law, the regulatory authorities started an antitrust probe into Meituan’s suspected abuse of market dominance in the Chinese online food delivery platform market.

The regulatory authorities then set up a task force to carry out this aim. After investigation and evidence collection, it obtained a number of evidential materials and made comprehensive analysis to find out the facts of the case. It also organized experts to carry out research and demonstration and listened to the opinions of Meituan to protect its legal rights, to ensure that the facts of this case are clear, the evidence is conclusive, the handling is proper, the procedures are complete and the procedures are legal.

After investigation, it was determined that since 2018, Meituan has assumed a dominant position in the market. By implementing differential rates and delaying the launch of businesses that applied for Meituan services, the platform has encouraged merchants to sign exclusive cooperation agreements, collected exclusive cooperation deposits, and used data, algorithms and other technical means for various punitive measures. Meituan has implemented a “pick one of two” approach, namely forcing merchants to use its services exclusively, thereby restricting relevant market competition, weakening the innovation and development vitality of platforms and damaging the legitimate rights and interests of merchants and consumers on the platform. In the eyes of authorities, this constitutes abuse of market dominance because “the counterparty can only trade with it without justifiable reasons,” which is prohibited by the Anti-Monopoly Law.

According to the law, and considering the nature, degree and duration of Meituan’s illegal activities, China’s State Administration for Market Regulation on October 8 made an administrative penalty decision, ordering Meituan to stop its illegal activities, provide refunds to wronged parties and pay the 3.422 billion fine.

It is worth mentioning that this penalty ratio – 3% of annual domestic sales – is lower than that imposed by Chinese authorities on Alibaba for monopolistic behavior in April this year. At that time, the regulatory authorities accused e-commerce giant Alibaba Group of violating the Anti-Monopoly Law and imposed a fine of 4% of its domestic sales of 455.712 billion yuan in 2019, accounting for 18.228 billion yuan.

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In addition to fines, the regulatory authorities also issued administrative instructions to Meituan: The platform is now required to carry out comprehensive rectification to improve the commission charging rules and algorithm rules of the platform, safeguard the legitimate interests of small- and medium-sized catering businesses on the platform and strengthen protection of the legitimate rights and interests of food delivery riders. Meituan also has to submit self-inspection compliance reports to the State Administration for Market Regulation for three consecutive years to ensure that the rectification is in place and has achieved standardized, healthy and sustainable development.

Meituan issued a response on Friday afternoon, saying, “We have received the administrative penalty decision made by the State Administration for Market Regulation. In this regard, we sincerely accept and will resolutely implement it, conduct comprehensive and in-depth self-examination and rectification according to the requirements and guidance, and put an end to the ‘pick one of two’ approach. We will take this as a warning, operate in compliance with laws and regulations, consciously safeguard fair competition order, earnestly fulfill social responsibilities, better obey and serve the overall economic and social development, and strive to make more contributions to the high-quality development of the national economy.”