<Editor's Pick> China opens second round of Internet anti-monopoly actions, targeting Meituan

Apr 28, 2021 Food E-commerce DiDi

On April 26, the website of China's General Administration of Market Supervision (GAMS) released the news that recently, based on the report, the SAMS opened an investigation into the suspected monopolistic behavior of Meituan, such as the implementation of "choose one of two".

Meituan then responded: Today, Meituan received a notice from the General Administration of Market Supervision to open an investigation into Meituan's suspected monopolistic behavior in accordance with the law. The company will actively cooperate with the regulatory investigation, further improve the level of business compliance management, protect the legitimate rights and interests of users and all parties, promote the long-term healthy development of the industry, and effectively fulfill its social responsibility. At present, the company's businesses are operating normally.

On April 10, the hammer of anti-monopoly regulation just hit Alibaba, which was fined 18.228 billion yuan, one of the toughest penalties imposed on Internet platform companies by China's anti-monopoly department, and the amount of the fine was also a record high. After half a month, Meituan was opened an antitrust investigation.

Meituan's share price plunged in response. As of today's close, it was trading at HK$305 per share, with a market value of nearly HK$1.8 trillion. Compared with the yearly high of HK$460 in February, Meituan shares are now down 33%, and its market value has evaporated by more than HK$900 billion.

 

Meituan's "choose one of two"

In fact, the incident was not sudden. As for the anti-monopoly, the General Administration of Market Supervision has long hinted at it.

On April 13, the General Administration of Market Supervision, together with the Central Internet Information Office and the General Administration of Taxation, held an administrative guidance meeting for Internet companies.

It was suggested that issues such as the forced implementation of "choose one of two", abuse of dominant market position, implementation of "mergers and acquisitions", burning money to seize the "community group buying" market, disregard for counterfeiting, information leakage and implementation of tax-related illegal acts must be seriously rectified.

The meeting required the companies to compel the implementation of "choose one of two" and other issues, a comprehensive self-examination within a month, item by item to thoroughly rectify. 34 Internet company representatives participated in the platform including Meituan.

After the news of the General Administration of Market Regulation was issued, Meituan stated that it would actively cooperate with the investigation of the regulatory authorities, further improve the level of business compliance management, protect the legitimate rights and interests of users and all parties, promote the long-term healthy development of the industry, and effectively fulfill its social responsibility. At present, the company's businesses are running normally.

And the next day, April 14, Meituan lost an unfair competition lawsuit against Ele.me. The Intermediate People's Court of Huai'an City, Jiangsu Province, has ruled on Meituan's unfair competition, and Beijing San Kuai Technology Co Ltd (Meituan) will compensate Shanghai Lazarus Information Technology Co Ltd (Ele.me) 352,000 yuan.

Meituan has had a record of penalties related to unfair competition in recent years.

In June 2017, the Zhejiang Jinhua Municipal Market Supervision Bureau imposed penalties on Meituan, fining it a total of RMB526,000 for using its dominant position of having the largest local share to force merchants to sign a "cooperation undertaking".

In May 2018, the Market Supervision Bureau of Qingjiangpu District, Huai'an City, Jiangsu Province, found that Meituan constituted an act of unfair competition and fined Meituan 70,000 yuan.

In March 2019, the Market Supervision Administration of Tongjiang County, Bazhong City, Sichuan Province, punished Meituan with a fine of 250,000 yuan and an order to stop the illegal acts for allegedly misleading and deceptive, forcing users to modify, close, and uninstall online products or services legally provided by other operators.

On April 10, 2020, the official microblog of Guangdong Catering Association released the "Letter of Joint Representation from Guangdong Catering Industry to Meituan", accusing Meituan of allegedly implementing monopoly pricing and charging a maximum commission of 26% for new catering merchants, which has exceeded the threshold of merchants' tolerance.

In February 2021, the Jinhua Intermediate People's Court of Zhejiang Province made a verdict: Beijing Sankuai Technology Co., Ltd. Jinhua Branch to implement the act of unfair competition, which undermines the legitimate rights and interests of Lazarus (Ele.me), should bear the civil liability and compensate the latter 1 million yuan of economic losses.

 

A lesson from the past-Alibaba

On April 10, 2021, the General Administration of Market Regulation (GAMR) issued an administrative penalty against Alibaba Group Holdings Limited for its "choose one of two" monopoly in the online retail platform service market in China, ordering Alibaba Group to stop the illegal conduct and imposing a fine of 4% of its 2019 sales of RMB 455.712 billion in China, or RMB 18.228 billion. The administrative penalty was imposed on Alibaba Group.

At the same time, in accordance with the principle of administrative punishment law insisting on the combination of punishment and education, the Market Supervision Bureau issued an "Administrative Guidance Letter" to Alibaba Group, requiring it to carry out comprehensive rectification around the strict implementation of the main responsibility of platform enterprises, strengthen internal control and compliance management, maintain fair competition, and protect the legitimate rights and interests of merchants and consumers on the platform, and submit a self-examination and compliance report to the General Administration of Market Supervision for three consecutive years.

Alibaba then published an open letter, saying that they will firmly obey the regulatory decision.

Before the penalty was handed down, the General Administration of Market Supervision also opened a case against Alibaba.

In December 2020, the General Administration of Market Regulation (GAMR) filed a case against Alibaba Group Holding Limited for abuse of dominant market position in the online retail platform services market within China.

People are wondering how much Meituan will be fined in a few months.