Caixin
Aug 31, 2021 08:54 PM
TECH

Meituan Faces Fresh Regulatory Trouble Over Mobike Acquisition

Meituan CEO Wang Xing described the ongoing regulatory tightening as “good for the sustainable development and orderly growth of the internet platform economy.” Photo: VCG
Meituan CEO Wang Xing described the ongoing regulatory tightening as “good for the sustainable development and orderly growth of the internet platform economy.” Photo: VCG

China’s antitrust watchdog said that it is investigating a previous acquisition by food delivery platform Meituan, amid a regulatory tightening over the country’s freewheeling internet industry.

The investigation involves Meituan’s $2.7 billion deal in 2018 to acquire bike-sharing startup Mobike, the State Administration of Market Regulation (SAMR) said Monday in a statement, without giving specifics.

The announcement coincided with the release of Meituan’s second-quarter earnings report, in which the company warned that it may have to “make changes to its business practices and may be subject to a significant amount of fines.”

The warning came after the SAMR in April launched an investigation into Meituan over its suspected anti-competitive behavior including a practice known as “picking sides,” in which a platform company forces merchants to partner exclusively with it and shun competitors.

Bloomberg reported earlier that the SAMR is likely to slap Meituan with a fine of roughly $1 billion in the coming weeks for allegedly abusing its dominant market position, wrapping up the four-month-old investigation into the giant. In a similar case, the SAMR imposed a record $2.8 billion fine on Alibaba for the “picking sides” practice in April.

During an earnings conference call with investors and analysts on Monday, Meituan CEO Wang Xing described the ongoing regulatory tightening as “good for the sustainable development and orderly growth of the internet platform economy.”

“We have prohibited any use of exclusive partnership and we will be firmly against it. We will fully respect the merchants’ choices,” Wan said during the earning call.

The Meituan boss also promised to improve the working conditions and welfare of its delivery drivers. Last month, the SAMR and the Ministry of Human Resources and Social Security ordered Meituan to pay social insurance for delivery drivers, which can significantly drive up costs.

In the same announcement, the regulator said it is investigating power bank rental startup Soudian’s acquisition of rival Jiedian in April.

The announcement also said the SAMR plans to combat pricing irregularities in the sharing economy space. Specifically, the regulator will order the country’s sharing economy companies to improve their internal compliance review processes for price adjustments, make public their pricing rules and standards, and respond to consumers’ complaints in timely manner.

In June, the SAMR summoned eight sharing economy companies doing businesses related to shared bikes and power bank rental including Meituan and Soudian for a meeting that focused on standardizing their pricing processes. The meeting has resulted in a slight drop in prices paid for power bank rental services, according to the SAMR.

Contact reporter Ding Yi (yiding@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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