China fined food manufacturer Meituan $ 530 million for antitrust violations Friday, this is the second severe punishment this year for Beijing’s attempts to subjugate the country’s major internet companies.
The government’s campaign is blessed by the top leadership of the Communist Party. It involves a wide range of regulatory agencies and policymakers. And it wiped out hundreds of billions of dollars in shareholder wealth from some of the most successful tech companies in China and the world.
Like regulators and politicians in the United States and Europe, China’s leaders watch with dismay as Internet companies are gaining more and more influence over commerce, society and everyday life. They want to ensure that these companies do not use their power to gain unfair advantages over competitors or to exploit dependent customers.
But Beijing can move with a speed and determination that Western officials cannot even imagine. destruction of companies and industries in a few quick movements.
Investors are still waiting to learn about the fate of another of China’s most valuable internet companies. giant didi… Days after Didi went public on the New York Stock Exchange in late June, Chinese regulators ordered the company to stop registering new users and removed its apps from mobile stores, citing cybersecurity and privacy concerns.
In a statement In a post on Chinese social media, Meituan stated that she would take the punishment “sincerely” and “take this lesson to heart.”
This year, Chinese leader Xi Jinping shocked the business world with a massive campaign to strengthen government control on economics. The Communist Party wants to restrict business activities that it considers to be unfair or corrupt, and to push entrepreneurs and tycoons to share more of your wealth with the rest of society.
Beijing first major antitrust fine against a tech company was imposed in April on Alibaba, an e-commerce titanium co-founded by Jack Ma, one of the richest men in the world. The State Market Oversight Service, the State Market Regulatory Administration, fined Alibaba $ 2.8 billion for preventing sellers on its shopping sites from selling on other platforms.
That amount – a record fine for violating China’s antitrust laws – accounted for 4% of Alibaba’s domestic sales in 2019.
On Friday, the same agency fined Meituan for a similar anticompetitive practice, namely for using exclusive agreements barring restaurants from offering takeout delivery on other platforms.
The regulator’s penalty on Meituan is only 3 percent of the company’s sales in China last year. But the agency also ordered Meituan to refund more than 1.6 million restaurants and other vendors for deposits they paid as part of their exclusive agreements with the platform. The regulator said that if the restaurant violates the agreement, Meituan will require a deduction from the deposit.
According to the regulator, the total amount of compensation is about $ 200 million. That’s the equivalent of just over 1 percent of Meituan’s 2020 sales.
Meituan was founded in 2010 as a Groupon-like service to purchase vouchers from local sellers. Mr. Wang previously founded and operated two social networks. Last year, the Meituan platform was used by more than 510 million people to order takeaways and groceries, book hotels and travel.
Earlier this year, China Market Observer punished Meituan and four other “group shopping” sites where people team up with friends to place bulk orders for groceries and other goods. By burning cash to sell goods at below cost, the platforms hurt small retailers and “disrupted the normal order of market prices” agency said… Meituan was fined approximately $ 230,000.
In July, national regulators customized food delivery companies to ensure that their drivers receive at least the local minimum wage. In metropolitan areas such as Beijing, Shanghai and Guangzhou, the minimum wage is roughly $ 300 to $ 400 per month.
Investors were worried about further government action. In May, Meituan founder and CEO Wang Xing posted on social media a centuries-old Chinese poem about a powerful emperor who cannot foresee the threats that will eventually overthrow him. Against the backdrop of the repression in Beijing, it looked like a veiled shot at the government. Hong Kong-listed Meituan plummeted.
Later, Mr. Wang explained in another post on social media that he was thinking about this poem as he pondered how the biggest obstacles to a successful business could appear out of nowhere.
Shortly thereafter, Mr. Wang donated a stake in Meituan to his charitable foundation. Several prominent Chinese tech moguls have recently felt the pull of charity – perhaps a way to deflect growing skepticism about their wealth and power. Others have resigned from leadership positions or remain in the shadows.
Colin Huang, founder of e-commerce giant Pinduoduo, pledged $ 100 million in research and development through his foundation in March, the day after stepping down as chairman of the company. In June, Zhang Yimin, founder of ByteDance, the parent company of TikTok, invested $ 77 million in education in his hometown in Fujian province. It was shortly after Mr. Zhang said that he resign as CEO of ByteDance focus on long term strategy.
Alby Zhang contributed to the research.