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China plans to fine food delivery app Meituan $1 billion

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Chinese competition authorities are planning to fine food delivery startup Meituan $1 billion.

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According to the Wall Street Journal (WSJ), Meituan was set to pay a fine of nearly 6% of last year’s revenue on the 11th (local time).

Meituan abused its dominant position in the market to jeopardize the competitive environment, according to the competition authorities.

Firmer regulation of companies
The Chinese government’s regulation of companies, which began when the fintech company Ant Group halted its listing on the Hong Kong stock exchange last November, shows no sign of stopping.

Following large-scale fines against Tencent and Alibaba, regulation was extended to Didi Chuxing, China’s largest ride-sharing company, and Full Truck Alliance, a truck sharing company, early last month.

The fine is expected to be officially announced within a few weeks, according to sources.

Meituan is accused of forcing small retailers out of their marketplaces if they want to sell on other online markets.

Meituan ranks third in terms of market capitalization among Chinese technology companies after Tencent Holdings and Alibaba Group Holdings.

The company has successfully raised large-scale capital from investors around the world and has a market capitalization of approximately $170 billion.

Meituan, which is headquartered in Beijing, operates an online marketplace that is used by millions of restaurants and retailers. The company dominates the market as China’s largest food delivery service.

Food delivery is its main focus, but other businesses are also an interest. Additionally, it offers hotel reservations and online grocery shopping.

Alibaba was forced out of its “alternative” practice of punishing companies that sold on its own marketplace while also selling on other online marketplaces.

In absolute terms, the $1 billion fine is not as large as Alibaba’s, but in sales terms it is larger. This is about 6% of last year’s $17.8 billion in sales.

China’s Fair Trade Law allows authorities to fine up to 10% of annual sales.

In addition, Meituan, listed on the Hong Kong Stock Exchange in 2018, reached an all-time high in February this year, with a market capitalization of more than $340 billion.

Nevertheless, several analysts and investors have downgraded Meituan’s sales and earnings forecasts since then.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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