China widens monopoly crackdown with probe into food delivery giant Meituan

China’s government has expanded its antitrust crackdown beyond Jack Ma’s technology empire, launching an investigation into suspected monopolistic practices by food-delivery behemoth Meituan.

A food delivery courier for Meituan rides a motorcycle in Beijing, China, on Wednesday, April 21, 2021. (Bloomberg)

China's government has expanded its antitrust crackdown beyond Jack Ma's technology empire, launching an investigation into suspected monopolistic practices by food-delivery behemoth Meituan.

The State Administration for Market Regulation announced the investigation, which began recently, in a statement Monday. The antitrust watchdog is looking into alleged abuses including forced exclusivity arrangements known as “pick one of two.” The company said it will actively cooperate with the probe and step up efforts to comply with regulations. Operations are currently normal, it added in a statement.

The investigation into Meituan signals that the regulatory crackdown is now moving beyond Ma's empire. Beijing has become increasingly concerned over the growing influence of titans like Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Meituan over every aspect of Chinese life as well as the vast amounts of data they've amassed through providing services like online shopping, chatting and ride-hailing.

The crackdown has gathered pace in recent weeks, as regulators slapped a record fine on Alibaba, instructed affiliate Ant Group Co. to overhaul its business and ordered 34 of its largest technology companies -- including Meituan -- to rectify any anti-competitive business practices within one month. Following the meeting with SAMR, the Beijing-based firm issued a pledge to abide by antitrust laws, saying it will maintain market order and won't force merchants to “pick one of two” -- forcing them to select betweens Meituan or a rival -- through unreasonable methods.

Wang Xing's firm has long been criticized by rivals and merchants for alleged excesses like forced exclusive arrangements. The firm -- which competes against Alibaba's Ele.me in food delivery -- had previously been found guilty of unfair competition in at least two legal cases this year and ordered to pay compensation, local media has reported. The corporation had also rejected allegations that it charged onerous commissions to restaurants during the Covid-19 outbreak last year.

Alongside Ele.me, Meituan also faced an online backlash after several delivery riders were killed or injured while trying to meet strict deadlines. It was among a handful of operators fined by the antitrust watchdog in March for giving improper subsidies to expand in the red-hot arena of community e-commerce.

Ahead of the probe, Meituan raised $10 billion in a record new share sale by a Hong Kong-listed firm as well as through an offering of convertible bonds. The firm had said it will use the funds to boost investments in new technologies like autonomous delivery as well as for general corporate purposes.

Meituan shares nearly tripled in 2020, making it one of the best-performing Chinese technology stocks. It's dropped roughly 32% from a February record, partly as China's antitrust campaign accelerated and after the company flagged that it will incur more losses from its investments in newer businesses like online groceries.