Meituan to Pay $530 Million Fine to Market Regulators; Stock Rises

The fine for anti-monopoly practices was lower-than-expected - 3% of Meituan's 2020 revenue.
Oct. 08, 2021 22:50
Meituan to Pay $530 Million Fine to Market Regulators; Stock Rises

(CapitalWatch, Oct. 8, Hong Kong) Chinese food delivery giant Meituan (OTC: MPNGF; HKEX: 3690) was slapped with a $534 million fine for monopolistic practices Friday, and investors breathed a sigh of relief.

China's State Administration for Market Regulation launched the antitrust probe in April and found Meituan guilty of violating the Anti-Monopoly Law, which "stipulates that a business operator with a dominant market position is prohibited from restricting business counterparties through exclusive arrangements without justifiable causes," the company wrote Friday in a filing with the Stock Exchange of Hong Kong.  

The company has to end the practices and pay 3.4 billion yuan, or 3% of its 2020 revenue. It was also forced to return 1.3 billion yuan of deposits related to some exclusivity deals, Bloomberg reported.

The SAMR ordered Meituan "to rectify its competing acts in all aspects, protect the lawful rights and interests of all participants on the platform, enhance its internal controls and compliance, and uphold a positive competitive ecosystem of the platform." In addition, the company has to submit self-assessment and compliance reports for the next three years.

In its statement Friday, Meituan vowed to implement "a comprehensive and in-depth self-rectification program" and take other measures to appease the regulators, including "contribute more towards the high-quality development of the national economics."

The outcome of the SAMR probe bumped Meituan's shares up 2% in Hong Kong to HK$256 Friday. Its OTC stock in the U.S. jumped nearly 5% to $34.05 per share. Some analysts expected bigger fines for Meituan, according to Bloomberg. And considering the precedent – a record $2.8 billion fine imposed on Alibaba in April 2021, which turned the e-commerce giant to losses in the fiscal fourth quarter – the fine on Meituan is a breeze.

Year-to-date, Meituan's market value remains diminished. Starting in late 2020, China has waged a war on big independent tech companies, wiping out billions in valuations and imposing fine after fine on Alibaba (NYSE: BABA; HKEX: 9988), Tencent (OTC: TCEHY; HKEX: 0700), and others for unfair competition and other violations. For Meituan, the $530 million fine isn't the first this year.

Meituan, Alibaba, MPNGF, BABA, TCEHY, China