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Beijing orders Meituan, like Alibaba, to shape up—or else

April 27, 2021, 11:46 AM UTC

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Chinese antitrust regulators are widening their crackdown on monopolistic practices by the nation’s leading Internet companies.

On Monday, the State Administration of Market Regulation announced that it is looking into alleged antitrust violations at Meituan, the food delivery giant that is China’s third-most valuable Internet company.

Word of the Meituan investigation follows a similar probe into misbehavior at Ant Group, the financial-technology giant controlled by billionaire Jack Ma, and its sister company Alibaba Group Holding.

On April 9, regulators hit Alibaba with a record $2.8 billion fine. Days later, they ordered Ant to completely overhaul its business and apply to become a financial holding company overseen by the central bank—an edict that will dramatically reduce Ant’s profitability.

Meituan’s share price gained nearly 3% in Tuesday trading on the Hong Kong Stock Exchange, reversing Monday’s loses. Investors appeared to have taken comfort in a report by analysts at Nomura Securities suggesting regulatory penalties levied on Meituan aren’t likely to exceed $709 million.

At issue at all three companies are forced exclusivity arrangements known as “pick one from two”—POFT for short, or in Chinese er xuan yi (二选一). The government claims the companies used their dominant marketing position to forbid merchants trading on their platforms from doing business on rival platforms.

Merchants have long complained that er xuan yi is among a host of bullying tactics employed by China’s online platforms to squelch competition and squeeze more profit out of the buyers and sellers they claim to serve. (TechNode‘s Weiqi Liu has a first-hand account of how Meituan pressures restaurants in his neighborhood in Beijing.)

Now Beijing is issuing Ant, Alibaba, Meituan and dozens of other Internet giants an ultimatum of its own: “rectify” your bad behavior or suffer regulators’ wrath.

It’s unclear how long the investigation into Meituan will last. In a contrite statement, Meituan promised it would “actively cooperate with the investigation by the regulatory authorities to further improve the level of business compliance management, project the legitimate rights and interests of users and all parties, promote the long-term healthy development of the industry, and earnestly fulfill its social responsibilities.”

Meituan, founded in 2010 by coding guru Wang Xing, has emerged as one of China’s most innovative—and aggressive—e-commerce operators. In 2015, the company combined with arch-rival, Dianping, to become a “super-app” offering food delivery and a host of other services including restaurant reviews, travel and hotel bookings, and movie tickets.

But the alliance was fraught, not least because Meituan had financial backing from Alibaba while Dianping’s main investor was Alibaba nemesis Tencent Holdings. Alibaba refused to put more money into the joint venture because it declined to integrate the venture’s app with Alibaba’s. Instead, Alibaba sold all its shares in Meituan and invested in an upstart rival, Wang turned to funding from Tencent, which chipped in an additional $1 billion, merged its delivery services with the combined venture and allowed it to operate independently.

Meituan’s share of China’s food delivery market grew to 68% last year, while’s shrank to 25%, according to research firm Trustdata. In 2020, Meituan reported total sales of nearly $15 billion, an increase of 18% over 2019, with food delivery accounting for more than half of revenue. More broadly, the company competes with other e-commerce giants including, Pinduoduo, and Ctrip—and Wang has made no secret of his desire to go head-to-head with Alibaba over the next ten years.

Meituan’s shares tripled in 2020 thanks to the pandemic boom in online shopping. The company, which now boasts a market valuation of $220 billion, last week raised $10 billion in a stock and convertible bonds sale. Wang has vowed to use that capital to improve Meituan’s delivery network by investing in autonomous vehicles, drones, and other cutting-edge technologies.

In March, China’s regulators fined Meituan, along with other leading e-commerce players, for offering improper subsidies to accelerate its expansion into the fast-growing community e-commerce market. Last year Meituan and drew a storm of online criticism after several couriers were killed or injured while scrambling to meet to daunting delivery deadlines.

Even so, analysts at Nomura say they expect the latest investigation to have “limited impact on Meituan’s business.” They note that while POFT played “a big role in the early days of food delivery,” Meituan’s strong market position has enabled it to “outgrow” the practice.

More Eastworld news below.

Clay Chandler

P.S. Fortune launched a new education hub on Monday where we rank MBA and other professional education programs. Check out the platform, Fortune Education, and our ranking of the best online MBAs here.

This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at


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