China’s antitrust regulator has slapped the country’s largest food delivery service, Meituan, with a 3.44bn yuan (US$533m) fine for abusing its market position. It also ordered the company to “comprehensively rectify” its operations. But the penalty was lower than expected, and Meituan’s shares surged more than 8% on Monday as investors breathed a sigh of relief.
The State Administration for Market Regulation (SAMR) levied the fine on Friday, equivalent to 3% of the company’s total domestic revenue of 114.7bn yuan. This was considerably smaller than forecasts of US$1bn from The Wall Street Journal in August.
Earlier this year, Alibaba was fined a record 18.2bn yuan (US$2.8bn) by the SAMR, which equated to 4% of the ecommerce giant’s 2019 domestic sales. Alibaba competes with Meituan with its own delivery service Ele.me, which holds approximately 20% market share.
The SAMR cited Meituan’s monopolistic “pick one from two” practice as the main reason for the fine. By asking merchants to pay deposits and charging different rates, the delivery service provider forces partners to choose only one platform as their exclusive distribution channel. This has become a widely adopted tactic for platform operators in China.
The antitrust watchdog also ordered Meituan to refund exclusive cooperation deposits paid by merchants, which amounted to 1.29bn yuan (US$200m).
“We accept the penalty with sincerity and are determined to ensure our compliance with the decision and its terms,” a Meituan spokesperson said in an emailed statement following the regulator’s announcement of the fine.
The SAMR also told the company to build a better commission fee mechanism and to rectify its algorithm rules while ensuring that the rights and interests of small- and medium-sized partners and delivery riders are protected. In addition, it ordered the company to submit a self-examination compliance report to the SAMR for three consecutive years.
Meituan’s shares jumped over 8% on Monday, as the lower-than-expected fine cleared an “overhang” over the company, market analysts explained.
Share prices of other Hong Kong-listed Chinese tech companies also rose on Monday. Tencent’s shares surged 2.9%, and Alibaba ended the day with its stock prices up nearly 8%.
Since the market regulator initiated its investigation into Meituan in April, the company has lost over 16% in market value, equating to HK$226bn (US$29bn). Additionally, Meituan is also experiencing continuous losses from investments in various new businesses, notably its grocery delivery and community group-buying platforms.
The latter field has also been at the centre of Beijing’s ongoing tech crackdown. This growing trend in China’s ecommerce sector allows consumers to buy products at exceptionally low prices by clubbing together to buy in bulk, potentially cutting out various supply chain and logistics costs.
Regulators in China have denounced the trend, saying that big tech firms abuse their dominant positions to grab big market shares, employing such practices as dumping low-priced goods and illegally collecting and using consumers’ personal information.
The ugly truth of Meituan’s location tracking
On Monday, Meituan also came under fire on Chinese social media after it was revealed that the app tracked users’ locations around the clock, even if it was not being used. After upgrading to Apple’s iOS 15 version – which features the new “Record App Activity” setting – Chinese iPhone users took to social media to complain that Meituan continuously tracks users’ whereabouts.
One user wrote on Weibo, China’s equivalent to microblogging platform Twitter:
“This is too scary. The Meituan App tracks my location 24 hours, once every 5 minutes. What is this good for?”
A company engineer commented on the news, saying that the type of software the company uses “unilaterally reads the system operation log before performing selective displaying”. He added that most mainstream apps use similar tactics and suggested that monitoring results among other apps would be highly similar.
Using the “Record App Activity” setting, netizens noted that social media apps, such as WeChat and QQ, and ecommerce platform Taobao, were also accessing user data in the background, for instance through the phone’s camera roll.
Apple’s new feature allows users to find out which apps are accessing private data such as location information and photos or accessing features such as the phone’s camera or microphone. It also records the domains that the apps are communicating with or connecting to, so that users track where their data is being sent.
Back in 2019, Apple threatened to delete apps from its App Store if they violated user privacy.
“Protecting user privacy is paramount in the Apple ecosystem. Our App Store Review Guidelines require that apps request explicit user consent and provide a clear visual indication when recording, logging, or otherwise making a record of user activity,” a spokesperson said, according to TechCrunch.
“We have notified the developers that are in violation of these strict privacy terms and guidelines and will take immediate action if necessary,” the spokesperson added.