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China expands internet raid with Meituan monopoly probe

(Bloomberg) – China’s government has expanded its antitrust crackdown beyond Jack Ma’s tech empire and has launched an investigation into suspected monopoly practices by food company Meituan. The state administration of market regulation is investigating alleged abuses, including enforced exclusivity agreements known as “Pick one of two”, using the same language in an investigation by Alibaba Group Holding Ltd. used by Ma which resulted in a fine of $ 2.8 billion. China’s third largest internet company made up for early losses, rising as much as 3.1% on Tuesday after Nomura analysts estimated Meituan might pay just 4.6 billion yuan ($ 709 million) due to Alibaba’s punishment got to. Meituan’s investigation extends Beijing’s approach beyond Ma Holding Ltd.’s Alibaba group. and Ant Group Co. and threaten to calm the ambitions of founder Wang Xing, one of China’s most aggressive entrepreneurs. The government is increasingly concerned about the growing influence of titans like Alibaba, Tencent Holdings Ltd. and Meituan on all aspects of Chinese life as well as the vast amounts of data they have collected from providing services such as online shopping, chat and ride. The antitrust campaign has picked up pace in recent weeks as regulators imposed a record fine on Alibaba, hired subsidiary Ant to overhaul its business, and hired 34 of its largest tech companies – including Meituan – to correct anticompetitive business practices within a month. After meeting with SAMR, the Beijing-based company pledged to comply with antitrust laws, stating that it would maintain the market regime and not force dealers to choose “one of two,” forcing them to choose between Meituan or a rival – by unreasonable methods. Meituan said in a statement Monday that he would be actively working with the probe and stepping up compliance efforts. Choosing one of two practices “played a huge role in the early days of competition for food delivery and helped differentiate restaurant supplies from competitors,” Nomura analysts Jialong Shi and Thomas Shen wrote in a research -Report. “Meituan’s strong market position and customer loyalty have enabled him to grow beyond that.” What Bloomberg Intelligence Says: Meituan is unlikely to face harsher punishment than Alibaba’s recent $ 2.8 billion fine after being hit with a monopoly probe, a sign that the regulator is expanding into tech giants Country. The meantime could be troubling to its investors, but we believe any penalty Meituan may pay is in line with its smaller operational yardstick. – Vey-Sern Ling and Tiffany Tam, Analysts Click here for the investigation. It remains uncertain whether regulators will address other aspects of the company, which was founded by 42-year-old billionaire Wang, has long been criticized by rivals and traders for alleged excesses such as forced exclusive agreements. The company, which competes against Alibaba’s Ele.me in supplying food, had previously been found guilty of unfair competition in at least two legal cases earlier this year and had to pay compensation, local media reported. The company had also denied allegations that it collected onerous commissions on restaurants during the Covid-19 outbreak last year. In addition to Ele.me, Meituan also faced an online backlash after several delivery drivers 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 granting undue subsidies to expand in the glowing arena of community e-commerce. “This latest news shows that the enforcement of this antitrust regulation is much stricter and more stringent than Our original idea,” wrote Nomura analysts. Prior to the investigation, Meituan said he would raise $ 10 billion for a record sale of new shares by a Hong Kong-listed company as well as an offering of convertible bonds. The company announced that it would use the funds to stimulate investments in new technologies such as autonomous provisioning, as well as for general corporate purposes. Read More: Meituan CEO Beat Jack Ma Receives $ 10 Billion For Next Fight According to antitrust laws, Meituan could face a fine of up to 10% of his revenue if found to be in breach of regulations . Revenue in 2020 was approximately 114.8 billion yuan ($ 17.7 billion). In contrast, rival Alibaba has been fined $ 2.8 billion, which is roughly 4% of its 2019 domestic revenue. Wang, a coding guru whose methodical obsession with data and algorithms helped humiliate Alibaba’s rival food service Ele.me, has openly telegraphed his ambitions. In a 2017 interview with local media, he said Meituan could join Alibaba and Tencent as the third member of a Chinese internet triumvirate in five to ten years as it adds value to food, travel and other services. The billionaire described it in a lengthy online post last week about how he’ll raise capital to research autonomous drones and delivery systems – what analysts expect to fuel Meituan’s foray into the glowing community of retailing where buyers in a local neighborhood are discounting volume receive. It was expected that Meituan would wage a fierce battle for subsidies and sweeteners for food and produce supplies with Alibaba, JD.com Inc. and Pinduoduo Inc. Meituan shares nearly tripled in 2020, making them one of the top performing Chinese technology stocks. It’s down around 31% from February’s record, in part as China’s antitrust campaign accelerated and after the company announced it would take more losses from its investments in newer businesses like online groceries. Dollar bond spreads widened on Monday following the watchdog’s announcement. (Updates with stock promotions and analyst commentary from second paragraph) For more articles like this, visit bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP

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