Meituan investigated for antitrust practices

China based same-day delivery giant Meituan has been put under investigation by the The State Administration for Market Regulation, the antitrust watchdog agency.

According to the agency, it is looking into whether the delivery firm has forced merchants to use it as their exclusive distribution channel.

“We expect a limited impact on Meituan’s business,” Nomura analysts Shi Jialong and Thomas Shen said in a report on Monday. “We note that POFT (picking one from two) practice helped play a big role in the early days of food delivery competition as it helped differentiate one’s restaurant supplies from those of competitors. We think Meituan’s strong market position and customers’ loyalty has enabled it to outgrow this POFT practice.”

It is expected that Meituan is to be fined around US $709 million thanks to its behaviour, or 4% of its net cash balance. This isn’t expected to impact its overall business thanks to customer loyalty and its strong market position.

“The company will actively cooperate with the investigation by the regulatory authorities to further improve the level of business compliance management, protect the legitimate rights and interests of users and all parties, promote the long-term healthy development of the industry, and earnestly fulfil its social responsibilities,” Beijing-based Meituan said in a statement. “At present, the company’s various businesses are operating normally.”

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