A Meituan grocer on motorcycle in the rain in Futian Central Business District, Shenzhen, China.
FroggyFrogg | iStock Editorial | Getty Images
GUANGZHOU, China – Meituan lost roughly $ 38.96 billion in value in the past two weeks as Beijing audited the Chinese grocery giant.
On April 26, the Chinese State Administration for Market Regulation (SAMR) opened an investigation into Meituan’s “suspected monopoly practices”. It is only the second antitrust investigation by a domestic technology company. Alibaba was the first to fall into the crosshairs and was subsequently fined 18.23 billion yuan ($ 2.8 billion).
Market regulator is addressing an alleged practice of Meituan forcing traders to choose their platform over competitors or to impose penalties for listing on both.
Since closing at $ 305 Hong Kong on April 26, Meituan shares have fallen roughly 16%. On Wednesday the stock gained about 2.5% and closed at 255.20 Hong Kong dollars, interrupting 10 days of selling.
Still, around $ 38.96 billion in value has been struck from the company since April 26.
The Meituan probe underscores an expanded drive to regulate China’s technology sector, which has grown largely carefree in recent years. In February, China has revised antitrust regulations for so-called “Platform Economy” companies. This is a broad term for internet companies that offer a variety of services from e-commerce to grocery delivery.
In response to the SAMR investigation, Meituan said it will “actively work with regulators to investigate, take steps to improve its companies’ compliance management, protect the legitimate rights and interests of its users and all relevant parties Promote health and longevity. ” -term development of the industry, and strive to meet its social responsibility. “
A misunderstood poem
While the SAMR investigation – which could result in a multi-billion yuan fine – is certainly the most serious problem for Meituan, a number of incidents since then have put more pressure on the delivery giant.
Last month, Wang Lin, an officer from the Beijing Human Resources and Social Security Bureau, was undercover as a Meituan driver and earned 41 yuan (US $ 6.37) during a 12-hour shift. He researched the working conditions of the Meituan drivers.
Meituan said it held 22 meetings with delivery workers to learn more about their ideas on how to improve their work process. The company has initiated plans to develop drivers’ careers and protect their rights and interests.
“We know this is nowhere near enough, but we will continue to work to improve the delivery driver’s work experience,” Meituan said in a statement in Mandarin translated by CNBC.
Further investigations into the company were fueled by an unlikely source – a poem posted online May 6 by Wang Xing, CEO of Meituan. In the late 2000s, he founded China’s first Twitter-like service called Fanfou. While Weibo is currently the most dominant microblogging platform in China, Fanfou still has a niche audience. And Wang has a loyal following on duty, posting several times a day.
The poem told the story of an old emperor who burned books to silence intellectuals. But he was eventually overthrown by two uneducated people. It has been interpreted as a disguised criticism of Xi Jinping’s government.
Wang deleted the post and issued clarification on May 9th.
He noticed that the emperor was overthrown by two people who did not have much education and used it to express a business hour.
“It reminds me that the most dangerous rivals are usually not who you expect them to be. Alibaba has been watching JD.com for a long time. In the end, it was Pinduoduo who came out of nowhere and competed with Taobao, “Wang said, according to a CNBC translation in Mandarin.
Taobao is one of Alibaba’s e-commerce products. Pinduoduo is a fast growing rival.
“Likewise, it looks like Ele.me is Meituan’s biggest rival. But what could tumble the grocery delivery business could likely be companies or business models we weren’t looking for,” he added.
Ele.me is Alibaba’s grocery delivery app.
The latest pressure on Meituan came from the Shanghai Consumer Council, a consumer rights group. On Monday, it criticized Meituan for some of its business practices regarding fees it levies on merchants, among others.
The Shanghai Consumer Council is not a regulator.
Meituan declined to comment on the poem and the Shanghai Consumer Council’s contribution when contacted by CNBC.
– – CNBC’s Iris Wang contributed to this report.