Meituan shares sink 14% after Chinese regulator ask on-demand platform to lower...

Meituan shares sink 14% after Chinese regulator ask on-demand platform to lower merchant fees

Meituan shares sink 14% after Chinese regulator ask on-demand platform to lower merchant fees

February 19, 2022 10:05 pm

Meituan’s shares fell more than 14% that shed USD26 billion in market value on Friday after Chinese regulators issued guidance for online food delivery platforms to lower service fees charged to restaurants.

The new guidelines announced by China’s state planner, the National Development and Reform Commission, are aimed at helping the service sector to lower operating costs of the country’s service industry, which has been hit hard by the pandemic.

The National Development and Reform Commission said the country’s internet platforms should follow guidance to further lower the service fee standards for businesses to help them reduce operating costs, and give discounts to restaurants in areas hit hard by Covid.

Meituan, which operates China’s biggest food-delivery platform, saw its stock down 15 per cent on the Hong Kong Stock Exchange. Shares of Alibaba, which the country’s second largest food-delivery platform Ele.me, down 3 percent following the announcement.

The hit to Meituan’s share price came as Metuan’s billionaire founder Wang Xing celebrated his 43rd birthday, Wang Xing founded the company in 2010.

In October 2021, China’s antitrust regulators fined Meituan CNY3.4billion (USD537million) for abusing its market position through its pick one from two practice. The fine equates to 3% of the Meituan’s total revenue of CNY114.7 billion in 2020, China’s top antitrust body also added that Meituan should stop its “illegal behaviour” and refund exclusive cooperation deposits paid by merchants totalling CNY1.29 billion.

The State Administration of Market Regulation has also issued a guideline to rectify food delivery platform particularly Meituan, asking the platform to guarantee driver’s benefit by improving riders’ salary package and ensuing their basic social and medical insurance.

The fine and the pressue to improve riders’ pay has made it difficult for Meituan to increase profits. Meituan reported its biggest quarterly loss since 2018 as the company took a hit from China’s anti-monopoly campaign that mainly targets big tech companies.

Despite the headwinds, Meituan went on hiring spree, adding 60,000 new jobs in 2021 that help it to deepen its expansion into community group buying businesses.

The 60,000 new jobs, which mainly fell under Meituan’s community group buying unit- Meituan Youxuan and B2B food distribution arm Kuailv, are mostly on the group logistics and marketing position, it has already filled by the end of last year.

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