Meituan: A Chinese Online Delivery Platform`s Unfair Business Practices
| Case Code: BECG185 Case Length: 15 Pages Period: 2020-2021 Pub Date: 2023 Teaching Note: Available |
Price: Rs.400 Organization: Meituan Industry: Foodservice Countries: China Themes: Business Ethics, Digital Marketplace,Platform Model |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Meituan’s Merger with Dianping
From 2012 to 2019, around 46 cases of unfair competition were filed by several companies against internet companies in China. Meituan’s merger with Dianping also came under scrutiny as the companies together garnered a market share of 81% in the Chinese group-buying market. The merged entity had a dominant position in the market and posed a threat to Nuomi, online delivery platform owned by Chinese multinational technology company Baidu Inc..
Meituan’s Alleged Unfair Business Practices
In 2020, GRA in association with 32 trade associations appealed to Meituan to remove the monopoly clauses in its agreements and lower its commission by at least 5%. The association claimed that the online food delivery platform was charging 26% as commission, taking advantage of the Covid-19 downturn..
Meituan’s Alleged Labor Exploitation
In addition to monopolistic business practices, Meituan was accused of exploiting its delivery personnel..
The Regulator Intervenes
In April 2021, the SAMR launched an investigation into Meituan’s monopolistic business practices. Commenting on the investigation, Meituan said..
Meituan’s Response
To tackle the challenge of its delivery riders, Meituan announced in September 2021 that it had sent a notice to its more than 1,100 food-delivery partners prohibiting them from signing on delivery workers as independent businesses through ‘deceptive or coercive means.’ , in addition to ensuring that they gave the workers employment protections and employment injury insurance. The company also started a hotline for delivery personnel to report any issues they faced with their contractors..
SAMR Imposes Fine on Meituan
Even before the SAMR announced its penalty on Meituan, the company had lost 40% of its market value by September 2021 from its peak in February 2021 (See Exhibit VII for a chart showing Meituan’s market value)..
Looking Ahead
While China’s crackdown on Meituan for labor exploitation came as a boon to the delivery drivers, it became a challenge for Meituan as the new regulations were expected to increase costs for the company. According to Meituan, for the year 2020, the company’s revenues from food delivery stood at RMB66.2 billion out of which it spent around 74% or RMB48.7 billion on rider costs. Since the new Chinese regulations required Meituan to enter into a contractual labor relationship with each driver and provide them with minimum wages..
Exhibits
Exhibit I: Meituan’s Condensed Consolidated Statements of Comprehensive Income
Exhibit II: Meituan’s Financial Information by Segment
Exhibit III: Market Share of Players in China’s Online Food Delivery Market (2020)
Exhibit IV: China Anti-Monopoly Law with regard to Monopoly Agreements and Abuse of Market Dominance
Exhibit V: SAMR’s Guidelines to Online Food Delivery Platforms in China
Exhibit VI: How Mergers are Controlled by SAMR
Exhibit VII: Meituan’s Market Value (February 2021 to September 2021)
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