Meituan put under probe for Mobike acquisition

The State Administration for Market Regulation, China's top market regulator, said on Monday that it is launching an investigation into food delivery giant Meituan's undeclared acquisition of bike-sharing firm Mobike.

The administration said on its website that the move is to strengthen the regulation of the shared consumption sector. It had already urged eight sharing economy firms, including Meituan and Shenzhen Laidian Technology, to rectify soaring prices.

The announcement followed an exchange filing by Meituan in which it said it was likely to make changes to its business practices or be fined a significant amount following an administration investigation in April into alleged monopolistic behavior by the company.

Meituan is likely to be fined about $1 billion by the antitrust regulator in the coming weeks for allegedly abusing its dominant market position to the detriment of merchants and rivals, The Wall Street Journal reported.

"Such moves clearly send a signal that the country is boosting regulations on improper market behavior, especially monopolistic behavior, by internet and technology firms," said Wang Peng, an associate professor at Hillhouse Research Institute at Renmin University of China. "Behaviors that violate the interests of consumers will not be tolerated anymore."

On Monday, China's top leadership said at a high-level meeting that it is necessary to boost supervision and law enforcement in key areas, such as the platform economy, technological innovation, information security and the protection of people's livelihoods.

Meituan, which is backed by tech giant Tencent Holdings, has shed about $160 billion in market value since its February high. It reported on Monday that its total revenue rose 77 percent year-on-year to 43.7 billion yuan ($6.77 billion) in the second quarter of this year, but its net loss hit 3.36 billion yuan during the period.

Since last year, a string of Chinese internet heavyweights, including Alibaba Group Holding, Tencent, JD and Suning.com, have been investigated or fined for alleged monopolistic behavior.

"Antitrust efforts will not crack down on a single company or industry," said Li Chao, chief analyst at Zheshang Securities. "On the contrary, such moves will lead to the flourishing of the sector as a whole in the long term."