China’s 14 regulatory departments, including the National Development and Reform Commission (NDRC) and the State Administration for Market Supervision (SAMR), published policies on February 18 to facilitate the recovery of service industries affected by epidemic prevention measures, as reported by South China Morning Post on February 21. Service industries covered under the policies include catering, retailing, civil aviation, and tourism. As part of the policies, the departments ordered China’s on-demand delivery services providers to further lower the commission fees on restaurants and offer preferential fees to restaurants in regions hit by epidemics.

Meituan [3690:HK] and Alibaba-backed [BABA:US] Ele.me respectively occupies around 67% and 31% of China’s on-demand food delivery market. Both online platforms have raised merchant fees from 10% to around 20% over the past few years. The move has brought a burden on restaurants’ profit margins, especially when they rely on take-away orders amid epidemic prevention and control measures. According to research firm Analysys, the new policy is expected to bring down the commission fee charged by on-demand delivery platforms by around 5 percentage points, resulting in a 25% to 27% slash in revenue from food delivery businesses. Over the two trading days since the announcement, China’s largest food delivery platform Meituan had lost about 20% of its market value. The new crackdown on Meituan came after it had been fined RMB3.44bn (USD542.8m) by the SAMR for abusing its dominant market position last October. Last July, seven Chinese regulators demanded platforms such as Meituan to secure the basic rights for laborers including food deliverymen, drivers for ride-hailing platforms, and other delivery riders.

Sources:

https://www.scmp.com/tech/policy/article/3167870/china-tech-crackdown-meituan-eleme-other-demand-delivery-providers-face

https://www.scmp.com/tech/policy/article/3167567/chinese-directive-asking-demand-platforms-lower-merchant-fees-triggers?module=perpetual_scroll_0&pgtype=article&campaign=3167567

https://www.caixin.com/2022-02-18/101843911.html