Meituan Cuts Merchant Fees to Comply With China’s Policy Change

(Bloomberg) -- Chinese food-delivery giant Meituan said it will cut commissions for some small and medium-sized merchants nearly two weeks after new government guidelines asked food-delivery platforms to lower fees for restaurants in pandemic-hit regions.

Beijing-based Meituan will cut 50% of the technical service fee for small and medium-sized merchants in pandemic-affected areas whose daily average user transaction volume has dropped by more than 30%. It will also cap the technical service fee for each order at 1 yuan (16 U.S. cents) after the discount, according to a company statement issued late Tuesday.

Meituan has been grappling with regulatory and public scrutiny on multiple fronts, including its market power, the welfare of delivery riders and the size of commissions it charges restaurants, though the company has said its margins on take-outs are slim. The company has been among the targets of Beijing's regulatory crackdown on the tech sector.

China Wipes $26 Billion Off Meituan's Value With New Fee Policy

Shares of Meituan advanced as much as 4.9% in Hong Kong, with analysts saying the fee changes will have limited impact on its business. The rate cuts will be temporary and dynamic, rather than permanent reductions across the board as feared by some investors, Credit Suisse analyst Kenneth Fong said in a note.

Meituan will keep the lower fees until one month after the designation of the areas as medium and high risk is lifted. For merchants who face business difficulties in other regions, it will cap the technical service fee at 5% until the end of December. The company will also offer free services for some small restaurants to boost their capability to run online shops.

Rival Ele.me, owned by Alibaba Group Holding Co., followed suit by saying it will cut or waive commissions for merchants in areas hit by Covid for at least 15 days, committing 20 million yuan to the effort.

Since last May, Hong Kong-listed Meituan has rolled out pilot reforms to make its fees more transparent and so far the program has covered 70% of the merchants on the platform. Merchants have been able to see the breakdowns of Meituan's cut. The Tencent Holdings Ltd.-backed company charges merchants a fee for its technology service and, for those who use its delivery services, a fee to cover rider costs based on order value, distance, and time of delivery. The rate varies wildly from 5% to over 20% of order value, according to research and interviews done by Bloomberg.

Separately, a Chinese top court on Wednesday outlined delivery companies' responsibilities when it comes to consumer protection. For instance, delivery companies are required to inspect restaurants' food sale qualifications and they will be held accountable for resolving disputes between food suppliers and customers from March 15, the court said.