How a Digital Platform Revised Its Exclusive Dealing Practices Under AML Pressure: Competition Law Case Study

Introduction: Exclusive Dealing in China’s Platform Economy

Exclusive dealing arrangements — where a platform requires merchants to sell exclusively on its marketplace — have been at the center of China’s antitrust enforcement against digital platforms since the landmark Alibaba case in 2021. The RMB 18.2 billion fine imposed on Alibaba for its “choose one from two” (er xuan yi) practice sent shockwaves through China’s platform economy and triggered a wave of compliance reforms across the industry. This case study examines how a major Chinese digital platform, Meituan, revised its exclusive dealing practices in response to AML enforcement, and what lessons this restructuring offers for both domestic and foreign digital platforms operating in China.

Meituan, China’s largest on-demand local services platform offering food delivery, restaurant booking, hotel reservations, and other lifestyle services, was investigated by SAMR for allegedly requiring merchants to sign exclusive cooperation agreements that prevented them from listing their services on competing platforms. The investigation, announced in April 2021 and concluded with a RMB 3.44 billion fine in October 2021, focused on Meituan’s abuse of dominant market position in the Chinese food delivery market through exclusive dealing arrangements.

The Nature of Meituan’s Exclusive Dealing Practices

Meituan’s exclusive dealing practices operated through a combination of contractual provisions, financial incentives, and enforcement mechanisms that together created a powerful disincentive for merchants to multi-home (list their services on multiple platforms). The specific practices identified by SAMR included:

Exclusive cooperation agreements. Meituan required certain merchants — particularly high-volume restaurant chains and popular independent eateries — to sign exclusive cooperation agreements that contractually prohibited them from listing their menus on competitor platforms such as Ele.me (Alibaba’s food delivery platform). These agreements varied in duration from six months to three years and included penalty clauses for breach.

Commission rate differentials. Meituan offered merchants that accepted exclusive arrangements substantially lower commission rates (typically 15-18% of order value) compared to non-exclusive merchants (22-26%). The rate differential was large enough that many smaller restaurants with thin profit margins felt compelled to accept exclusivity to remain economically viable on the platform.

Priority listing and search placement. Exclusive merchants received preferential treatment in Meituan’s search results and recommendation algorithms, including higher rankings in relevant search categories, featured placement on the platform’s homepage, and better visibility during peak ordering hours. Non-exclusive merchants were algorithmically deprioritized, reducing their discoverability and order volumes.

Financial penalties and delinquency fees. Merchants that violated their exclusivity obligations by listing on competitor platforms faced financial penalties, including fines equal to several months of commission payments, suspension of advertising services, and in some cases, complete account deactivation. These enforcement mechanisms created significant economic risk for merchants considering multi-homing.

Delivery fee subsidies. Meituan cross-subsidized delivery fees for exclusive merchants, offering lower delivery charges to end consumers that ordered from these restaurants. This practice reinforced the competitive advantage of exclusive merchants and indirectly pressured non-exclusive merchants to accept exclusive terms.

SAMR’s Legal Analysis and Enforcement Approach

SAMR’s investigation of Meituan followed the analytical framework established in the Alibaba case but incorporated several refinements specific to the local services market. The legal analysis proceeded through three stages.

Market definition. SAMR defined the relevant market as “Chinese online food delivery platform services” distinguishing it from offline dining, self-pickup, and food delivery directly operated by restaurants. This market definition reflected the unique characteristics of platform-mediated food delivery, including the two-sided network effects connecting consumers and restaurants, the importance of real-time logistics coordination, and the distinct competitive dynamics of platform-based versus traditional food delivery.

Dominant market position assessment. SAMR found that Meituan held a dominant market position based on several factors: a market share of 67-72% in China’s food delivery market (substantially higher than Ele.me’s 25-30%); high barriers to entry driven by network effects and logistics infrastructure investment; and significant market power vis-a-vis merchants, who faced substantial switching costs and lacked countervailing buyer power.

Abuse finding. SAMR concluded that Meituan’s exclusive dealing practices constituted an abuse of dominant market position under Article 22 of the AML. The regulator found that the practices had the effect of excluding competitors from the market, reducing consumer choice, and raising barriers to entry. SAMR specifically noted that the practices prevented Ele.me and smaller competitors from achieving the scale necessary to effectively compete, thereby entrenching Meituan’s dominant position.

The Compliance Restructuring Program

Following the SAMR investigation and fine, Meituan implemented a comprehensive compliance restructuring program that transformed its approach to merchant relationships. The restructuring addressed both the specific violations identified by SAMR and the broader systemic issues that had enabled the anticompetitive conduct.

Termination of exclusive agreements. Meituan immediately terminated all exclusive cooperation agreements with merchants, releasing approximately 12 million merchants from exclusivity obligations. The company committed to not entering new exclusive agreements and to ensuring that all merchants were free to list their services on any platform of their choice.

Commission rate standardization. Meituan narrowed the commission rate differential between exclusive and non-exclusive merchants, moving to a more uniform fee structure based on objective factors such as order volume, order value, and delivery distance rather than exclusivity status. The company published transparent commission rate schedules and established a price review committee to ensure fairness and non-discrimination.

Algorithmic neutrality commitments. Meituan committed to algorithmic neutrality in search ranking and recommendation systems. The company published detailed criteria for search result placement, removed exclusivity status as a ranking factor, and agreed to regular third-party audits of its algorithmic systems to ensure compliance. An algorithm ethics committee was established with external expert participation.

Internal compliance restructuring. Meituan established a dedicated AML compliance department reporting directly to the CEO, with regional compliance officers in each major market. The compliance team was given authority to review and approve any merchant-facing policies, pricing changes, or promotional programs for AML compliance before implementation. The company also implemented a whistleblowing system for merchants to report potential compliance violations.

Remediation for affected merchants. As part of the settlement, Meituan established a fund to compensate merchants that had been financially harmed by the exclusive dealing practices. The company also provided fee waivers and advertising credits to affected merchants as part of the remediation program.

Impact on Platform Competition and Market Dynamics

The restructuring of Meituan’s exclusive dealing practices had significant effects on China’s local services platform market. Following the compliance reforms, multi-homing rates among food delivery merchants increased substantially. Industry data indicates that by mid-2022, approximately 35-40% of active merchants on Meituan were also listing on Ele.me, up from an estimated 15-20% before the investigation.

Competitive dynamics in the food delivery market also shifted. Ele.me gained market share in the months following the restructuring, reaching approximately 30-33% share by late 2022, while Meituan’s share declined to the 60-65% range. Smaller regional delivery platforms also saw modest growth, though they continued to face significant scale disadvantages in logistics and technology investment.

For consumers, the reforms produced mixed outcomes. Restaurant choice increased as more merchants offered their menus on multiple platforms, and promotional offers became more competitive as platforms competed more intensely for consumer attention. However, some consumers reported that delivery fees increased slightly as the cross-subsidies associated with exclusive merchant arrangements were phased out.

The case also had broader implications for China’s platform economy regulation. It established that the analytical framework developed in the Alibaba case would apply consistently across different types of digital platforms, from e-commerce marketplaces to local services platforms. It also demonstrated SAMR’s willingness to impose not only financial penalties but also detailed behavioral remedies requiring ongoing compliance monitoring.

Lessons for Digital Platforms on Compliance with China’s AML

The Meituan case offers several enduring lessons for digital platforms — both domestic and foreign — operating in China.

Exclusive dealing is high risk in platform markets. SAMR has clearly signaled that exclusive dealing arrangements by dominant platforms will be treated as per se violations of the AML. Platforms with significant market power should avoid contractual exclusivity provisions and should carefully examine whether incentive-based exclusivity (such as differential commission rates) has the same practical effect.

Algorithmic neutrality is now a regulatory expectation. SAMR’s focus on algorithmic fairness and transparency in the Meituan case reflects a broader regulatory trend toward algorithmic accountability. Platforms should expect scrutiny of their algorithmic systems for potential anticompetitive effects and should implement governance mechanisms to ensure algorithmic neutrality.

Compliance must be embedded in organizational structure. The Meituan case demonstrates that effective AML compliance requires more than policy changes — it requires structural changes to organizational governance, including independent compliance departments with real authority to influence business decisions.

Foreign platforms should take note. While Meituan is a Chinese domestic company, the principles established in this case apply equally to foreign digital platforms operating in China or whose operations affect Chinese merchants or consumers. Global platforms should review their exclusive dealing practices, algorithmic neutrality, and compliance governance structures against the standards established in the Meituan case.

Conclusion

The Meituan exclusive dealing case represents a watershed moment in China’s platform economy antitrust enforcement. It demonstrated that SAMR would apply the AML’s abuse of dominance provisions rigorously across the digital economy, including to local services platforms that had previously received less regulatory attention than large e-commerce marketplaces. The comprehensive compliance restructuring that Meituan implemented provides a template for how digital platforms can reform their business practices to align with AML requirements while maintaining competitive market positions.

The case also illustrates the evolving nature of competition compliance in China’s digital economy. Exclusive dealing, which was once a widely accepted business practice in China’s platform economy, is now clearly prohibited for dominant platforms. As SAMR continues to refine its enforcement approach through additional platform economy guidelines and implementing regulations, digital platforms should expect sustained scrutiny of their merchant relationship practices and should invest proactively in compliance infrastructure.