In the wake of a record-breaking $2.8 billion fine on Alibaba for abusing a monopoly position in e-commerce, regulators have announced a fine on a somewhat smaller Chinese tech firm: the food delivery app Sherpa’s, or as it’s known to insiders, “Big English-Language, Shanghai-based Food Delivery.” Local market regulators announced a fine of about $180,000 Monday that went lightly viral for the depth of its antitrust reasoning.
What’s a market? Antitrust cases often hinge on defining a market—in fact, until Saturday it was an open question whether there was such a thing as the Chinese e-commerce market. Now we know that there is both a Chinese e-commerce market and an English-language Shanghai food delivery market.
- The State Administration for Market Regulation (SAMR), China’s top trustbuster, argued that e-commerce is “non-interchangeable with offline marketplaces” in order to define the market Alibaba was alleged to monopolize.
Geeking out: In the Sherpa case, local antitrust regulator Shanghai Municipal Administration for Market Regulation (SMAMR) cited polls of foreign residents, app design, and the interior decorating of restaurants to prove that delivering food to foreigners in Shanghai is a discrete market, in a statement of 15,727 Chinese characters and seven charts, and jam-packed with economic formulas.
- The regulator argued that the app does not compete with Chinese food delivery leaders Meituan and Ele.me because it exists in a separate English-language market.
- Sherpa’s grabbed 99.8% daily orders in the English-language food delivery market in the first ten months in 2019, according to the statement.
- Around 76% of foreigners living in China only use food delivery platforms that provide an English user interface because of language barriers, SMAMR cited a “relevant market research report” as saying.
- The app’s user interface, SMAMR argues, had “thoroughly taken into account western culture“ with design decisions including avoiding the color red, which is “considered to be festive by Chinese users but seen as a warning color in Western countries.”
Details: Sherpa’s was fined RMB 1.2 million (around $178,500), or 3% of the company’s revenue in 2018, SMAMR said in a statement (in Chinese) on Monday. The fine was issued in December 2020, it said.
- The regulator said Sherpa’s had “utilized its position of market dominance” to charge excessive delivery fees to users and commissions to restaurants.
- Sherpa’s could not immediately be reached for comment.
Context: China’s tech antitrust spree started in November as SAMR imposed antitrust-related fines on three acquisition deals involving Alibaba, Tencent, and parcel service SF Express, a move that legal experts described as the country’s first batch of antitrust enforcements against tech firms.
- SAMR said on Saturday it had issued a $2.8 billion fine on Alibaba for antitrust practices including “forced exclusivity.” The fine is the largest antitrust penalty ever issued in China.