Trip.com Group shares plunged on Thursday, after China’s leading market regulator announced that it has opened an investigation against the online travel service provider. This was the steepest drop in the stock since the Hong Kong listing of the company in 2021.
Trip.com, the stock that fell the most in Hong Kong during the session, was the lowest performing company on the Hang Seng Index.
This decline was a result of a drop overnight by 17% in American Depositary Receipts (ADRs) issued by the company in New York.
This sale put shares on track for the worst day since April 2021, when they first listed.
According to CNBC’s translation, the State Administration for Market Regulation in China (SAMR), announced late on Wednesday that it is investigating Trip.com for “suspected misuse of its dominant position on the market and monopolistic practice.”
Markets react sharply to antitrust investigation
At the time this article was written, Trip.com shares listed in Hong Kong were worth around $457.6 Hong Kong Dollars. They had lost about a fifth.
The market data revealed that the drop erased in one day tens billions in Hong Kong dollar’s worth of capitalization.
The regulator stated that it began the investigation after initial investigations.
Trip.com confirmed that it received an official notice of investigation by SAMR. It said it will “actively” cooperate with the authorities and added that it’s business was operating as normal.
This investigation is similar to previous enforcement actions taken against large Chinese technology companies.
Alibaba Group was fined a record 18,2 billion yuan (US$2.8 billion) by SAMR in 2021 after being found guilty of unfair monopolistic business practices. This case marked the beginning of Beijing’s regulation of online platforms.
Pricing practices flagged by analysts could lead to fines
Nomura analysts said that the Trip.com investigation could have been motivated by hoteliers’ concerns about Trip.com’s ability to influence pricing.
Nomura reports that some hoteliers are unhappy with Trip.com for its interference in the pricing of hotel rooms and in some cases their insistence to maintain lower prices than those on other travel platforms.
According to China’s Antitrust Law, companies that are found guilty of abusing a dominant position on the market can be fined between 1% and 10 percent of their previous-year revenue.
Citi analysts calculated that this could result in a fine between $490 million and $4.9 billion, which is roughly $700 to $70 millions, for Trip.com.
Nomura says the investigation will not fundamentally affect Trip.com’s dominance in China’s on-line travel market.
The bank stated that this could reduce the influence of the company over independent hotels who rely on travel agents online for a large part of their customer traffic.
Tourism outlook remains strong despite scrutiny
Trip.com, the world’s largest travel website by market cap in Asia and the second-largest worldwide.
It has invested in the UK flight aggregator Skyscanner as well as Indian travel agency MakeMyTrip and other Chinese travel companies.
This investigation comes as China’s tourist sector continues to recover and expand.
China Trading Desk, a travel marketing and technology company, estimates mainland Chinese tourists will take between 165 to 175 millions cross-border journeys in 2026. This is up from the estimated 155 to 165 million trips last year.
The domestic travel market has grown steadily.
The travel consultancy Dragon Trail International reported that by 2025, there will be 501 millions Chinese who have traveled within China during the Chinese holiday season. This represents a growth of 5.9% on an annual basis.
The tourism spending in the same period increased by 7% to 6.77 billion Yuan.
Travel demand is likely to increase as the Chinese New Year, which will be celebrated between February 5 and 23, comes into focus.
The post Trip.com share price tumbles after China launches antitrust investigation into travel giant could be updated as new information becomes available
