The fines have become the highest in the food safety sector since the relevant law was amended in 2015.
China’s market regulator has fined seven major online platforms a combined 3.6 billion yuan ($527.5 million) for “ghost kitchen” violations, including confiscation of illegal gains, as authorities move to address disorderly competition in the food-delivery sector.
The penalties come as competition in the sector is under closer scrutiny. In January, China announced that a market-wide competition investigation and assessment into the online food-delivery sector has been opened by the State Council's antimonopoly and anti-unfair competition commission office.
The State Administration for Market Regulation (SAMR) said the penalties address platforms’ failure to verify merchant qualifications and to stop practices such as undisclosed order outsourcing, which infringed consumer rights and created food-safety risks.
The fines cover Pinduoduo, Meituan, JD.com, Douyin and Alibaba’s Ele.me, Taobao and Tmall, with Pinduoduo receiving the largest penalty at more than 1.5 billion yuan.
SAMR also fined the platforms’ legal representatives and food-safety officers, with Pinduoduo’s legal representative receiving the largest individual penalty of more than 6.9 million yuan.
The penalties mark the largest imposed in the food safety sector since the Food Safety Law was revised in 2015.
Ghost kitchens
At the center of the cases is the proliferation of so-called “ghost kitchens,” particularly in cake delivery, where merchants operated without valid licenses or used falsified credentials, enabled by weak platform oversight.
According to the findings, the investigation uncovered more than 67,000 “ghost” stores and more than 3.6 million illegally outsourced cake orders across the platforms.
Many of the cases involved decorated cake vendors, where orders placed through branded storefronts were transferred through intermediaries to third-party producers without disclosure to consumers.
In one example cited by state media outlet Xinhua, a consumer paid 252.3 yuan for a cake order, while the actual producer received less than 80 yuan after platform fees and order transfers.
Official commentary linked the cases to “involution-style” low-price competition, saying aggressive outsourcing and platform fee-taking squeezed producers’ margins and undermined product quality.
It also described platforms as reluctant to tighten reviews for fear merchants would shift to rival platforms.
The cases themselves show how platforms enabled that model by allowing unlicensed sellers onto their marketplaces and by failing to act against merchants that transferred orders without informing consumers.
Penalties
SAMR applied a “one shop, one penalty” approach, treating each failure to verify a merchant as a separate violation. In JD.com’s case, fines were calculated on a per-store basis, with penalties of 10,000 yuan for shops without transactions and 50,000 yuan for those with transactions, reflecting differences in impact.
The regulator also imposed additional penalties for failing to act against illegal order outsourcing and confiscated related gains, bringing JD.com’s total penalty to about 634.9 million yuan.
Regulators imposed stricter penalties in cases involving repeat violations, with Meituan and Ele.me cited for prior offenses of a similar nature.
In Pinduoduo’s case, SAMR said the platform refused to provide required materials, submitted false information and obstructed the investigation, including an incident in which an enforcement officer was injured.
The regulator imposed fines of 160,000 yuan per non-compliant store, significantly higher than in other cases, helping explain why Pinduoduo received the largest overall penalty.
SAMR also imposed temporary bans on onboarding new cake shops for periods ranging from three to nine months.
Source: MLex
