Chinese platforms fined 3.6b yuan for food safety violations amid cutthroat rivalry

China’s State Administration for Market Regulation (SAMR) has levied more than 3.6 billion yuan (US$527.3 million) in fines on seven e-commerce and food delivery platforms and their representatives following an investigation, the regulator announced on Friday. SAMR said the seven platforms, which included retail and food delivery mainstays Pinduoduo (PDD), Meituan and JD.com, failed to properly verify food vendor licences and knowingly allowed unverified “ghost” catering services to operate. The other platforms fined included Alibaba Group Holding’s Taobao Shangou, ByteDance’s Douyin and Alibaba’s Taobao and Tmall marketplaces. PDD received the heaviest penalties, with illegal gains of 5.85 million yuan confiscated and a fine of 1.51 billion yuan imposed. The company was also slapped with a nine-month suspension on adding new bakery merchants – as they were a hotbed for malpractice – after the regulator found 9,463 outlets operating without licences or beyond their permitted scope, according to released documents. The regulatory action follows an extended period of cutthroat competition, which started early last year, that drove down prices and stalled profit-making at China’s food delivery platforms. The state of “involution” led to the SAMR last July ordering Meituan, Alibaba and JD.com to engage in “rational competition”, but the discounts did not stop. Shares of US-listed PDD rose more than 3 per cent in pre-market trading following the announcement, while US-listed shares of Alibaba gained around 0.7 per cent and JD.com added 0.4 per cent. In Hong Kong, Meituan closed 2.54 per cent lower on Friday. PDD said it “sincerely accepts” the penalty and would “strictly comply”. Meituan said it would “firmly crack down” on unverified merchants. Both said they would further improve their internal operations. JD.com, Alibaba and Douyin’s parent company ByteDance did not immediately respond to a request for comment on Friday. Alibaba owns the South China Morning Post. “Ghost” catering services typically lack a proper dine-in area, but are able to get listed on major food delivery platforms by renting business licences, using fake addresses, or faking photos of their stores. The conduct violated China’s e-commerce law, as well as food safety laws and regulations, the regulator said. The fines and forfeitures on the companies amounted to 3.6 billion yuan, while legal representatives and food safety directors of the enterprises were also fined a combined total of 19.7 million yuan, it said. The fine “marked a milestone” as it was “the most severe penalty ever imposed in the history of China’s internet regulation” regarding food safety issues in food delivery, said Li Chengdong, founder and chief analyst at e-commerce consultancy Dolphin. The “ghost takeaways” were a “serious issue”, and the result of an “unregulated rat race within the industry”, Li added. The move “creates an environment of fair competition for compliant food service businesses” and pushed the industry “from unregulated expansion to standardised development”, said Chen Liteng, an analyst at market consultancy 100ec.cn. It would also force the platforms to “increase their investment in compliance and improve the mechanisms for merchant onboarding”, he added. Meituan held 65 per cent of the food delivery market in 2024, with Ele.me – later rebranded as Taobao Shangou – a distant second at 33 per cent, according to Bocom International, leaving just 2 per cent for all others combined. Regardless of the price wars, analysts believed the industry landscape would not alter much. Meituan would continue to dominate China’s food delivery market with a 75 per cent share in terms of gross transaction value by 2030, according to Morgan Stanley. Jay Lau, analyst at S&P Global Ratings, said last year that the margins of the three major platforms “would not recover over the next 12 to 24 months”. He estimated that Meituan, Alibaba and JD.com would spend at least 160 billion yuan within the next 12 to 18 months to grab or defend market share in food delivery and instant commerce. The irrational competition also got the attention of the State Council, the country’s cabinet, which in January announced a market competition probe and assessment of the food delivery platforms. “Recently, issues such as excessive subsidies, price wars and control over traffic flow in the online food delivery platform service industry have become prominent,” according to a statement issued then by the Anti-Monopoly and Anti-Unfair Competition Commission. No update has since been disclosed.

Chinese platforms fined 3.6b yuan for food safety violations amid cutthroat rivalry

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The fines follow a period of intense competition that drove down prices and stalled profit-making at China’s food delivery platforms

The fines follow a period of intense competition that drove down prices and stalled profit-making at China’s food delivery platforms