China Targets "Ghost Kitchens" Amid Food Safety Concerns

Chinese authorities have taken aim at a new target as they rein in the country's cut-throat food delivery industry: "ghost kitchens", or restaurants that don't actually exist but appear on apps.

The "ghost kitchens" outsource orders to third-party vendors, which fulfill them at lower costs, allowing merchants to push down prices and maximise profits.

Authorities have found thousands of these "ghost kitchens" across China, raising concerns that the cheap prices are coming at the cost of food safety.

Starting this week, apps must verify restaurants' licences and addresses, while merchants must ensure the listing online matches the physical business and specify if it offers dine-in services.

The scrutiny of "ghost kitchens" began last year, after a man in Beijing lodged a complaint over an unsatisfactory cake topped with inedible flowers. He had ordered it on a food delivery app, state media reported.

Officials found that the cake chain he had ordered from listed nearly 380 locations on major e-commerce platforms but did not have a single physical store. Its online shops also allegedly used forged business licences.

As the investigation continued, it revealed that the chain accepted orders which were then transferred to a different platform - and that is where the orders were outsourced to various third-party vendors, depending on who had the lowest bid.

Authorities found a total of 3.6 million cake orders across two order-transfer platforms, state news agency Xinhua reported last month.

They also recorded 67,000 "ghost shops" across seven major food delivery apps, which together with the order-transfer sites "formed an illegal supply chain through mutual collusion", according to Xinhua.

Food delivery platforms were complicit in these arrangements, it added. "If we're too strict in our review, the merchants would go to other platforms," a staff member from one delivery app reportedly told officials.

Last year, a price war among major delivery apps led to government warnings about a race to the bottom. Bearing the brunt of ever-speedier takeouts are delivery riders scrambling to meet tight deadlines for a pittance.

In April, the State Administration for Market Regulation said that they have fined seven e-commerce platforms - including Taobao, JD.com, Meituan and Pinduoduo - a total of 3.6bn yuan ($530m; £400m), mostly over deliveries from "ghost kitchens".

As the campaign against "ghost kitchens" continues, merchants are trying to assure consumers of food safety.

According to a Xinhua report, more than 20 takeout stalls in the eastern city of Hangzhou have installed "transparent kitchens" with live broadcasting features, allowing consumers to view food preparation in real time.