How one disappointing order uncovered a massive ‘ghost cake’ delivery scandal in China
A Disappointing Cake Order Unearths a Major ‘Ghost Vendors’ Scandal in China
When a Beijing resident, Liu, received a birthday cake adorned with an unpalatable flower, he unwittingly triggered a nationwide probe that exposed a vast network of fraudulent food delivery operators. The incident, reported by state media, revealed that Liu had ordered the dessert through an online platform, only to find it lacking in quality. His complaint led regulators to uncover a deceptive bakery chain with nearly 400 outlets, all operating without physical stores or valid licenses.
The Hidden Supply Chain
Investigators discovered a shadowy system where vendors would collect payments from customers and resell orders to third-party producers via intermediaries. The lowest bidder, often a “ghost” merchant, fulfilled the request, while the platform retained a 20% fee. This practice left real bakers with minimal profits and compromised food safety. Over 67,000 such vendors, responsible for selling 3.6 million cakes, were identified in the probe, according to Xinhua.
Regulatory Crackdown and Fines
The State Administration for Market Regulation concluded that seven major delivery platforms, including Temu’s parent company PDD, Alibaba, Douyin, Meituan, and JD.com, failed to verify vendors properly. A combined penalty of 3.6 billion yuan ($528 million) was imposed, the highest since the 2015 amendment to China’s food security law. The fine targets the platforms’ role in enabling unchecked price competition, which has driven businesses into a cycle of sacrificing quality for cost-cutting.
“Food and beverage businesses have been forced to sacrifice quality and compress margins, pushing the entire industry into a vicious cycle of losing money just to generate volume,” wrote an Economic Daily commentary, highlighting the economic strain of relentless price wars.
During the 10-month investigation, regulators faced resistance from delivery service staff, including instances of employees passing cryptic notes to avoid speaking. One employee, questioned during the probe, was handed a crumpled A4 paper with the message “stay silent” by a colleague before officials noticed. These tactics underscore the scale of the deception.
Analysts note that while the government’s intervention has begun to ease unhealthy competition, platforms may adapt by shifting subsidies or prioritizing speed over safety. Flora Chang of S&P Global Ratings suggested the fines could encourage a focus on quality, signaling a potential shift from the destructive cycle of price cuts. However, recovery in profitability remains a long-term challenge.
Illustrating the scale, Xinhua cited an example where a consumer paid 252 yuan ($35) for a six-inch cake, only for the order to be sold to a bidder offering as little as 80 yuan. The “ghost” merchant pocketed nearly half the price, leaving the actual baker with a meager 30% profit. Han Bing, a regulator, called this a “new form of industrialized illegal activity,” emphasizing its systemic impact.
