Chinese food delivery stocks were subdued on Monday after regulators imposed hefty penalties on major platforms over so-called “ghost deliveries”, heightening concerns over tighter scrutiny in the fast-growing sector.

China’s market regulator said it had fined and confiscated a total of 3.6 billion yuan ($527 million) from several major platforms, including Meituan, JD.com, and Alibaba’s food delivery unit, citing violations related to food safety and consumer protection.

Hong Kong-listed Meituan (HK:3690) shares fell 1.4%, while the JD.com (HK:9618) stock edged 0.4% lower, in comparison to Hang Seng index rising nearly 1%.

Alibaba Group (HK:9988) shares rose 1.3%.

Authorities found that platforms failed to properly verify vendor licences and allowed unregistered “ghost shops” to operate, in some cases, enabling deliveries from unverified sources or transferring orders without customer knowledge.

The probe also uncovered practices where orders were transferred between vendors without customer knowledge, raising concerns about transparency and safety standards. 

The penalties, among the largest imposed on China’s food delivery sector, underscore Beijing’s growing focus on regulating “instant retail” services, where intense competition and rapid expansion have raised compliance risks.