Additional Coverage:
- DOJ says Alibaba failed to stop illegal pharmaceuticals and banned goods from reaching US buyers (foxbusiness.com)
Chinese e-commerce powerhouse Alibaba has reached a $600 million settlement with the U.S. Department of Justice (DOJ) after acknowledging it failed to stop the sale of tens of thousands of illegal products on its platforms. The agreement includes a non-prosecution deal addressing allegations that Alibaba and its U.S.-based payment processor, AUS Merchant Services, allowed the importation of unlawful pharmaceuticals, controlled substances, regulated chemicals, and pill-making equipment into the United States.
According to the DOJ, between January 2016 and December 2024, approximately 80,000 illegal product transactions on Alibaba’s marketplaces violated federal laws, including the Federal Food, Drug, and Cosmetic Act. These illicit sales generated over $200 million in gross merchandise value.
Court documents reveal that Alibaba’s monitoring systems did not fully utilize certain wire transfer data, causing the company to overlook some high-risk transactions. In one notable case, a merchant continued to sell prohibited goods to U.S. customers despite prior investigations and reporting by AUS Merchant Services.
The DOJ’s investigation involved more than 40 undercover purchases of illegal pharmaceuticals and counterfeit pharmaceutical equipment, underscoring the scope of the compliance failures.
AUS Merchant Services, formerly known as Alipay U.S., also admitted to lapses in its anti-money laundering controls. Both Alibaba and AUS Merchant Services have agreed to enhance their compliance programs and maintain ongoing cooperation with federal authorities.
Assistant Attorney General Brett A. Shumate emphasized the importance of accountability, stating, “Companies operating online marketplaces-whether based in the United States or abroad-must implement appropriate safeguards to prevent bad actors from exploiting their platforms. If they fail to do so, the Department will hold them accountable.”
Alibaba expressed full cooperation throughout the regulatory process and reaffirmed its commitment to implementing stricter controls on third-party merchant sales in the U.S. “This settlement reflects a thorough regulatory process with Alibaba’s full cooperation and our commitment to best-in-class standards of control, policies, and measures against non-compliant product sales,” a company spokesperson said.
Under the terms of the settlement, Alibaba will pay a $125 million criminal fine and forfeit $200 million, while AUS Merchant Services will pay an $85 million criminal fine and forfeit $190 million. Both entities will also strengthen their compliance programs as part of the agreement.