TL;DR
Alibaba and its US payments arm will pay $600 million to resolve a Justice Department investigation into illegal sales of pharmaceuticals on its e-commerce platform.
Alibaba and its US digital payments processor agreed to pay $600 million to resolve a federal investigation into whether they failed to prevent the sale and importation of illegal pharmaceuticals and controlled substances, the Justice Department said Wednesday. Alibaba entered into a non-prosecution agreement to end an investigation into alleged violations of the Federal Food, Drug, and Cosmetic Act between 2016 and 2024. The investigation was led by the Department of Justice and the U.S. Attorney’s Office in Rhode Island.
Alibaba admitted that foreign customers used its platforms to make approximately 80,000 purchases of products that lacked approval under U.S. drug, device or import laws, with a combined value of more than $200 million. The settlement did not specify the products by name, but the Justice Department said they involved pharmaceuticals, regulated chemicals and counterfeit drug equipment. US agents made more than 40 undercover purchases of drugs and equipment that were illegal to import.
The company acknowledged that “failed to prevent some third-party sellers from circumventing controls and measures” on its platform and using it to sell and import goods into the US in violation of federal law. Alibaba employees had internally raised concerns about compliance measures and filtering systems that failed to detect illegal sales, the company admitted.
The deal also involves AUS Merchant Services, a unit of Ant International that operates Alipay. AUS admitted that its anti-money laundering program “did not prevent some Alibaba merchants from using their payment processing and settlement services to facilitate the sale and import of prohibited products into the United States,“said the Department of Justice.
The deal comes at a difficult time for Alibaba in Washington. Anthropic accused Alibaba last month of using approximately 25,000 fake accounts and nearly 29 million exchanges to extract capabilities from its Claude AI model, the largest distillation campaign it has ever revealed. Alibaba also has sued the Pentagon withdraw from a list of Chinese military companies, a designation that has already sparked several lobbying companies to cut ties with the company.
Alibaba said in a statement that the deal will bring “stricter enforcement of the sale of products in the United States by third-party merchants on their e-commerce platforms.The $600 million fine is among the largest the Justice Department has obtained against a Chinese technology company for platform compliance failures, and adds another layer to the regulatory pressure Alibaba faces as it tries to maintain its business relationships with the United States.
