Alibaba and its U.S. digital payment processor have 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 on Wednesday.
A $600 Million Penalty for E-Commerce Failures
The non-prosecution agreement, struck with the U.S. Attorney’s Office in Rhode Island, mandates Alibaba and AUS Merchant Services—a unit of Ant International that operates Alipay—to pay $600 million. The deal resolves claims that the companies failed to stop the sale and importation of unapproved pharmaceuticals, regulated chemicals, and drug counterfeiting equipment. U.S. agents conducted over 40 undercover purchases of drugs and equipment that were illegal for import, the DOJ confirmed.
Alibaba Admits 80,000 Unapproved Purchases
Alibaba acknowledged that overseas customers used its platforms to make approximately 80,000 purchases of unapproved products, valued at over $200 million. The company admitted it “failed to prevent some third-party sellers from circumventing controls and measures” to sell goods violating U.S. drug, device, and importation laws. Internal concerns about inadequate compliance measures and filtering systems were raised by employees, according to the DOJ.
AUS Merchant Services’ Role in Payment Facilitation
AUS Merchant Services admitted its anti-money laundering programme “failed to prevent some Alibaba merchants from using its payment processing and settlement services to facilitate the sale and importation of prohibited products into the United States,” the DOJ said. The settlement includes both Alibaba and AUS Merchant Services as parties to the agreement.
A Penalty in U.S.-China Tech Tensions
The $600 million penalty is among the largest the DOJ has secured against a Chinese technology company for platform compliance failures. It adds to regulatory pressures facing Alibaba, which has sued the Pentagon to remove itself from a roster of Chinese military companies. Anthropic accused Alibaba last month of using roughly 25,000 fake accounts and nearly 29 million exchanges to extract capabilities from its Claude AI model, marking another layer of scrutiny for the tech giant.
Alibaba’s Pledge to Strengthen Compliance
In a statement, Alibaba said the settlement will bring “stricter compliance to the sale of products in the United States by third-party merchants on its e-commerce platforms.” The company emphasized its commitment to addressing compliance issues but did not comment on the broader regulatory challenges it faces in the U.S.
The case highlights ongoing tensions between U.S. regulators and Chinese tech firms, particularly around platform accountability and cross-border trade violations. The DOJ’s investigation underscores the agency’s focus on ensuring e-commerce platforms adhere to federal laws governing pharmaceuticals and controlled substances.
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