Alibaba Group and its US-based payment processor AUS Merchant Services have agreed to pay a combined $600 million under separate non-prosecution agreements with the US Department of Justice (DOJ), resolving allegations that the two companies failed to prevent the sale and import of illegal pharmaceuticals and related products into the United States through Alibaba's online marketplaces. The settlement, announced on 2 July, is one of the largest e-commerce compliance penalties in recent US legal history.

What the Settlement Covers

Under the agreements, Alibaba will pay a $125 million criminal penalty and forfeit $200 million, while AUS Merchant Services will pay an $85 million criminal penalty and forfeit $190 million, bringing the combined total to $600 million.

The DOJ said Alibaba admitted that between January 2016 and December 2024, it failed to stop merchants on Alibaba.com and AliExpress from completing approximately 80,000 sales involving pharmaceuticals, listed chemicals, and pharmaceutical counterfeiting equipment imported into the US in violation of federal law. The combined gross merchandise value of those transactions reportedly exceeded $200 million.

How the Violations Occurred

Federal agents conducted more than 40 undercover purchases of illegal pharmaceuticals and counterfeiting equipment during the investigation. Despite Alibaba having internal policies that prohibited such products, the DOJ noted that company employees had raised concerns that compliance controls were inadequate.

Some merchants also used Alibaba's internal messaging service to facilitate unlawful transactions and, in certain cases, directed buyers to encrypted third-party messaging platforms to evade detection. Alibaba acknowledged earning revenue from these merchants through membership, advertising, marketing, shipping, and payment-processing fees.

AUS Merchant Services admitted that between January 2020 and December 2023, its anti-money laundering compliance programme failed to flag transactions by Alibaba merchants selling prohibited products to US buyers. Its transaction monitoring system did not incorporate certain wire-transfer data, leaving payments from high-risk jurisdictions or involving multiple payers undetected. In some instances, merchants continued selling prohibited products even after AUS had investigated and reported them to Alibaba.

What the DOJ Said

Assistant Attorney General Brett A. Shumate of the DOJ's Civil Division said: 'Today's resolution reflects the Department of Justice's commitment to ensuring that companies operating e-commerce and digital payment platforms keep illegal, unapproved, misbranded, and dangerous foreign pharmaceuticals off their marketplaces. 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.'

Assistant Attorney General Tysen Duva of the Criminal Division added: 'Without active compliance, criminals use e-commerce sites to carry on and profit from illicit activity.' Duva noted that both Alibaba and AUS had 'documented steps taken to improve their screening and compliance and provided a commitment to ongoing cooperation with US law enforcement in the future. As a result, another channel for illegal pharmaceuticals and associated equipment is now closed.'

Compliance Commitments Going Forward

Under the non-prosecution agreements, both companies accepted responsibility for the conduct of their officers, directors, employees, and agents. They have also agreed to strengthen compliance systems, improve transaction monitoring, and continue cooperating with US authorities in any ongoing or future investigations.

Alibaba, founded in China in 1999, operates Alibaba.com — one of the world's largest business-to-business online marketplaces — and AliExpress, a global consumer shopping platform. The company is listed on both the New York Stock Exchange and the Hong Kong Stock Exchange. This settlement signals that US regulators are increasingly willing to pursue foreign-headquartered platforms over domestic marketplace violations, a precedent that could reshape compliance standards across global e-commerce.