Alibaba to pay $600M to settle allegations it allowed illegal drug and equipment sales

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WASHINGTON (AP) — The Chinese tech giant Alibaba will pay $600 million to resolve a dispute with the U.S. government over allegations that the Hangzhou-based firm sold and imported illegal pharmaceuticals, controlled substances, regulated chemicals, and pill-making equipment into the U.S.

Alibaba operates some of the world's largest e-commerce platforms, including Alibaba.com and AliExpress.com.

The U.S. alleges that Alibaba’s U.S.-based payment processor, AUS Merchant Services, violated federal law by failing to prevent merchants from selling and importing illegal products into the U.S. through Alibaba.com and AliExpress.com.

Alibaba acknowledges in an agreement with the Justice Department that between January 2016 and December 2024, it failed to stop roughly 80,000 product sales involving unlawful imports that violated the Federal Food, Drug, and Cosmetic Act and other federal laws.

A news release on the settlement resolution says that Alibaba employees raised concerns that the company’s compliance controls were inadequate and failed to prevent the sale of illegal products — and, in some instances, merchants used Alibaba’s messaging service to direct buyers to third-party messaging platforms to facilitate illegal sales.

In a statement, Alibaba said the firm and the U.S. government reached a mutually satisfactory resolution to bring stricter compliance to the sale of products in the U.S. by third-party merchants on its e-commerce platforms.

Law enforcement officers across the FDA, FDIC, IRS-CI, and other agencies conducted more than 40 undercover purchases of pharmaceuticals and equipment that were illegal to import into the U.S., according to the news release. A non-prosecution agreement was crafted between Alibaba and the Justice Department.

IRS Criminal Investigations' Chief Jarod Koopman said the resolution "underscores IRS Criminal Investigation’s commitment to following the money and ensuring that companies operating in the United States comply fully with federal law.”