Alibaba and its US payment processor will pay $600 million to resolve a DOJ investigation into unlawful drug sales.

Alibaba and its US payment processor will pay $600 million to resolve a DOJ investigation into unlawful drug sales.

      Alibaba and its US payment subsidiary will pay $600 million to settle a Department of Justice (DOJ) investigation into illegal pharmaceutical sales on its e-commerce platform. The DOJ announced on Wednesday that Alibaba, along with its US digital payment processor, has reached an agreement to resolve a federal inquiry regarding their failure to prevent the sale and importation of unauthorized pharmaceuticals and controlled substances. As part of a non-prosecution agreement, Alibaba will conclude the investigation into alleged violations of the Federal Food, Drug, and Cosmetic Act from 2016 to 2024, which was spearheaded by the DOJ and the US Attorney’s Office in Rhode Island.

      Alibaba acknowledged that customers outside the US used its platforms for approximately 80,000 purchases of products that did not have the necessary approvals according to US drug, device, or importation laws, totaling over $200 million. While the specific products were not identified, the DOJ mentioned they related to pharmaceuticals, regulated chemicals, and equipment for drug counterfeiting. US agents executed more than 40 undercover purchases of illegal drugs and equipment intended for importation.

      The company admitted to failing to stop some third-party sellers from bypassing its controls and measures on the platform, allowing them to sell and import goods into the US contrary to federal law. Alibaba disclosed that employees had raised concerns about compliance measures and filtering systems that were ineffective in detecting these illegal sales.

      The settlement also involves AUS Merchant Services, a branch of Ant International that operates Alipay, which conceded that its anti-money laundering program “failed to prevent some Alibaba merchants from using its payment processing and settlement services to aid the sale and importation of restricted products into the United States,” as noted by the DOJ.

      This agreement comes at a challenging time for Alibaba in Washington. Last month, Anthropic accused the company of utilizing around 25,000 fake accounts and nearly 29 million transactions to extract capabilities from its Claude AI model in what has been characterized as the largest distillation campaign revealed to date. Alibaba has also initiated legal action against the Pentagon to be removed from a list of Chinese military companies, a designation that has already led several lobbying firms to sever ties with the company.

      Alibaba stated that the settlement will enforce “stricter compliance regarding the sale of products in the United States by third-party merchants on its e-commerce platforms.” The $600 million penalty is one of the largest the DOJ has imposed on a Chinese technology firm for compliance deficiencies, adding to the regulatory challenges Alibaba faces as it seeks to sustain its relationships in the US market.

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Alibaba and its US payment processor will pay $600 million to resolve a DOJ investigation into unlawful drug sales.

Alibaba acknowledged that its platform did not stop 80,000 illegal pharmaceutical transactions amounting to more than 200 million dollars from 2016 to 2024.