The allegations centred on violations of the US Federal Food, Drug, and Cosmetic Act. Prosecutors said merchants used Alibaba’s e-commerce platforms to sell and import products that were illegal, unapproved, misbranded or dangerous.
Alibaba operates major global marketplaces including Alibaba.com and AliExpress.com, giving the case a familiar modern problem: enormous platforms, millions of listings and compliance systems asked to keep pace with all of it. Not exactly a low-traffic corner shop.
Undercover purchases and internal concerns
US law enforcement officers from multiple government agencies carried out more than 40 undercover purchases during the investigation, according to the Justice Department. Those purchases included pharmaceuticals and equipment that were illegal to import into the US.
The department also said Alibaba employees at times raised concerns internally about whether illegal products were being sold and whether the company’s compliance measures were inadequate to stop those sales.
That detail matters because the case was not framed only as a bad-merchant problem. Prosecutors described gaps in the company’s controls, policies and enforcement, not merely a few sellers slipping through a digital net the size of a continent.
Payment processor also faulted
AUS Merchant Services, Alibaba’s US-based payment processor, was also included in the settlement. The US government said its anti-money laundering compliance programme failed to prevent some merchants from using its services to facilitate the sale and importation of banned products.
Anti-money laundering rules are meant to stop payment systems from being used to support illegal trade or disguise unlawful proceeds. In this case, authorities said the processor’s controls did not adequately block transactions tied to prohibited goods.
The settlement requires both companies to improve compliance programmes, though the Justice Department did not frame the agreement as the end of scrutiny for the sector. If anything, it reads like a reminder to large digital marketplaces that scale is not a defence strategy.
Alibaba says it cooperated
Alibaba said in a statement that the settlement followed a thorough regulatory process and reflected its cooperation with US authorities.
“This settlement reflects a thorough regulatory process with Alibaba’s full cooperation and our commitment to best-in-class standards of control, policies, and measures against non-compliant product sales,” the company said.
Assistant US Attorney General Brett Shumate said the resolution showed the Justice Department’s focus on online marketplaces and payment platforms.
“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,” Shumate said.
The broader message is straightforward enough: when a marketplace becomes global infrastructure, regulators expect the back-end controls to act like infrastructure too, not like optional decoration.
