Alibaba and its US payment processor will pay 600 million dollars to settle a DOJ probe into illegal drug sales

Alibaba and its US digital payment processor have agreed to pay 600 million dollars 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. Alibaba entered into a non-prosecution agreement to end a probe of alleged violations of the Federal Food, Drug, and Cosmetic Act between 2016 and 2024. The investigation was led by the DOJ and the US Attorney’s Office in Rhode Island.

Alibaba admitted that overseas customers used its platforms to make roughly 80,000 purchases of products that lacked approvals under US drug, device, or importation laws, with a combined value of more than 200 million dollars. The agreement did not specify the products by name, but the DOJ said they involved pharmaceuticals, regulated chemicals, and drug counterfeiting equipment. US agents conducted more than 40 undercover purchases of drugs and equipment that were illegal for import.

The company acknowledged that it “failed to prevent some third-party sellers from circumventing controls and measures” on its platform and using it to sell and import goods into the US in violation of federal law. Alibaba employees had raised concerns internally about compliance measures and filtering systems that were not catching the illegal sales, the company admitted.

The settlement also involves AUS Merchant Services, a unit of Ant International that operates Alipay. AUS admitted that 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 deal comes at a difficult moment for Alibaba in Washington. 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, the largest distillation campaign it has disclosed. Alibaba has also sued the Pentagon to remove itself from a roster of Chinese military companies, a designation that has already prompted several lobbying firms to cut ties with the company.

Alibaba said in a statement that 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 600 million dollar penalty is among the largest the DOJ has secured against a Chinese technology company for platform compliance failures, and it adds another front to the regulatory pressure Alibaba faces as it tries to maintain its US business relationships.