AliExpress slapped with record $629M EU fine over illegal products

The European Union has imposed a record fine of 550 million euros ($629 million) on Alibaba Group’s AliExpress platform for failing to address the sale of illegal, unsafe, and counterfeit goods on its site. This marks the largest penalty ever levied under the EU’s Digital Services Act (DSA). The European Commission announced the decision on Monday, citing systemic failures in how AliExpress assessed and mitigated risks associated with illegal product listings. The fine follows a formal charge against AliExpress in June of last year, when the Commission alleged the company did not meet DSA requirements to evaluate and reduce the risks of spreading illegal content. The regulator gave the platform until October 20 to submit a plan for corrective action. If these measures fail to satisfy the Commission by December, additional penalties could follow. EU technology policy chief Henna Virkkunen emphasized the dangers posed to consumers by the unchecked proliferation of illegal items on such large-scale platforms. She noted that AliExpress had nearly 193 million users in Europe in 2023—surpassing competitors like Shein (156 million users) and Temu (130 million users). Both Shein and Temu have faced scrutiny under the DSA, with Temu already receiving a 200 million euro fine earlier this year. Virkkunen added that approximately one in five Europeans shops monthly from these three platforms, underscoring the scale of the issue. AliExpress responded to the fine by stating it disagreed with the decision, calling the penalty “disproportionate” and claiming it fails to account for the company’s existing compliance frameworks and recent improvements. In a statement, the firm said it would review the ruling and consider all legal avenues available to challenge it. The company previously avoided a potential fine of up to 6% of its global annual revenue in June 2023 after agreeing to implement measures to combat the spread of potentially illegal and adult content. According to the European Commission, AliExpress failed to ensure adequate staffing for monitoring risks and overestimated the effectiveness of its content detection systems. The regulator criticized the platform’s recommendation algorithms and advertising mechanisms for promoting illegal products rather than suppressing them. Additionally, the company relied too heavily on a single metric to gauge the success of its moderation efforts, leading to gaps in identifying and removing unlawful listings. The Commission highlighted that the presence of counterfeit goods, hazardous children’s toys, and unsafe cosmetics on AliExpress persisted for extended periods due to these shortcomings. It also pointed to the ineffectiveness of the platform’s internal enforcement policies, which allowed sanctioned sellers to continue offering illegal products despite penalties. The mandatory brand authorization system designed to curb counterfeiting was found to be understaffed and easily bypassed by unscrupulous vendors. The regulator acknowledged that the novelty of the DSA played a role in determining the final amount of the fine, suggesting it might have been even larger. This penalty far exceeds previous DSA-related fines, including the 120 million euro penalty imposed on Elon Musk’s social media platform X in December 2023 and the 200 million euro fine levied against Temu in May of this year. The case underscores the growing regulatory pressure on major e-commerce platforms operating within the EU. As digital marketplaces expand their reach, regulators are increasingly scrutinizing their ability to enforce compliance with laws aimed at protecting consumer safety and intellectual property rights. With the implementation of the DSA still in its early stages, this ruling sets a precedent for future enforcement actions against other large online retailers.