Alibaba Group Holding Ltd. and U.S.-based payment processor AUS Merchant Services agreed to pay $600 million under a non-prosecution agreement to resolve allegations they failed to stop illegal pharmaceuticals and banned goods from reaching U.S. buyers through Alibaba’s online marketplaces. The settlement addresses claims that the companies' platforms facilitated transactions for items violating the Federal Food, Drug, and Cosmetic Act and other federal laws. This resolution concludes an investigation into compliance mechanisms, resolving claims without the companies admitting to the allegations.

According to the U.S. Department of Justice (DOJ), merchants using Alibaba.com and AliExpress carried out roughly 80,000 unlawful sales involving imports into the U.S. between January 2016 and December 2024. The sales included illegal pharmaceuticals, controlled substances, regulated chemicals, and pharmaceutical counterfeiting equipment, with a combined gross merchandise value exceeding $200 million. Federal investigators conducted more than 40 undercover purchases of illegal drugs and pill-making equipment during the probe.

Compliance Failures

The DOJ stated that Alibaba’s internal controls were not strong enough to prevent prohibited sellers from using its platforms. It also noted that some merchants used Alibaba’s private messaging tools and third-party encrypted apps to facilitate unlawful transactions. AUS, formerly known as Alipay U.S., admitted weaknesses in its anti-money-laundering compliance program. Court documents indicated the company failed to fully incorporate certain wire-transfer data into its transaction monitoring systems, causing it to miss some high-risk transactions. In at least one case, a merchant continued selling prohibited goods after being flagged.

Settlement Breakdown

The resolution involves a financial penalty and underscores the regulatory scrutiny on e-commerce platforms regarding product listings. The following table outlines the primary components of the agreement:

Both companies agreed to strengthen compliance controls and continue cooperating with federal investigators. Assistant Attorney General Brett A. Shumate emphasized that companies operating online marketplaces must implement safeguards to stop bad actors from exploiting their platforms. Alibaba said it cooperated fully with the investigation and called the settlement a mutually satisfactory resolution.

Broader Scrutiny

The settlement comes as Alibaba faces broader scrutiny in the U.S. Last month, AI startup Anthropic accused the company of using thousands of fraudulent accounts to harvest nearly 28.8 million conversations from its Claude AI models. Alibaba did not publicly respond to that allegation. At the time of publication, Alibaba shares were down 1.58% at $96.44 in pre-market trading. The stock has traded between a 52-week high of $186.20 and a 52-week low of $88.65.

Access Advance LLC and Alibaba Group today announced that Alibaba has joined the Access Advance Video Distribution Patent Pool (VDP Pool) as a Licensee. The agreement secures a license to the pool's comprehensive coverage of HEVC, VVC, VP9, and AV1 codec technologies. This move expands Alibaba's existing relationship with Access Advance, where it already participates as both a Licensor and Licensee in the VVC Advance Patent Pool and as a Licensor in the VDP Pool. Alibaba's subsidiary Youku also joined the VDP Pool as a Licensee in 2025.

Alibaba operates a diverse video ecosystem spanning e-commerce, entertainment, and digital media. The VDP Pool's single-license structure covers essential patents across all four major video codecs for one royalty rate. This framework eliminates the need to manage multiple bilateral agreements as platforms evolve, addressing the scale and diversity of Alibaba's operations.

Strategic Collaboration

Peter Moller, CEO of Access Advance, highlighted the significance of Alibaba's expanded engagement. He noted that contributing innovation to video codec standards, adding patents to a pool, and taking a license reflects deep engagement with the licensing ecosystem. Moller stated that the VDP Pool is designed for the kind of business model complexity Alibaba represents, and the company is pleased to have their full participation on both sides of the program.

Licensing Framework

The VDP Pool provides a transparent and efficient licensing mechanism for patent owners and implementers. Access Advance manages the HEVC Advance Patent Pool, with over 29,000 patents essential to HEVC/H.265 technology, and the VVC Advance Patent Pool, with over 5,400 patents essential to VVC/H.266 technology. The company's Multi-Codec Bridging Agreement offers eligible licensees a single discounted royalty rate structure for participating in both pools.

Future Outlook

Xiaopeng Ke, Patent Legal Director of Alibaba Group, emphasized that video technology enables Alibaba to serve customers better across its platforms. Ke expressed confidence that the VDP Pool's licensing framework can support the continued development and broad adoption of next-generation video codec standards. Alibaba looks forward to working with Access Advance and other participants to ensure the pool serves the interests of both licensors and licensees.