BRUSSELS - Alibaba's AliExpress was hit with a record €550 million (US$629 million) fine by the European Union on Monday for failing to tackle sales of illegal, unsafe and counterfeit products on its platform.
The fine was the third issued by the European Commission under the EU's landmark Digital Services Act, which requires very large online platforms to do more to counter illegal and harmful content.
The Commission charged AliExpress in June last year with failing to comply with a key DSA requirement to assess and mitigate the risks of dissemination of illegal products.
It set an Oct 20 deadline for AliExpress to propose remedial measures, and the company could face further penalties if the regulator decides in December that they do not comply with the DSA.
"This is very dangerous for consumers, unfair for companies which are complying with all our rules," EU tech chief Henna Virkkunen told reporters.
She pointed to AliExpress' 193 million users in Europe last year versus Shein's 156 million and Temu's 130 million. Temu has also been fined under the DSA, while Shein is facing an ongoing probe.
"One in five Europeans say they shop once a month from Shein, Temu and AliExpress," Virkkunen said.
AliExpress said it will appeal the fine as it considers it excessive.
"Today's decision and disproportionate fine ignores our sound risk management framework and the significant, proactive enhancements we have made," AliExpress said in an email.
The company also said it has worked with the Commission to meet its "evolving expectations".
Penalty higher than fines on Musk's X and Temu
The Commission said AliExpress had not properly evaluated whether it had enough people to review the risks and had overestimated the effectiveness of its system in detecting and removing illegal products.
The regulator criticised AliExpress' recommender and advertising systems for exacerbating the spread of illegal products and its reliance on one quantitative indicator to measure its moderation system to prevent the risk of illegal products appearing or reappearing in similar forms.
It said AliExpress' failure to detect illegal products meant many illegal products ranging from counterfeit products to unsafe toys and dangerous cosmetics remained online for many weeks.
The Commission also took issue with the company's ineffective penalty policy, which resulted in penalised companies continuing to sell illegal products on its platform.
It said AliExpress' mandatory "brand authorisation" system – intended to prevent counterfeit sales – was ineffective and understaffed and was easily circumvented by traders selling fake products.
The regulator said the novelty of the Digital Services Act was a mitigating factor in calculating AliExpress' fine, which could have been higher.
The penalty is significantly higher than the €120 million handed out to Elon Musk's social media platform X in December last year and the €200 million meted out to Temu in May this year, both for DSA violations.
AliExpress dodged a fine, which could be as much as 6% of its global annual turnover, in June last year after agreeing to measures to tackle the dissemination of potentially illegal and pornographic materials on its platform.
