The European Commission has imposed a substantial fine of €587 million (approximately $629 million USD) on AliExpress, the popular online retail platform, for its failure to adequately address the sale of illegal and counterfeit products on its site. This significant penalty marks the third enforcement action taken by the Commission under the European Union’s Digital Services Act (DSA), a landmark piece of legislation designed to hold very large online platforms accountable for combating illegal and harmful content.
EU’s Digital Services Act and AliExpress’s Violations
The Commission initiated proceedings against AliExpress in June of the previous year, citing a failure to comply with a core requirement of the DSA. Specifically, the platform was accused of not properly assessing and mitigating the inherent risks associated with the dissemination of illegal goods to consumers within the EU. Following this charge, AliExpress was given a deadline of October 20 to present a plan outlining remedial measures. The company now faces the possibility of further penalties if the regulator determines in December that its proposed actions do not meet the DSA’s stringent requirements.
The EU’s tech chief, Henna Virkkunen, emphasized the danger such practices pose to consumers and the unfairness to legitimate businesses that adhere to regulatory standards. She highlighted the vast reach of AliExpress in Europe, noting its 193 million users in the previous year, surpassing competitors like Shein (156 million users) and Temu (130 million users). Both Temu and Shein have also faced scrutiny under the DSA, with Temu having been fined and Shein currently undergoing an investigation.
Virkkunen also pointed to consumer shopping habits, stating that approximately one in five Europeans reported making monthly purchases from these major online marketplaces. This underscores the significant impact these platforms have on the European market and the importance of regulatory oversight.
AliExpress’s Response and Planned Appeal
In response to the fine, AliExpress has stated its intention to appeal the decision, asserting that the penalty is excessive. The company issued a statement indicating that the Commission’s decision and the substantial fine overlook the robust risk management framework already in place and the significant, proactive enhancements they have implemented. AliExpress also claimed to have been collaborating with the Commission to align with its evolving expectations.
Critique of AliExpress’s Risk Management and Moderation Systems
The European Commission detailed specific shortcomings in AliExpress’s operations. The regulator found that the platform had not conducted a thorough evaluation of its capacity to manage risks, nor had it adequately assessed the effectiveness of its systems designed to detect and remove illegal products. A significant criticism was leveled at AliExpress’s recommender and advertising systems, which were found to exacerbate the spread of prohibited items. Furthermore, the platform’s reliance on a single quantitative metric to gauge the success of its moderation efforts in preventing the recurrence of illegal products was deemed insufficient.
The Commission’s assessment revealed that AliExpress’s failures in detecting illegal merchandise allowed a wide array of illicit items, including counterfeit goods, unsafe toys, and dangerous cosmetics, to remain available to consumers for extended periods, often for many weeks. The company’s penalty policy for offending sellers was also criticized as ineffective, allowing penalized entities to continue offering illegal products on the platform.
Moreover, AliExpress’s mandatory “brand authorization” system, intended to curb the sale of counterfeit goods, was found to be understaffed and easily circumvented by vendors of fake products, rendering it largely ineffective.
Comparison with Previous DSA Fines
The Commission noted that the novelty of the Digital Services Act served as a mitigating factor in determining the final fine amount for AliExpress, suggesting the penalty could have been considerably higher. This fine significantly surpasses previous penalties issued under the DSA. For instance, Elon Musk’s social media platform X received a fine of €120 million in December of the previous year, and Temu was fined €200 million in May of the current year, both for violations of the DSA.
It is worth noting that AliExpress had previously avoided a potentially larger fine, which could have reached up to 6% of its global annual turnover, by agreeing in June of the previous year to implement measures aimed at curbing the dissemination of potentially illegal and pornographic materials on its platform. This latest action indicates that those measures were deemed insufficient or that new violations have been identified.
Implications of the Fine
This substantial fine against AliExpress underscores the EU’s commitment to enforcing the Digital Services Act and ensuring online platforms take robust measures to protect consumers from illegal and harmful products. The DSA places significant obligations on large online platforms to proactively identify and remove illegal content, assess risks, and implement effective moderation systems. AliExpress’s case serves as a clear warning to other major online marketplaces operating within the EU about the consequences of non-compliance.
The ongoing scrutiny of platforms like Shein and the penalties issued to X and Temu demonstrate a consistent regulatory approach across various sectors of the digital economy. As the DSA continues to be implemented, businesses will need to invest heavily in compliance, risk management, and transparent operational practices to avoid similar penalties and maintain consumer trust within the European market.
