The European Union said on June 18 that Chinese online marketplace AliExpress failed to do enough to curb the sale of illegal products on its platform, placing the company at risk of a hefty fine.

AliExpress, owned by China-based e-commerce giant Alibaba, has been under investigation since March 2024 over its alleged noncompliance with the EU’s Digital Services Act (DSA), which regulates how major social media platforms and marketplaces moderate or remove illegal content and products from the regional internet.

In an announcement on June 18, the European Commission said its preliminary findings indicate that AliExpress is “in breach of its obligation to assess and mitigate risks related to the dissemination of illegal products under the DSA.”

EU regulators found that AliExpress didn’t adequately consider the risks of spreading illegal products. The commission accused the company of failing to enforce its penalty policy against traders who “repeatedly post illegal content.”

It added that AliExpress’s platform shows “systemic failures” in its content moderation systems, which allowed “manipulation by malicious traders.”

AliExpress faces the “most stringent rules” under the DSA after being added to the commission’s list of “very large online platforms” in April 2023.

Once the preliminary findings of violations of DSA are confirmed, the EU can impose a fine up to 6 percent of a company’s global turnover.

The commission mentioned that AliExpress had made proposals to address its concerns, which the EU executive accepted and made legally binding. Any violation of these commitments could also lead to fines.

Among the steps AliExpress pledged to take was to improve its platform’s systems for monitoring hidden links practices that sell illegal products, often counterfeit items such as medicines and food supplements, according to the commission.

AliExpress didn’t respond to a request for comment by publication time.

In a media statement, the company said it has “proactively engaged and closely collaborated” with the commission since the investigation began and is committed to continuing this cooperation.

“We are confident that a positive and compliant result will be achieved through continuing our mutual dialogue with the Commission to address any remaining concerns,” the company’s spokesperson said.

Under the DSA, platforms with more than 45 million monthly European users must adopt more measures to protect minors and do more to address counterfeit products sold on their platforms.

In addition to AliExpress, the commission designated several major Chinese e-retailers, such as Shein and Temu, as “very large online platforms.”

Reuters contributed to this report.