Alibaba Wins Temporary Halt on US Military Lobbying Ban

Alibaba caught a break from the US government’s military-linked blacklist—at least for now. A federal judge barred the Pentagon from treating the Chinese e-commerce giant as a military-affiliated company under new lobbying restrictions. The reprieve lasts until a ruling or 60 days after a court hearing.

The dispute centers on the Pentagon’s Section 1260H list, designed to flag companies it claims support China’s military-civil fusion strategy. Alibaba, added to the list on June 8, joins 187 other entities. The company insists it has no ties to the Chinese military and challenged the designation in court. It argued the listing had no “basis in fact or law” and violated its constitutional rights.

This blacklist triggered a harsh lobbying ban. Section 851 of the 2025 National Defense Authorization Act blocks the Defense Department from awarding contracts to firms that hire lobbyists representing any company on the 1260H list. Alibaba lost more than two dozen registered lobbyists overnight as firms cut ties to avoid penalties. Major Washington lobbying firms have been dropping Chinese clients including Alibaba and Tencent since June 30.

Judge Eumi K. Lee made the reprieve official. She ordered the Pentagon to hold off treating Alibaba as a military company regarding lobbying rules. “The Pentagon must not treat Alibaba as a Chinese military company with respect to new lobbying restrictions,” she said. The court will now examine if the law itself stands up to constitutional scrutiny.

While Alibaba battles this classification, it faces another US legal headache. The company agreed to pay $600 million to settle claims that its US payment processor, AUS Merchant Services, allowed illegal drug and equipment sales into the country. From January 2016 to December 2024, Alibaba failed to stop roughly 80,000 unlawful product sales involving pharmaceuticals, controlled substances, and pill-making equipment.

IRS Criminal Investigations chief Jarod Koopman emphasized the agency’s resolve, stating, “The resolution underscores IRS Criminal Investigation’s commitment to following the money and ensuring that companies operating in the United States comply fully with federal law.”

The 1260H list, created under the 2021 defense authorization act, is separate from the US sanctions list managed by OFAC. This distinction matters because penalties and restrictions differ. But the lobbying ban hits hard. It cuts off firms from Washington’s influence machine, forcing them to abandon Chinese clients overnight.

Alibaba’s legal victories might stall the Pentagon’s blacklist enforcement, but the company remains in hot water. Losing all its lobbyists stripped its voice in Washington. Settling for $600 million over illegal sales only adds fuel to a fire it can’t yet put out.

The clash between US defense policy and Chinese tech giants is far from over. As courts weigh constitutional challenges, lobbying firms and lawmakers face tough choices about dealing with firms tagged as military-linked. Alibaba bought time but not peace. The blacklist saga will continue shaping China-US tech relations.

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