Chinese online retail giant AliExpress has been fined a record €550m (£467m) by the EU for allowing the sale of illegal products such as unsafe toys and fake clothes.

The European Commission said AliExpress has fallen short of its legal obligations to "diligently assess" the risk of illegal, unsafe or fake goods on its platform.

"The spread of counterfeit clothing, unsafe toys, dangerous cosmetics and other illegal and harmful products is not an unavoidable cost of shopping online - it is a failure by AliExpress to comply with its obligations," said EU tech chief Henna Virkkunen.

AliExpress said the fine was "disproportionate" and that it would appeal.

The two-year investigation found that AliExpress's detection systems "did not work properly", with many illegal products not flagged while others that were identified remained on the site for several weeks.

The European Commission also found the company did not properly enforce penalties on traders selling illegal goods.

Furthermore, its product compliance checks could be "easily circumvented".

AliExpress, which is owned by the Chinese tech conglomerate Alibaba, has 193 million users in Europe, more than fellow Chinese online retailers Shein or Temu.

The penalty is the highest fine imposed under the Digital Services Act, which requires tech giants to do more to counter illegal and harmful content.

The act allows for fines of up to 6% of a company's revenue, but as Alibaba had a global turnover of €122bn last year, the penalty is far short of that.

AliExpress said it was surprised by and disagreed with the EU's decision.

"AliExpress has been and continues to be committed to meeting our obligations to consumers. We invest substantial resources in risk assessment and mitigation, product safety and consumer protection," it said.

"Today's decision and disproportionate fine ignores our sound risk management framework and the significant, proactive enhancements we have made. We will appeal the decision."

Under the EU's ruling, the company has to pay the penalty and present a plan by 20 October that includes what action it will take to tackle the breaches.

Earlier this year, Temu was given a €200m fine for allowing the sale of illegal products such as dangerous baby toys.

And Elon Musk's X was fined €120m last year, after the commission said allowing users to pay for its blue tick badges was deceptive because the social media platform was not "meaningfully verifying" who was behind the account and exposed users to scams.