Baidu promoted fake-drug sites, CCTV show says

PUBLISHED : Tuesday, 20 July, 2010, 12:00am
UPDATED : Tuesday, 20 July, 2010, 12:00am

The main state-run television station has accused Baidu, the country's top internet search engine, of manipulating search results to promote websites that sell fake drugs.

It is the second time in two years that a prime-time China Central Television show has taken on Baidu over its bidding-for-ranking system, which is used as a promotional tool by websites that sell fake products.

Bidding for ranking means internet search engines accept money from businesses to list their companies in search results, with the top bidder being listed first.

An online advertising agency chief executive, who declined to be named, said bidding for ranking was common among mainland search engines as it brought in revenue, but Baidu was the biggest. 'It basically means you can buy your popularity.'

Two years ago, CCTV aired a similar expose about Baidu selling links to unlicensed medical sites with unproven claims for their products. The company's Nasdaq-listed shares later fell more than 20 per cent and its fourth-quarter earnings were hit, prompting Baidu chief executive Robin Li to issue a public apology.

CCTV reported on Saturday that Baidu had profited from promoting three websites offering counterfeit drugs that had duped more than 3,000 people on the mainland, citing suspects detained by Wuhan police during a crackdown on the online trade in fake drugs.

One suspect's website sold a capsule claiming to contain a pure, natural herb that was the only drug in the world able to cure rheumatoid arthritis. Baidu had promoted it. '[We] paid more than 12 yuan [about HK$13.7] for one click; the ranking was the third, fourth or fifth,' said Gan Junbo, detained for running a website selling counterfeit drugs.

He told CCTV his website was clicked hundreds of times daily and paid Baidu thousands of yuan a day. Total sales revenue exceeded 400,000 yuan, with 300,0000 yuan paid to Baidu for 'bidding for ranking'.

Baidu set a starting price of 13yuan per click for the top spot on the search-result page, with the highest bidder getting the most prominent place. The drug's cost is 32 yuan, but is sold for 660 yuan, with 495 yuan going to Baidu, 20 yuan to couriers and 90 yuan to those selling it.

CCTV found that one Baidu-promoted website, which sold drugs that were claimed to cure diabetes, was not registered with the State Food and Drug Administration.

The administration requires companies selling drugs online to obtain a certificate, but only 27 companies have obtained such qualifications.

Yet websites can bypass the regulation with the help of Baidu, the CCTV report revealed. 'So this is a personal website and does not have qualification? It has to be registered through another website, like the agent's account you are using,' a Baidu saleswoman told a CCTV undercover reporter. 'If you can borrow the business licence and the production permit of the drug, Baidu will give you an account. If you don't have the complete documents you can use the agent's account, meaning two or three companies are sharing the account for promotions.'

A Baidu official said he was not authorised to answer questions from foreign media and its public affairs chief failed to respond to a subsequent emailed query.