Dairy executives held over smear campaign

PUBLISHED : Thursday, 21 October, 2010, 12:00am
UPDATED : Thursday, 21 October, 2010, 12:00am

A senior executive of mainland dairy giant Mengniu and three of the company's online marketing managers have been arrested for running a smear campaign against major rival Yili.

In a statement released yesterday afternoon, Yili identified the executive as An Yong , who is in charge of Mengniu's children's dairy products. The three marketing managers are from the Beijing-based PR firm BossePR.

The Yili statement contradicted an earlier one put out by Mengniu, which said 'all senior executives of Mengniu are working as usual'.

Shanghai-listed Yili, the country's largest dairy company, is the main competitor of Hong Kong-listed Mengniu.

The public sparring between the Inner Mongolian diary giants has brought to light not only their long-term feud, but also the dirty tactics many mainland companies use to smear one another through gossip and innuendo on the internet.

It looks set to bring further damage to the battered reputation of the mainland's dairy industry, which is still recovering from the infamous scandal over milk tainted with the industrial chemical melamine, which left at least six children dead and 300,000 ill in 2008.

The statements from the two companies came a day after a media frenzy caused by the internet leak of Yili's internal correspondence on the development of the police investigation, which detailed a systematic attack on Yili's dairy products for children organised with strategic planning and arranged by professional online marketing firms.

Yili said in yesterday's statement that it had detected many postings and reports online attacking the company's brand and products since the middle of July. Yili reported the matter to Hohhot police on July 30.

'The case of deliberately damaging Yili's reputation has been cracked after a police investigation,' said the statement. 'This case involves employees from Mengniu Dairy; Beijing BossePR, whose chairman and general manager also works as the assistant to the general manager of Mengniu, and the Edayspring online marketing consulting firm.'

An Yong and the three Beijing BossePR employees - Zhao Ning , Hao Liping and Ma Ye - have been formally arrested. Two other executives are wanted by police, according to the statement.

A separate report by Caijing magazine confirmed the arrests, citing a senior official with Hohhot police.

Officials from Mengniu and Yili were not available for comment yesterday despite repeated attempts to contact the companies.

According to the leaked internet documents, senior Communist Party officials had 'attached high importance to the case' and a Politburo member, Minister of Public Security Meng Jianzhu and Inner Mongolia party chief Hu Chunhua had all instructed police to make a speedy and thorough investigation.

The documents detailed how online marketing firms had published postings saying that one of Yili's products for children, containing deep-sea-fish oil, could cause premature puberty. Soon afterwards three newspapers published articles attacking Yili's products, without mentioning its brand name. Major internet news portals picked up the reports. Yili later received confirmation from those portals that the articles were arranged and paid for by public relations firms, according to the leaked documents.

The documents also said a mainland reporter was fed a story that three baby girls in Hubei had developed breasts early, while online postings appeared saying Yili's products contained a substance that would cause premature puberty.

The media and internet blogs initially focused on Synutra, a Hubei-based company specialising in baby milk products, alleging its products caused the babies to grow breasts.

The shares of the Nasdaq-listed company plunged by 27 per cent a day after the reports. A week later the Ministry of Health announced that 'the cases of premature development of breasts in three baby girls in Hubei had no link to being fed the Synutra baby formula'.