Dairy giant Mengniu apologised for an act of commercial libel by one of its former employees against competitor Yili, but said it had also been the victim of such smear campaigns. In a statement released yesterday, Mengniu, one of the mainland's largest dairy firms, for the first time acknowledged that An Yong, a brand manager of its liquid milk division, was arrested for 'expressing opinions that the substance EPA in fish oil was harmful to the health of children in July'. Police had said suspects were trying to attack Yili's products to increase the sales of Mengniu's. An, a former employee of Yili, joined Mengniu in 2006 as a brand manager, and his income had been connected to the sales of the product. But he had been fired, Mengniu added. The company stressed An had acted 'on the circumstances of not seeking approval from any higher level' and 'took the liberty' to work with a contracted public relations company. 'We express deep regret to the relevant party and customers for the damages An Yong has done,' the statement said. In an earlier statement to the Hong Kong Stock Exchange, where the company is listed, the firm said a manager was co-operating with the relevant authorities, and none of the directors or senior management of the group had been arrested. It denied it had 'planned, organised or acted relating to the claim [that] rival companies' products triggered precocious puberty'. Mengniu's statement came after Yili's accusation on Wednesday that a Mengniu employee and its online marketing firm was behind a smear campaign against Yili's children's dairy product. Police in Hohhot, Inner Mongolia , where the two companies are based, told state media that An and three employees from BossePR, Mengniu's online marketing firm, were arrested for allegedly damaging business and product reputation. The month-long, 280,000 yuan (HK$326,500) operation involved publishing smear postings on blogs and news portals and impersonating parents and experts to question the safety of the competitor's products through the internet and in the media. Police said it was An's 'personal act' and 'currently no evidence suggested the case has a deeper background'. In the statement, Mengniu also accused Yili of masterminding five campaigns in 2003 and 2004 to attack Mengniu's products. Citing the police investigation, the statement said Yili promised to pay a Beijing public relations company 5.92 million yuan to publish hundreds of articles in the print media in 11 provincial capitals and on the internet. The head of that public relations company, whom the statement did not identify, had been detained by police. The company provided electronic or photographic copies of the campaign's plan and the contract between the company with the PR agency on its website. Yili's public affairs department did not return calls, but in an interview with The Beijing News, an unidentified senior executive told the newspaper 'if what they said was true and they had obtained so much evidence, why wouldn't they provide it to the police at that time? ... Mengniu is trying to mislead the public.' However, many expressed online their doubts over whether the company was unaware of the employee's act, and said the firm should take responsibility as well, rather than acting like a victim. Others said they had lost confidence in the dairy industry as a whole. Chen Yu , a director of the Dairy Association of China, was concerned the current dispute between Yili and Mengniu would affect the entire industry, which is still struggling since the scandal over melamine-tainted milk broke two years ago. He told the 21st Century Business Herald that it 'would eventually lead to lower confidence in the domestic dairy industry and send corporate competition in unhealthy directions'. Counting the cost The reported cost, in yuan, of the month-long smear campaign aimed against Yili: 280,000