State media accuses Baidu of promoting fake drug sites-report

SHANGHAI, July 19 (Reuters) - China's main state-run television station has accused the country's top internet search engine Baidu Inc BIDU.O of directing users to websites that sell counterfeit drugs, the People's Daily reported on Monday.

CCTV reported on Sunday that Baidu and other search engines had profited from promoting three websites offering counterfeit drugs that had duped more than 3,000 people in China, said the newspaper, the mouthpiece of the ruling Communist Party.

Baidu declined comment on the report. In the second quarter, Baidu had a 70.8 percent share of China’s search market, according to iResearch data.

A source familiar with the situation told Reuters on Monday that the sites exploited a loophole in the system, piggybacking on legitimate websites to gain access to buy keywords. The source could not be identified due to the sensitivity of the matter.

In 2008, CCTV aired a similar expose on Baidu selling links to unlicensed medical sites with unproven claims for their products. The company’s Nasdaq-listed shares subsequently fell more than 20 percent and its fourth-quarter earnings were hit, prompting Baidu Chief Executive Robin Li to publicly apologise.

As a result of the scandal, Baidu had overhauled its operations and sacked staff involved.

In the last few years, China has been beset by a series of product safety scandals ranging from tainted milk to fake pharmaceuticals.

The government has announced several crackdowns but the problems persist, aided by a lack of surveillance, generally poor quality standards and corruption. (Reporting by Melanie Lee; Editing by Chris Lewis and Anshuman Daga)