Baidu is currently facing one of the most serious scandals in company history and the situation only seems to be getting worse following a government investigation.
The government took action against Baidu on May 2nd, when news of the death of Wei Zexi, a young cancer patient, became the biggest story in China, assigning a team of investigators from the Cyberspace Administration of China, the State Administration of Industry and Commerce and the National Health and Family Planning Commission to look into the company’s use of paid medical advertisements.
Wei, a 21-year-old university student, was diagnosed with synovial sarcoma in 2014. On a Baidu search, he learned about an experimental cancer treatment being offered at the Second Hospital of Beijing Armed Police Corps. The hospital claimed it was an effective method that had been developed in a research collaboration with the Stanford medical school. Only afterward did Wei learn that this was a lie. The treatment had been found not viable by Stanford and shelved; meanwhile foreign countries contested the effectiveness of the experimental treatment, which had a low record of success.
His family spent 200,000 yuan on the treatment and it was not successful, later Wei posted on Zhihu (Chinese Quora), detailing his experience and denouncing Baidu for carrying the ad in the first place. Wei died on April 14th and in the ensuing weeks his story went viral online.
Netizens accused Baidu of placing profits before the health and safety of its users through its business model of “Pay for Placement” (P4P) — in which Baidu’s paid medical ads were not listed in order of effectiveness, but by how much money was paid to the company. Unlike some other search engines, which place paid ads on the right-hand side, Baidu presents paying advertisements right on top of search results, though they are clearly divided. Critics charged that considering the confusion that can result, Baidu has not done enough to check the medical credentials of its own advertisers.
Just last month, Chinese President Xi Jinping spoke out against this kind of practice, saying: “Search engines should not arrange the information sequence only based on how much they pay.” According to Quartz, medical advertisements make up around 30% of Baidu’s online advertising revenue.
The initial stages of the government investigation have wrapped up. In their investigation, officials found that Baidu’s search results were “misleading” and did influence Wei’s choice for medical treatment, potentially holding the company liable for damages.
One of the biggest concerns in this case is that P4P services are not restricted by advertisement law because it is not classified as a form of online advertisement under the Advertisements Law of the People’s Republic of China. However, in the meantime, the Cyberspace Administration of China has managed to issue three immediate demands of Baidu, reports Sina.
First, Baidu is required to inspect all medical-related information from advertisers, including treatments, medications and nutritional supplements, in order to maintain public health and security. Ads from institutions or individuals that violate regulations must be taken down immediately.
Second, the search result order must be changed from a price dominated P4P system, to a credit based one. Furthermore, each page must be less than 30% paid advertisements and Baidu needs to list the terms and conditions, as well as the risks, in each ad.
Third, Baidu must set up a compensation system, in case of misleading and harmful information, as well as a user report platform to expose potentially deceptive ads.
Baidu has expressed its remorse and has pledged to comply with all the demands before May 31st. The company has already removed 126 million P4P advertisements and 2,518 medical institutions that were out of compliance. In addition, a 1 billion RMB fund was set up to compensate people who have been misled.
Xiang Hailong, Baidu’s senior executive said that the case has “prompted all Baidu employees to re-examine their responsibilities,” adding “Baidu should provide better and more reliable search services,” the Wall Street Journal reports.
Baidu has not been the only party to face repercussions in the case, the Beijing hospital where Wei received his treatment has suspended services to all new patients as it undergoes a government investigation. Meanwhile, former patients are looking for refunds. The National Health Commission also ordered the hospital to cease collaboration with Shanghai Claison Bio-tech, which is the private medical company that provided the experimental cancer treatment.
Amid this scandal, Baidu’s stock prices on NASDAQ dropped 2.56% on the morning of May 9th, Tencent reports. The company’s P4P plans seem to have backfired.
This isn’t the first time that Baidu has been criticized for endangering its users’ health. Back in January, the company was slammed for selling the moderation rights of its forums related to blood disease to an unlicensed private hospital, which then used the forum to promote itself and deleted negative comments disparaging the clinic’s credentials. Baidu apologized and said it would “reflect deeply” on such practices.
Additionally, the company was also involved in a landmark court case involving a gay conversion therapy clinic. The patient in the case underwent electroshock therapy to “cure” his homosexuality at a medical clinic that he had found listed on Baidu. A Beijing court ruled that the clinic must pay compensation and Baidu was forced to remove the ad.
Maybe Baidu should just stick to making smart chopsticks and helping to design the KFC of the future.
By Sarah Lin
[Images via People’s Daily / NetEase / Caixin]