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Chinese Regulators Impose Stricter Rules for Baidu's Healthcare Search

CAC, 5/09/16

Following their investigation of Chinese search engine Baidu's (Nasdaq: BIDU) business practices in the online healthcare advertising sector, the Cyberspace Administration of China, State Administration for Industry and Commerce (SAIC), National Health and Family Planning Commission of the PRC, and related departments of the Beijing municipal government have announced a set of healthcare-related online search requirements to which Baidu must adhere.

The investigating parties have announced that they will require Baidu to:

1. Reorganize its healthcare advertising services, remove all healthcare-related information that has already been discovered to be illegal, and stop all advertising for healthcare businesses that have not received approval from relevant government authorities.

2. Change its paid search ranking system so that it does not rely solely on bidding price as a determinant. The government has determined that Baidu must, by May 31, propose a system that weighs ad results by trustworthiness, and subsequently implement it, as well as have each advertiser include a clearly defined logo and risk disclaimer on their advertisements. Finally, Baidu must limit search advertisements to no more than 30% of the search results page.

3. Create a compensation mechanism to protect Internet users' rights. Baidu must create a complaint channel, deal with the complaints in a quick and efficient manner, and punish offenders accordingly. The company must also halt service to those that have broken the law and infringed on Internet users' rights. Finally, Baidu must develop a system that will cover damages to Internet users who have suffered losses due to fraudulent advertising.

Editor's Note: Last week, the Chinese government announced it would investigate Baidu's (Nasdaq: BIDU) healthcare-related advertising practices following an incident in which a student died after undergoing an experimental cancer treatment that he found through an advertisement on the online search giant's platform. For more background on this topic, please see "Chinese Regulators to Investigate Baidu over Medical Ads, Student's Cancer Death," MD 5/03/16 issue.

Keywords: Beijing Municipal Government Internet scandal online search online healthcare Baidu SAIC BIDU Cyberspace Administration of China regulation search advertising NHFPC

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The information contained in this newsletter is based upon sources that Marbridge Consulting believes to be reliable, and we have made every effort to translate the original articles or article excerpts as faithfully as possible. However, Marbridge Consulting makes no warranty of and assumes no legal responsibility for the accuracy of either the original source material or the English language translations.

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