Baidu, Sohu Get Caught in Latest Chinese Internet Clampdown

(Bloomberg) -- China’s cyberspace police have ordered Baidu Inc. and Sohu.com Ltd. to suspend a plethora of news services for a week, kicking off an online clean-up campaign with two of the country’s biggest internet corporations.

The Cyberspace Administration of China on Thursday announced it was starting a six-month effort to eradicate “vulgar” information” from a plethora of online media, including messaging services and livestreaming platforms. The Beijing branch of the watchdog said it summoned executives from both firms and ordered several of Baidu’s and Sohu’s news and content feeds to suspend updates from Jan. 3 to Jan. 10 while they root out undesirable content.

Shares in both companies fell as the broader market whipsawed after Apple Inc.’s surprise outlook cut spooked investors. Baidu’s shares fell 4.7 percent, marking their largest drop since August. Sohu plummeted 7.4 percent, its biggest decline in three months.

Neither the companies nor the regulator stipulated exactly why they were being punished, nor what’s needed to resume operations. But Beijing has increasingly taken a hard line as the country’s internet ecosystem flourishes, instigating crackdowns on video games and social media that’ve hurt industry leaders such as WeChat-operator Tencent Holdings Ltd. and Bytedance Ltd. They represent the most severe digital crackdown in the country’s history, shuttering services or temporarily forcing them from app stores for spreading everything from crude jokes to banned information.

While one-week bans are unlikely to have a major impact on either Baidu or Sohu, they come at a stressful time with advertising sales slowing as consumers spend less. The latest crackdown also emphasizes the sweep of powers wielded by China’s regulators: everything from pornography and gambling to vulgarity and “spreading unhealthy lifestyles” will be fair game over the next six months.

The CAC will “severely investigate and close a number of illegal websites and accounts, effectively curbing harmful information,” the regulator said in a statement, adding it was targeting 12 types of “illegal internet information” in its latest drive. Both Sohu and Baidu said on their social media feeds -- in separate but very similar statements -- that they would comply and “rectify” the affected services.

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