Chinese dairy producer Mengniu Dairy Group Co yesterday apologized for the first time to rival Yili Group and consumers for an online libel scandal allegedly orchestrated by one of its managers.

This is a marked shift from Mengniu's previous tough stance, where it insisted that the company was never involved in dirty tricks campaigns.

Mengniu said in a statement yesterday that it felt "deeply sorry" about the bad feeling caused to Yili Group and customers, which it said was caused by An Yong, a product manager in Mengniu's liquid milk department.

The company claims An plotted alone to fabricate online posts about Yili, insisting that Mengniu "had absolutely no idea of his plan."

Without asking permission from supervisors, Mengniu claims, An worked in tandem with an Internet PR agency in July to spread accusations that an element called eicosapentaenoic acid (EPA) in fish oil contained in Yili's children's milk products was harmful.

An should take full responsibility for the consequences, the statement said.

An has been arrested, along with three employees of BossePR, Mengniu's PR agency, by police in Hohhot, Inner Mongolia Autonomous Region. Both Mengniu and Yili are based in the regional capital city.

In the past, An was an employee of Yili and came to Mengniu in 2005. He was sacked this week.

Mengniu pledged to reflect deeply on the incident, strengthen internal management and improve education to prevent such things from happening again, according to the company statement.

However, in the statement Mengniu also went on the offensive.

It claims that from 2003 Yili, one of the biggest dairy producers in China, invested more than 5.9 million yuan (US$886,000) hiring PR companies to launch media attacks against Mengniu.

It accuses Yili of commissioning a PR company to bribe media and spread negative reports about Mengniu in five campaigns. Three employees of the PR company, including the general manager surnamed Yang, were detained by the police, according to Mengniu.

In response, Yili accused Mengniu of trying to deflect public attention from its own scandal. "This case is still unsolved," an employee with Yili's PR department told The Beijing News. "Why did they bring up things that happened several years ago? Is it to confuse the public?"

Police yesterday tried to downplay the negative image surrounding the libel case between China's two biggest dairy giants, saying there was no "in-depth foul play."

Police in Hohhot said that they were searching for two more suspects who were allegedly hired by Mengniu to publish articles defaming Yili online.

However, based on present evidence, there are no more skeletons in the cupboard, officers insisted.

If convicted, An may face sentence of up to two years in prison, Zhang Xingkuan, a lawyer with Deheng Law Firm, told The Beijing News.

The battle further damages the image of China's dairy industry, already tarnished by a melamine scandal in 2008 that killed six infants and left 300,000 others ill.

Read more: http://www.shanghaidaily.com/article/?id=452467&type=National#ixzz13AYW6hqJ