A police officer in Hohhot, Inner Mongolia, yesterday confirmed the arrest of a senior executive with dairy products manufacturer Mengniu but would not disclose further details.

At the same time, Caijing magazine cited an internal source with the Ministry of Public Security as saying that An Yong of Mengniu's liquid milk department had been formally arrested together with several public relations consultants hired by the Hohhot-based company on suspicion of fabricating online posts about a rival company.

Another two of Mengniu's PR consultants are being sought in connection with posts published on Sina.com in July which were aimed at defaming Mengniu's major rival the Yili Group, the ministry source told Caijing.

But the accusations - that baby formula was causing premature puberty in infants - missed the intended target and instead affected the formula producer Synutra International.

Reports by Hong Kong based Phoenix Television alleged that some Chinese infants had started to grow breasts after they were fed with Synutra milk and one girl had the estrogen levels of a grown woman.

Though the Ministry of Health issued an official report in August confirming Synutra International's innocence and despite a public apology from Phoenix TV, the NASDAQ-listed Chinese company still suffered huge losses and lost the confidence of many parents.

According to online speculation, the intended target of the alleged libel was Yili and its infant formula products.

Yili's PR manager Wang Qiushi confirmed that someone from Mengniu had been arrested. He said this was because of false allegations about Yili's infant formula products containing fish oil.

Yesterday, Mengniu issued a statement denying that any of its executives had been arrested and said the company had nothing to do with the libel that damaged Synutra.

Yili also issued a statement saying it discovered defamatory complaints against its products online in July and had called the police.

Police found the libels involved Mengniu and a Beijing-based PR agency, Yili said in the statement, adding that Mengniu's assistant president, Yang Zaifei, acted as the agency's general manager and managing director.