Milk giant’s word of mouth campaign turns foul

Local police in North China's Inner Mongolia Autonomous Region, where both Mengniu and its biggest competitor Yili are headquartered, confirmed that they had arrested Yang Zaifei, founder of Bosse. At least three other employees at the PR agency have also been detained.

Mengniu has a close relationship with Bosse and Yang Zaifei also has the title of assistant to president of Mengniu printed on his business cards.

An internal document from Yili first started to circulate Tuesday night on Twitter and several major Chinese language micro-blogging services including Sina Weibo.

In the document, Yili accuses Mengniu of being the mastermind behind an ugly plot that almost destroyed Nasdaq-listed Chinese baby formula producer Synutra (Sheng Yuan).

Yili says Bosse's employees spread stories on the internet in July that linked some cases of abnormal sexual development found in baby girls with Synutra's products. The posts created much buzz and soon caused nation-wide panic. China's products watchdogs later clarified that Synutra products are safe. 

Yili claims they noticed Bosse was also trying to defame its products and took immediate action, including notifying police to stop the attack before it turned uncontrollable.

Mengniu has denied the reports, saying that it was not involved in any activities damaging the business reputation of any rival companies.

Mengniu added that all members of its management are working as usual.

Business insiders said they are not surprised if the reports were true.

"I believe that China's PR industry will be put to trial some day in the future," said the founder of a local Chinese PR agency.