A U.S. federal district judge has dismissed a lawsuit alleging that Baidu Inc. deceived shareholders about its compliance with Chinese Internet content regulations.
In a ruling Wednesday night (April 7), San Jose-based Federal District Judge Lucy Koh dismissed the allegations made in the proposed class action lawsuit. The complaint alleged that 12 statements made by Baidu between March 2019 and March 2020 were false and misleading, and inflated the Beijing-based company’s stock price.
The statements included that Baidu had “cleaned up” harmful or questionable content related to drugs, gambling and pornography, thereby boosting user confidence and potentially increasing web traffic and revenue. Baidu is the world’s largest search engine, with the exception of Google, which is owned by Alphabet Inc.
Plaintiff Roger Ikeda (Roger Ikeda) argued that Baidu executives concealed compliance deficiencies to avoid fines and channel suspensions ordered by the Chinese government, and Judge Lucy Gao said she found no evidence suggesting Baidu had fraudulent intent.
Lawyers for both the plaintiffs and Baidu did not immediately respond to Reuters’ request for comment on Thursday (April 8).
The lawsuit was filed last April by investor Roger Ikeda in federal district court for the District of Northern California. The lawsuit comes shortly after China’s Internet regulator, the Internet Information Office of China, ordered Baidu to stop spreading “vulgar content,” prompting it to suspend some of its channels on its mobile app. Baidu resumed updating those channels two weeks later.
In the suit, the plaintiffs allege that Baidu’s stock price “plummeted” as a result of the company’s failure to comply with the Communist Party’s Internet regulations.
The judge dismissed the case on a non-permanent basis, meaning the plaintiffs can amend their complaint.
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