China's ministry of culture is to punish search engine company Baidu for providing illegal music downloads, a move that may hit its soaring share price.
Xinhua, China's official news agency, reported on Monday the government will punish 14 websites that have provided illegal music downloads, including Baidu, China's top search engine.
Xinhua reported that an official said the websites continued to provide illegal downloads after repeated warnings not to do so. Details about the punishment were not released.
Baidu spokesman Kaiser Kuo said it would act quickly to remove links to files identified by the ministry.
We are aware that songs require approval and have sought to comply with previous notifications from the ministry of culture. But search engine indexing is a continuous process and some files may have reappeared in results, Kuo said.
While Xinhua did not say why the songs were illegal, Baidu said it stemmed from a warning issued over a year ago to providers of online music, identifying songs deemed unacceptable.
The links to those songs had been removed but new links began to show up because the songs had been uploaded by other users on searchable sites that were found by Baidu, it said.
This will have an impact on their stock price. I think investors in the United States will react on this, said Fiona Zhou, an analyst with consulting firm Pacific Epoch.
Baidu shares have risen 54 percent this year, outpacing the 6.3 percent rise in the Nasdaq.
Over the past few months, Baidu has been involved in a dispute over its Baidu Library product with a group of authors who said Baidu reproduced their works without permission. Baidu apologized to the authors and took down the infringing material.
On April 6, the company said it would launch a licensed music search service in May.
Earlier, Baidu reached an agreement with the Music Copyright Society of China (MCSC) to pay fees to the MCSC for every song downloaded using Baidu Ting. The licensed music service would be supported by advertising.
Baidu's Mp3 music search has been criticized by the United States as being a notorious market for piracy over its ability to provide deep linking that steers users to allegedly infringing material hosted on third-party websites.
(Reporting by Melanie Lee; Editing by Jacqueline Wong and Dan Lalor)