Shanghai authorities said journalists of 21st Century Business Herald and the two PR firms ran an extortion racket in which they offered favourable coverage on its website in return for bribes. They did this by "exaggerating facts or obscuring problems" about the firms concerned. The scandal has come as a shock to the media and the PR industry and exposes a deep-rooted malaise that runs deep in China.
Explaining the modus operandi the state-run news service Xinhua said the accused journalists would pressure a company into buying advertisements or sign contracts that imposed high fees or commissions. At least 10 firms in Beijing, Shanghai and Guangzhou are said to have been blackmailed since November 2013 it said.
Among those arrested is Liu Dong the editor in chief of www.21cbh.com, the online version of 21st Century Business Herald—a widely respected and influential publication. Last month, the Chinese e-commerce giant Alibaba said it was blackmailed by IT Time Weekly, a magazine, which allegedly threatened to run negative reports about the firm if it did not pay up 300,000 yuan ($49,000). The scandal comes barely a month after authorities arrested Rui Chenggang, a celebrity news anchor at China Central Television (CCTV) on charges of bribery. Chenggang, a star journalist, is also a former investor in the Edelman owned PR firm Pegasus.
The arrests have put a spotlight on the ethics of journalism in China. But it is also damaging to the reputation of the PR industry.
"Paying for coverage not only damages the media, it also makes the PR industry look like we are complicit in undermining the ethics of working journalists, and by extension, the development of the media as an independent force for good in Chinese society," David Wolf, managing director, Global China practice at Allison+partners told PRWeek.
"This particular scandal makes journalists look far worse than the companies and their PR people. Nonetheless, one cannot help but wonder what counsel the extorted companies got from their PR people, and whether executives heeded that advice. I have to believe the PR people told executives not to pay the squeeze: it is the only correct course of action," he said.
Red envelope journalism
The case reveals a culture of ‘red-envelope’ journalism’ – a euphemism for ‘cash-for-coverage’ practice, which is widespread in China.
"The practice of "cash for coverage" practice is fairly common, particularly among media who do not pay their journalists adequately," Wolf said.
"The 'cash for no negative coverage’ is less common, but there are few large companies or companies preparing for offshore listings that have not faced at least one 'journalist' requesting money to spike a negative story."
Bribes range from enclosed cash gifts to friendly journalists to more discreet hush money to cover up unfavorable news.
Blackmailing by journalists is not a new phenomenon in China. The Washington Post, as far back as 2007, reported that the practice was "frequent". In 2005 a local news daily in Henan province exposed a massive scandal in which 480 journalists were demanding "shut-up" fees to keep news of a mine flood out of the public eye.
In some ways the practice may have grown out of a system in which the state censors news rigorously, covering up matters that are seen as unfavorable to the Communist party. Local party officials, long used to manipulating information, have been complicit in the payoff system demoralising upright journalists and encouraging those willing to bend ethics for personal gains. In the "everybody-does-it" atmosphere, even PR pros have found ways to get in on the take.
"My wife is working as a journalist for more than 10 years and for CCTV for 5 years. She always tells me about stories of her colleagues from anchors to producers who receive expensive gifts (from mobile phones to cars). The problem she points out is that they don’t even see it as bribery. They don't question themselves. They see it as a privilege of the job" Beijing-based author Romain Guerel and a visiting lecturer at INSEAD wrote on a blog.
An intern who worked with 21st Century Business Herald told Financial Times (FT) that he had attended a meeting where editors openly discussed plans to compel some foreign investment banks in China to buy ads by threatening to run negative stories.
"If you want more good news, you need to pay; if you want less or no bad news, you need to pay as well," Qiao Mu, a professor of media studies at Beijing Foreign Studies University told FT.
"I am under no illusions: as long as there are hungry writers with poison pens, we will face this problem in China," Wolf told PRWeek.
"Which is why it is incumbent on companies to show some intestinal fortitude and refuse to make the payments. If the matter is true, it will come out eventually, as will the information that the company had paid journalists hush money to cover it up. If the matter is not true, there are strategies to attenuate the potential damage," he said.
A blog (which has been taken down) put up by the Beijing-based AC Capital Strategic PR in 2007 urged western PR firms in China to take a stand against paying off journalists. But standing up to the powers that be can be costly for those working in China as PRWeek found out first hand when asking members of the communications industry to comment on the scandal. Most refused.
But there could be a clean up underway. China has launched what appears to be a systematic crackdown on corruption and the recent arrests are part of a broad campaign to rid graft in media. The latest arrests are aimed at deterring malpractices in the media and PR industry. But change may need more than a strong arm of the state. According to Wolf for the "red envelope" culture to end, PR pros will need to change their approach to the craft in China and the media need to change the way they compensate journalists. "We are a long ways from that, but we can start by shutting down some of the more egregious practices," said Wolf.