How Qihoo is Committing Fraud

Earlier this week, we wrote about the double serving of bad news Chinese web firm Qihoo got when its apps were removed from the iTunes store and China's State Administration for Industry and Commerce (SAIC) handed it an official warning for unfair competition. On Thursday, we finally got to see the details of Qihoo's transgressions in the warning statement issued by the SAIC. Qihoo has been using creepy trickery to get people to install its software for years. More than a year ago, New York-based Digital Due Diligence released details on 9 sketchy tactics Qihoo made use of to force users to install its software. A year later, has anything changed? No. The warning statement the SAIC released yesterday details some of the tactics used by Qihoo to try to trick or force people into installing Qihoo's software, and then keep it there once it's installed. Here are some examples of things Qihoo has done, all from the SAIC warning statement:

• Making uninstalling the anti-virus software difficult.

• [Faking] incompatibility to prevent the installation of competitors' software.

• Giving users of non-Qihoo browsers security warnings suggesting their browsers are unsafe.

• Using default settings to trick users into installing the 360 Browser along with Qihoo's security software.

• Using forced upgrades to change users' browser and homepage preferences.

• Tricking users into thinking the 360 Browser download is an official patch from Microsoft.

That last one is a particularly nasty trick Qihoo pulled this past August. Through its "360 Defender" security software, it send users what claimed to be a Microsoft Internet Explorer update patch titled KB360018 that professed to fix "an extremely dangerous security leak." Users who accepted the patch were then forced to install Qihoo's 360 Browser. I suppose a warning from the government is better than nothing, but pretending to be Microsoft in order to spread your own software doesn't just sound like unfair competition to me, it sounds like fraud. In fact, it is fraud, at least going by the dictionary definition. I'm not sure what Chinese law has to say on the subject, but if what Qihoo is doing is currently legal, it should not be, and if it isn't legal, the company should be prosecuted, not just warned. Admittedly, I'm not an entirely unbiased observer. I have never liked Qihoo CEO Zhou Hongyi's blustery management and public relations style, and my time working at Chinese companies with Qihoo security software pre-installed on their computers taught me to hate the 360 suite of products, which seemed to be constantly installing toolbars I didn't want in the name of "security." So yes, I have never been Qihoo's biggest fan. But I can't imagine how anyone could justify the obviously fraudulent behavior reported by the SAIC. What's even more shocking is that Google has set up a sales partnership with Qihoo. I can see where the company is coming from; Baidu has been its main competitor in China, so Google is likely looking at Qihoo and thinking 'the enemy of my enemy is my friend.' But that strikes me as very shortsighted. In the long run, Qihoo is another competitor, and in the short-term a partnership with Qihoo could severely damage Google's brand in China. Google is still seen by many as having taken the high ground in China's search wars by refusing to censor its results, but the partnership with Qihoo -- widely considered one of the least honorable companies in China's tech sector, and with good reason -- could wash all of that away fairly quickly if it becomes widely known the two companies are working together. Whatever Google does, though, Chinese regulatory authorities should do more to protect users from the fraud and trickery that is perpetrated by Qihoo and other companies like it. An official warning is a good first step, but it is not enough and it should have been issued years ago.
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