GRADUATE SCHOOL OF BUSINESS

STANFORD

GRADUATE SCHOOL OF BUSINESS

 

CASE: P-54 DATE: 11/15/06

GOGGLE IN CHINA

“It’s an imperfect world, we had to make an imperfect choice.”

Elliot Schrage, Google vice president for global communications and public affairs.

INTRODUCTION

Using servers located in the United States, Google began offering a Chinese-language version of Google.com in 2000. The site, however, was frequently unavailable or slow because of censoring by the Chinese government. Google obtained a significant share of searches in China but lagged behind market leader Baidu.com. To achieve commercial success, Google concluded that it was imperative to host a website from within China. Given its motto, “Don’t Be Evil,” Google had to decide whether to operate from within China or to continue to rely on Google.com. If it decided to establish operations in China, the company had to decide how to deal with the censorship imposed by the Chinese government.

As a result of an extensive debate within the company, cofounder Serge Brin explained their decision: “We gradually came to the realization that we were hurting not just ourselves but the Chinese people.”1 Google decided to establish the site Google.cn, but without features that allowed users to provide content. To avoid putting individuals in jeopardy of being arrested, Google offered neither e-mail nor the ability to create blogs, since user-generated material could be seized by the Chinese government. This allowed Google to avoid putting individuals in jeopardy of being arrested. Because it would be required by Chinese law to censor search results associated with sensitive issues, Google decided to place a brief notice at the bottom of a search page when material had been censored, as it did in other countries such as France and Germany which banned the sale of Nazi items. Google planned to exercise self-censorship and developed a list of sensitive items by consulting with third parties and by studying the results of the Chinese government’s Internet filtering. Senior policy counsel Andrew McLaughlin stated, “Google is mindful that governments around the world impose restriction on access to information. In order to operate from China, we have removed some content from the search results available on Google.cn, in response to local law, regulation or policy. While removing search results is

1 San Jose Mercury News, March 3, 2006.

Professor David P. Baron prepared this case from public sources as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2006 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: cwo@gsb.stanfordedu or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of the Stanford Graduate School of Business.

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Google in China P-54 p. 2inconsistent with Google’s mission, providing no information (or a heavily degraded user experience that amounts to no information) is more inconsistent with our mission.”2

Within a month of offering Google.cn, Google came under criticism from two government-run newspapers in China. The Beijing News criticized the company for not doing enough to block “harmful information.” Referring to Google’s practice of informing users when search results had been censored, the China Business Times wrote in an editorial, “Is it necessary for an enterprise that is operating within the borders of China to constantly tell your customers you are following domestic law?” Both publications claimed that Google was operating as an Internet content provider without a proper license.3

Reporters Without Borders, a Paris-based organization campaigning for freedom of expression, called the establishment of Google.cn “a black day for freedom of expression in China.” It stated:

The firm defends the rights of U.S. Internet users before the U.S. government, but fails to defend its Chinese users against theirs. United States companies are now bending to the same censorship rules as their Chinese competitors, but they continue to justify themselves by saying their presence has a long-term benefit. Yet the Internet in China is becoming more and more isolated from the outside world.4

Other activists demanded that Google publish its censorship blacklist in the United States. Internet Censorship in China

According to the U.S. State Department, companies offering Internet services were “pressured to sign the Chinese government’s ‘Public Pledge on Self-Discipline for the Chinese Internet Industry.” Under the agreement, they promised not to disseminate information that “breaks laws or spreads superstition or obscenity” or that “may jeopardize state security and disrupt social stability.”5 Providing Internet services required a license which in turn required not circulating information that “damages the honor or interests of the state” or “disturbs the public order or destroys public stability. ,,6

Censorship in China involved self-regulation by Internet companies as well as government actions. The government did not provide a list of objectionable subjects—instead companies inferred which topics were out of bounds by observing what the government censors removed. The State Council Information Office also convened weekly meetings with Internet service providers. An American executive explained, “It’s known informally as the ‘wind-blowing meeting’—in other words, which way is the wind blowing. They say: ‘There’s this party

2 The New York Times, January 25, 2006.

3 Washington Post, February 22,2006. Google shared a license with a Chinese company Ganji.com. This practice was common among foreign Internet firms.

4 The New York Times, January 25, 2006, op. cit.

5 BusinessWeek, January 23, 2006.

6 Clive Thompson, “Google’s China Problem (And China’s Google Problem),” The New York Times Magazine, April 23,2006.

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Google in China P-54 p.3

conference going on this week. There are some foreign dignitaries here on this trip.'”7 Xin Ye, a founder of Sohu.com, a Chinese value-added Internet services firm, was asked how hard it was to navigate the censorship system. He said, “I’ll tell you this, it’s not more hard than dealing with Sarbanes and Oxley.”8

Zhao Jing, a political blogger in China, “explained that he knew where the government drew the line. ‘If you talk every day online and criticize the government, they don’t care. Because it’s

just talk. But if you organize even if it’s just three or four people—that’s what they crack down on. It’s not speech; it’s organizing.'”9 In December 2005 Zhao called for a boycott of a newspaper because it had fired an editor. In response, the Chinese government asked Microsoft’s MSN to close Zhao’s blog and Microsoft complied.10 Brooke Richardson of MSN said, “We only remove content if the order comes from the appropriate regulatory authority.”11

Yahoo and MSN, as well as other sites, complied with Chinese law as well as exercising self-censorship.12 Robin Li, chairman of the Chinese search company Baidu.com, said, “We are trying to provide as much information as possible. But we need to obey Chinese law.”13 Baidu had reached an agreement that allowed the Chinese government to oversee its website and in exchange it avoided the disruptions of service and strict operating rules that plagued foreign Internet companies.14

In 2004 Yahoo provided information to the Chinese government that led to the arrest of the journalist Shi Tao. Shi was subsequently sentenced to 10 years in prison for releasing state secrets on a foreign website. Shi had provided information by e-mail about a Communist party decision. Yahoo general counsel Michael Callahan said the company regretted that action but had no alternative since its Chinese employees could have been arrested on criminal charges for not providing the information to the government. Callahan also said that Chinese law prohibited disclosing how many times the company had provided information on users to the government.15

The agencies that regulated the Internet employed 30,000 people who monitored e-mail, websites, blogs, and chat rooms. Internet cafes were required to use software that stored data on all users. Anyone establishing a blog was required to register with the government. Telephone companies were required to incorporate software that censored text messaging.

A key part of the censorship system was the control by the government of all gateways into China. This allowed the censors to block undesired content on websites and restrict Internet search results. Referred to as the Great Firewall of China, routers at China’s nine Internet

7 Clive Thompson, “Google’s China Problem (and China’s Google Problem),” The New York Times Magazine, April 23, 2006.

8 ibid.

9 Ibid.

113 Microsoft’s blogging servers are located in the United States. Clive Thompson, “Google’s China Problem (and China’s Google Problem),” The New York Times Magazine, April 23, 2006.

11

Business Week, January 23, 2006, op. cit.

12 Yahoo lagged behind other Internet companies in China and in 2005 invested $1 billion for a 40 percent interest in the Chinese company Alibaba.com. Yahoo then turned operating control of Yahoo China over to Alibaba.com.

13 Business Week, January 23, 2006, op. cit. Baidu had a 46.5 percent share of Internet searches in China; Google was second with 26.9 percent. Google had a small stake in Baidu but sold it in June 2006.

14 The New York Times, September 17, 2006.

15 San Jose Mercury News, February 20,2006.

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Googde in China P-54 p. 4gateways examined messages and search requests and were programmed to block or censor information. It was this firewall that made accessing Google.com slow or at times unavailable from China.

China also blocked certain news sites including the BBC News, Voice of America, Amnesty International, Human Rights in China, and Wikipedia, in addition to any information on the spiritual movement Falun Gong which was banned in China. Search results on terms such as Tiananmen Massacre, Tibet, and Dalai Lama were also suppressed.

Censorship was also practiced elsewhere, including at universities. University computer systems and bulletin boards banned certain subjects such as politics, and student monitors directed chatroom conversations away from sensitive subjects to those that helped build a “harmonious society.” Student monitor Hu Yingying said, “We don’t control things, but we don’t want bad or wrong things to appear on the websites. According to our social and educational systems, we should judge what is right and wrong. And as I’m a student cadre, I need to play a pioneering role among other students, to express my opinion, to make stronger my belief in Communism.” Another student, Tang Guochao, said, “A bulletin board is like a family, and in a family, I want my room to be clean and well-lighted, without dirty or dangerous things in it.”16

The censorship system was in a technology race with those attempting to evade it. Bill Xia, who arrived in the United States as a student in the 1990s and subsequently founded Dynamic Internet Technology (DIT), developed software called FreeGate that masks the websites that users visit.17 Companies such as DIT and UltraReach also used software to create new websites to elude the Chinese censors.1g For Voice of America, for example, DIT established uncensored proxy sites that directed users to the real site. DIT and UltraReach sent millions of e-mails a day alerting users to the uncensored sites. The Chinese censors worked to shut down the proxy sites and were often able to close the sites within a few days. The companies then would develop new software to evade the censors.

The Chinese government sought to justify its practices. Liu Zhengrong, deputy director of the State Council Information Office’s Internet Affairs Bureau, argued that China’s efforts to keep out “harmful” and “illegal” information were similar to those in Western countries. He said, “If you study the main international practices in this regard you will find that China is basically in compliance. The main purposes and methods of implementing our laws are basically the same.”19 He observed that the New York Times and Washington Post websites deleted content that was illegal or in bad taste. He added, “Our practices are completely consistent with international ~ractices.” He continued, “Many of our practices we got from studying the U.S. experience.”2 He noted, “It is clear that any country’s legal authorities closely monitor the spread of illegal information. We have noted that the U.S. is doing a good job on this front.”21

16 The New York Times, May 9, 2006.

17 Human Rights in China and Radio Free Asia were also DIT clients.

1s Both DIT and UltraReach were said to be connected to the Falun Gong movement. San Jose Mercury News, July 2, 2006.

19 The New York Times, February, 15, 2006.

20 Wall Street Journal, February 15, 2006.

21 The New York Times, February, 15, 2006, op. cit.

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Google in China P-54 p. 5

Liu commented, “No one in China has been arrested simply because he or she said something on the Internet.”22 Reporters Without Borders claimed that 62 Chinese were in prison for “Posting on the Internet articles and criticism of the authorities.”23

Despite the international criticism of Internet censorship in China, it was not clear that the Chinese people were concerned. Kai-Fu Lee, who headed operations for Google in China said, “People are actually quite free to talk about [democracy and human rights in China]. I don’t think they care that much. I think people would say: `Hey, U.S. democracy, that’s a good form of government. Chinese government, good and stable, that’s a good form of government. Whatever, as long as I get to go to my favorite website, see my friends, live happily.'”2a

Ji Xiaoyin, a junior at Shanghai Normal University, commented, “I don’t think anybody can possibly control any information in the Internet. If you’re not allowed to talk here you just go to another place to talk, and there are countless places for your opinions. It’s easy to bypass the firewalls, and anybody who spends a little time researching it can figure it out.”25

Google’s Perspective

In response to criticism that Google should lobby the Chinese government to change its censorship system, CEO Eric E. Schmidt said during a visit to China, “I think it’s arrogant for us to walk into a country where we are just beginning operations and tell that country how to run itself.” He also explained, “We had a choice to enter the country and follow the law. Or we had a choice not to enter the country.” Earlier he had said, “We believe the decision that we made to follow the law in China was absolutely the right one.”26

Speaking at an ethics conference on Internet search at Santa Clara University, Peter Norvig, director of research at Google, commented on the decision not to offer services such as e-mail and blogging in China. “We didn’t want to be in a position to hand over users’ information. … We thought that was just too dangerous….We thought it was very important to keep our users out of jail.”27

Norvig justified Google’s policies in China. “Yes, it’s important to get information about democracy and Falun Gong. They also want to know about outbreaks of bird flu. We thought it was more im~ortant to give them this information that they can use even if we have to compromise.” s

Google continued to debate internally whether and how it should operate in China. It also hoped for guidance from the U.S. government and the industry. Norvig said, “We feel that the U.S. government can stand up and make stronger laws, and we feel that corporate America can get together and have stronger principles. We’re supporting efforts on both those fronts. We feel we can’t do it alone.”29

22 San Jose Mercury News, February 20, 2006, op. cit.

23 San Jose Mercury News, July 2, 2006. 2~ Clive Thompson, op. cit.

25 The New York Times, May 9, 2006, op. cit.

26 The New York Times, April 13, 2006.

27 San Jose Mercury News, March 1, 2006, and March 3, 2006, op. cit.

2s San Jose Mercury News, March 1, 2006, op. cit. 29 San Jose Mercury News, March 1, 2006, op. cit.

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Google in China P-54 p. 6Norvig disclosed that Google was not keeping search logs in China. “They don’t have personally identifiable information but they do have IP addresses that are potentially identifiable with an individual.”30 That information was kept in the United States, and China could request that information through the U.S. State Department.

Political Pressure in the United States

In advance of congressional hearings on China and censorship, the State Department announced the creation of a Global Internet Task Force to decrease censorship and encourage change in other countries. Paula Dobriansky, undersecretary of state for democracy, human rights, and labor, said, “The Internet, especially, can be a liberating force. Topics once politically taboo can become freely discussed, and people can communicate anonymously. We must ensure it does not become a tool of repression.”31

Representative Chris Smith (R-NJ), chairman of the House Subcommittee on Africa, Global Human Rights, and International Operations, introduced the Global Internet Freedom Act that would impose restrictions on U.S. companies operating in China. It included a code of conduct, requiring that e-mail servers be located outside the country, and licensing requirements for the export of technologies that could be used for censorship. Smith held a hearing in which Cisco Systems, Google, Microsoft, and Yahoo testified and were grilled by subcommittee members. Commenting on China’s sophisticated censorship system, Smith said, “It’s an active partnership with both the disinformation campaign and …, and the secret police in China are among the most brutal on the planet. I don’t know if these companies understand that or they’re naive about it, whether they’re witting or unwitting. But it’s been a tragic collaboration. There are people in China being tortured courtesy of these corporations.”32 The bill was passed by the subcommittee and was sent to full committee for consideration.

Representative Tom Lantos (D-CA), leader of the Congressional Human Rights Caucus and a survivor of the Holocaust, said, “These captains of industry should have been developing new technologies to bypass the sickening censorship of government and repugnant barriers to the Internet. Instead, they enthusiastically volunteered for the censorship brigade.”33

In congressional testimony Elliot Schrage, vice president of global communications and public affairs at Google, explained that China was an important market for the company. He said, “It would be disingenuous to say that we don’t care about that because, of course, we do. We are a business with stockholders, and we want to prosper and grow in a highly competitive world. At the same time, acting ethically is a core value for our company, and an integral part of our business culture.”3a

30 San Jose Mercury News, March 3, 2006, op. cit.

31 San Jose Mercury News, February 15, 2006, op. cit.

32 Ibid.

33 San Jose Mercury News, February 19, 2006. 3a Wall Street Journal, March 10, 2006.

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Google in China P-54 p. ~

Earlier in 2006 Google had refused to comply with a request from the U.S. government to provide information on Internet search requests.35 The government had asked Google for a random sample of 1 million web addresses and a week’s search requests with any information that could identify the user removed. The information was to be used for a study to show that Internet filters were not sufficient to prevent children from accessing pornographic websites. The Department of Justice sought the information to help revive the 1998 Child Online Protection Act that had been blocked by the Supreme Court and sent to the Court of Appeals for reconsideration. Google strongly objected to the request on privacy grounds and refused to provide the information. The Department of Justice then took Google to court to force it to provide the information. In the court hearing the government substantially scaled back its request, and the judge ordered Google to provide 50,000 random web addresses. The judge also ruled that providing the requested 5,000 random search queries could harm Google through a loss of goodwill among its users.36

In June Brin commented on the criticism Google had received. He said, “We felt that perhaps we could compromise our principles but provide ultimately more information for the Chinese and be a more effective service and perhaps make more of a difference. … Perhaps now the principled approach makes more sense.”37

In July Amnesty International launched a campaign against Internet oppression, mentioning Sun Microsystems, Nortel, Cisco, Yahoo, Google, and Microsoft. Amnesty stated, “Internet companies often claim to be ethically responsible—these pledges will highlight how their cooperation in repression risks making them complicit in human rights abuses and damages their credibility.”38

35 The government also sought similar data from AOL, Microsoft’s MSN, and Yahoo, all of which complied with the request.

36 The judge also stated that the search queries could be within the scope of a subpoena. San Francisco Chronicle, March 18, 2006.

37 San Jose Mercury News, June 7, 2006.

38 Amnesty International, press release, July 20, 2006, www.amnesty.org.

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Google in China P-54 p. 8Preparation questions:

1. What principles are relevant for Google’s decision to enter China? Is censorship consistent with Google’s core values? Should compromises be made?

2. Why does the Chinese government censor information so aggressively?

3. Should Google have entered China?

4. Given that Google decided to enter China, should it have offered e-mail and hosted blogs? Should it have restricted its offerings more than it actually did?

5. Are Google’s practices sufficient? What else should it do?

6. Should Google lobby the Chinese government to change its censorship policies?

7. Should Google lobby the U.S. government to develop a policy to guide U.S. Internet companies in China?

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