Yahoo!'s Chinese Trial Aid No Help to Reputation

The company is accused of collaborating in the conviction of a journalist.
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Yahoo!

(YHOO)

has discovered the risk inherent in gaining a strong foothold in China: There's always that other shoe waiting to drop.

In August, Yahoo! won praise on Wall Street for its push into China's emerging Internet sector with a

$1 billion cash purchase of a 40% stake in

Alibaba.com

, one of the country's fastest-rising tech companies. In one bold act, the company leapt ahead of rivals like

Google

(GOOG) - Get Report

and

eBay

(EBAY) - Get Report

, who had been jockeying for a share of the market.

On Wednesday, the label being stuck on the company wasn't so flattering: collaborator.

Reporters Without Borders, an international nonprofit devoted to freedom of the press, lashed out at Yahoo! for assisting the government in convicting Shi Tao, a journalist at

Contemporary Business News

, who was sentenced to 10 years in prison for "illegally providing state secrets to foreign entities" deemed "hostile" to the Chinese government.

An English-language copy of the verdict on the

group's Web site says Shi took notes at a top-secret briefing and emailed them that night to a pro-democracy Web site in the U.S. Shi maintained the material in the email wasn't top secret.

Among the evidence cited is "Account holder information furnished by Yahoo Holdings (Hong Kong) Ltd.," which confirmed the address and phone number of the IP address sending the email as that of the office of

Contemporary Business News

.

"We already knew that Yahoo! collaborates enthusiastically with the Chinese regime in questions of censorship, and now we know it is a Chinese police informant as well," read a statement form Reporters Without Borders. "Does the fact that this corporation operates under Chinese law free it from all ethical considerations?"

Yahoo!'s response, in essence, is that it was just following orders. "Just like any other global company, Yahoo! must ensure that its local country sites must operate within the laws, regulations and customs of the country in which they are based," said spokesperson Mary Osako in a prepared quote.

But the charge is likely to leave a stain on Yahoo!'s reputation, especially among bloggers, an influential group that the company had been courting as loyal customers. "This is vile," was the terse verdict on the widely read BoingBoing.net. Good Morning Silicon Valley used the headline, "Yahoo apparently born in Year of the Rat."

Yahoo! faced a tough choice -- disobey a government that doesn't suffer noble acts of civil disobedience, or alienate the free-speech advocates among its core customers -- and acted as companies usually do. This is a choice that Yahoo! and others will face time and again.

But for Internet companies, deals with the devils of globalization carry the depressing realization that the ideals and visions the Internet began with are falling by the wayside: Making information easier to use, it seems, means sometimes betraying the people who use it.