Last updated: October 2, 2011 11:47 pm

China group’s eye on Yahoo fuels privacy fears

The possibility of Yahoo falling under Chinese control raises significant privacy risks for its users elsewhere and could provoke a backlash in Washington, privacy campaigners and other China-watchers in the US have warned.

The warnings follow a comment by Jack Ma, founder of Chinese internet group Alibaba, that he is interested in acquiring the troubled US online media and communications concern. Mr Ma has a first right of refusal to buy back Yahoo’s 40 per cent stake in Alibaba should the US company itself change hands, putting Mr Ma in an strong position to influence Yahoo’s ultimate fate following its decision to reconsider its strategic options .

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“Lawmakers should oppose a deal where the data of Americans come under the control of a foreign company with links to the Chinese government,” said Jeff Chester, head of the Center for Digital Democracy. “Instead of stealthfully spying on Google users, which Chinese officials have been alleged to have done, an Alibaba takeover of Yahoo would sanction the surveillance of millions of Americans.”

The claims were immediately rejected by Alibaba, which denied that any data held outside China would be subject to review by Chinese authorities.

“We’ve demonstrated consistently that we follow the laws in the countries in which we do business,” Alibaba said. “As such, there’s no reason to believe that Yahoo’s data would be treated any differently following a change in control.”

Rebecca MacKinnon, a senior fellow at the New America Foundation, said that any attempt by Alibaba to buy Yahoo was likely to be “highly controversial”, given the negative reaction in Congress last year when Chinese equipment maker Huawei attempted to become a supplier to Sprint, the US telecoms company.

“Will people who use Yahoo email feel comfortable using a service owned by a Chinese company, knowing that in China all internet companies are expected to share information about user identities and activities on request?” she said.

In a close parallel, US regulators had taken a close look at Deutsche Telekom’s purchase of a US wireless carrier, making it likely they would also study a Chinese acquisition of a big online communications firm, said Marc Rotenberg, head of the Electronic Privacy Information Center.

The rapid increase in the amount of data held by US internet concerns had made possible foreign acquisitions more of a concern, Mr Rotenberg added. “That is one of the scenarios that has long been of concern with respect to Google’s enormous data aggregation.”

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