Chinese firms embroiled in mobile app scam

Chinese mobile security vendor NetQin "collaborated" with app developing firm Feiliu to inject malware into smartphones before charging users for removing them, leading to industry and consumer backlash, reports say.

Chinese antivirus software company NetQin has been accused of being in cahoots with mobile software firm, Feiliu, to deliberately infect smartphones with malware before charging users to clean up the virus, according to reports.

A blog post by ZDNet Asia's sister site CNET Asia on Tuesday said that once the NetQin antivirus app was installed, it would "covertly install" Feiliu's download tool app onto the phone. This would, in turn, report a virus to the user before requesting a RMB2 (US$0.30) update for the antivirus app to clean up the phone.

However, an earlier report from another of ZDNet Asia's sister site, ZDNet China, said otherwise, revealing that Feiliu's app is downloaded first or comes preinstalled with the phone.

The ZDNet article revealed the pre-installed Feiliu mobile download app, when activated, would download four files and automatically run them concurrently. This causes the handset's performance to slow. At the same time, previously installed antivirus software apps would either be "deactivated" or "deleted", except for NetQin's, it noted.

Should users choose to run NetQin's security app, they are prompted to pay the RMB2 fee, after which the antivirus would label Feiliu's app as a Trojan before deleting it, the report stated.

Feiliu's download tool app is customized for the Android and Symbian operating systems (OSes) but only Nokia handsets were affected, according to the company's Web site.

Numerous government agencies are now investing the alleged fraud, which was first exposed on a Chinese Central Television (CCTV) program on Mar. 15. It also revealed that NetQin is Feiliu's second largest investor, and both companies have strategic collaboration partnerships. The companies' CEOs were previously classmates, it noted.

Both NetQin and Feiliu has since come out to deny any wrongdoings and criticized CCTV for "inaccurate" reporting.

All three Chinese mobile telcos--China Mobile, China Telecom, China Unicom--have since banned NetQin from their respective app stores while Nokia has terminated its partnership with the mobile security vendor.

The Finnish handset maker had previously preinstalled NetQin antivirus apps on various models of its Symbian-operated smartphones sold in China.

The CNET Asia blog post mentioned NetQin had recently filed of an IPO on the New York Stock Exchange, but the proposed listing could be "in doubt" due to the expose.

Since news of the "hooligan app" broke, Chinese media and Web users have been slamming both companies, according to Web sites such as Sohu.

Meanwhile, experts said many of such scams exist, and cautioned smartphone users to be alert when downloading apps.

An earlier Frost & Sullivan report pegged mobile security users in China at 2.8 million--an increase of 170 percent when compared to 2009--with NetQin the dominant industry player with 67.7 percent of the market.