BEIJING (Reuters) - China's Internet search leader Baidu said on Friday it will overhaul operations after state media said it allowed unlicensed medical services to buy high search rankings to win more customers.

Nasdaq-listed Baidu was accused on a state television show this month of letting the unlicensed services pay for prominent positions on its pay-for-performance (P4P) search platform, netting them more "clicks" for expensive but useless treatments. The claims sparked widespread public criticism of the Chinese search giant and dragged down Baidu's stock. And now Baidu's chief executive officer, Robin Li, has promised action.

"We have removed the key words of all four clients mentioned in the report and have begun to double-check the licenses of all other hospitals and pharmacies on our client list," Li told the official Xinhua news agency.

He said the company had sacked staff over the scandal and more may follow.

"Baidu employees who are found to have been involved in the scandal will be penalized...We have already fired people who helped fabricate documents for unlicensed suppliers," he said.

The television report described several ill people who used Baidu to search for treatments and were steered to unlicensed and expensive hospitals or medicines that failed to cure them.

One patient told the television program that he spent over 10,000 yuan (907 pounds) at one Baidu-boosted clinic listed to treat abdominal pain, but the treatment was ineffective, Xinhua said. He said he was later cured at a public hospital for 100 yuan.

The unlicensed clinic paid Baidu 16.56 yuan per click to get a prominent ranking, the program said.

Baidu dominates the Chinese Web search and advertising market, with an estimated two-thirds of the audience in the world's most populous market.

Google Inc, the global market leader in Web searches, is a distant second in China.

(Reporting by Chris Buckley; Editing by Nick Macfie)

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