Shanghai, Aug 26 (IANS): Shanghai police have arrested the head of a private IT company forcreating and spreading online rumours, police said.

Fu Xuesheng, 47, who was the chairman and legal representative of the "Shanghai LabInfo Technologies Ltd", was suspected of creating online rumours to slander his competitors as retaliation, reported Xinhua citing the police as saying Sunday.

Fu fabricated that Huang, who was a legal representative of an interior design and decorating company and died accidentally in May, has bribed a deputy district head in Shanghai, where Huang's company located.

Investigations later found that Fu and Huang were previously involved in a financial dispute, and Fu's accusation against Huang was found to be a retaliative slander.

After failing in one of Sinopec's biddings in Dec 2012, Fu took revenge against the winning bidder via slandering and said they were involved in sex bribes, police said.