CHINA: Wahaha brouhaha deepens
The rift between French food and drinks group Danone and its Chinese joint venture partner Hangzhou Wahaha Group Co. appears to be deepening, with the news, reported by Dow Jones, that China's Ministry of Commerce is stepping into the dispute.
The ministry has reportedly asked the companies to submit materials related to the dispute. A source suggested that the ministry will make a ruling on the dispute though there has been no official confirmation of this and it is unclear when such a ruling might be made.
The dispute dates back to April when Danone first alleged that Wahaha, led by the multimillionaire Zong Qinghou, had been illegally selling products identical to those sold by the companies' joint ventures. Danone filed a suit in Los Angeles seeking more than US$100m in compensation for the alleged illegal sales and has also filed for arbitration in Stockholm to help resolve the dispute.
In what might be seen as a retaliatory move by Zong, a lawsuit has been lodged in a court of the northeastern city of Shenyang against Qin Peng, a director of Shenyang Wahaha Yinliao Youxian Gongsi, one of the almost 40 Danone/Wahaha joint ventures across the country.
The suit against Qin, a Danone-appointed director, has been filed by Shenyang Lingdong Shiye Fazhan Zonggongsi, which has a 5% stake in Shenyang Wahaha.
Hangzhou Wahaha said that Qin has violated Chinese law by concurrently serving as a director of other companies that compete with Shenyang Wahaha.
The implication appears to be that Qin, and by inference Danone, has been guilty of competing with the joint venture, as Zong has been accused of doing by Danone.
But the PR firm Ogilvy, which represents Danone in China, said that directors in the joint ventures "have always acted in accordance with their legal duties, consistently served the best interests of the joint venture companies, and are committed to continue to do so in the future".
Moreover, Ogilvy added that under the relevant contracts, there was no non-competition obligation on the part of the Danone directors, but that a non-competition obligation does apply to Zong.
Ogilvy did not comment on the the Ministry of Commerce's involvement in the dispute.
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