Wahaha wins latest round in Danone battle

PUBLISHED : Monday, 10 December, 2007, 12:00am
UPDATED : Monday, 10 December, 2007, 12:00am

The mainland's largest drinks maker Wahaha Group has made its first score against France's Groupe Danone in their drawn-out dispute as a Hangzhou arbitration court ruled that Wahaha is the owner of their joint-venture brand, according to a mainland media report.

Danone can file an appeal against the decision, and the case is still pending at a court in Stockholm, according to the online edition of Caijing magazine.

The Hangzhou Arbitration Commission announced its ruling last Friday after the companies repeatedly failed to settle the disputes privately, Caijing said.

As a result, it decided that Danone had lost its right to sue Wahaha as the period in which it was eligible for a lawsuit had lapsed before the French company filed it.

Danone and Wahaha formed a joint venture in 1996 - in which the French company owns a 51 per cent stake - and signed an agreement under which Wahaha was to transfer its brand to the venture.

However, their applications to transfer the Wahaha brand to the venture in 1996 and in 1997 were rejected.

The Hangzhou court said Danone was allowed to sue only within two years after being informed of the rejection.

That was in line with claims by Wahaha president Zong Qinghou that the agreement was invalid as the government had rejected the application in a bid to protect the homegrown brand.

Danone, however, claimed the company had the ownership of the brand under the agreement and accused Mr Zong of lying when he said the state Trademark Office had rejected a transfer of the brand to the venture.

The French food maker also claims it is losing US$25 million every month as its estranged Chinese partner sells jointly developed products through independently set-up companies.

Records showed the French company also filed a lawsuit in California, accusing Wahaha of using the brand on products sold outside the joint venture.

A phone call to Danone yesterday was not answered while a Wahaha phone operator said no one worked on the weekend.

Mr Zong was quoted by Caijing as saying that Danone has no way to win the case even if it appealed against the Hangzhou court decision.

The dispute has attracted international attention as it highlights cultural differences and other problems in Sino-foreign partnerships and mainland firms keep growing.

The dispute was mentioned during French President Nicolas Sarkozy's meeting with President Hu Jintao and both sides agreed to let the judicial system work the dispute out.

Mr Zong, a member of the Communist Party, resigned as chairman of the joint venture company in June after the dispute with Danone escalated.

He said Danone had never helped Wahaha to grow and said it lost money when Danone took control of its largest domestic rival Robust Group.

Pressed for time

Arbitration court rules Danone has breached the time limit for a lawsuit

Number of years Danone was given to sue after brand transfer was rejected: 2

Amount the French company claims it is losing over the row every month, in US$: $25m