Wahaha union claims legal win to freeze assets

PUBLISHED : Monday, 17 December, 2007, 12:00am
UPDATED : Monday, 17 December, 2007, 12:00am

The blame game between French food giant Groupe Danone and its mainland partner Wahaha Group escalated yesterday as Wahaha's workers' union announced at a Beijing press conference that it had won local court orders to freeze some of Danone's assets.

The union, representing employee stake-owners, has accused Danone of investing in rival firms and hurting Wahaha's interests in Weifang in Shandong province.

Through its lawyers, the company said the Weifang case resembled an earlier lawsuit filed by the group against Danone in Guangxi's Guilin, in which a local court ruled in favour of Wahaha.

The latest development in the feuding between the partners came just two days after Emmanuel Faber, the French company's Asia-Pacific president, offered to drop all lawsuits against Wahaha if it agreed to return to the negotiation table.

The firms have been trading accusations and lawsuits since the beginning of the year in one of the most high-profile disputes between a foreign company and a mainland partner. State leaders from both countries have urged the two parties to settle the dispute amicably.

Danone, which has 51 per cent stake in the joint venture, has accused its mainland partner of breaking their agreement by setting up rival businesses outside their venture.

Wahaha has blamed Danone for hurting the venture's interests by investing heavily in its market rivals.

Li Su, president of H&J Vanguard Consulting Group, the union's lawyer, said the dispute would not be settled at the negotiation table unless Danone dropped all legal proceedings. 'If they let the lawsuits continue, there will be certain image problems for Wahaha and Chinese enterprises. This is not a sign they want to return to the table.'

He said only by dropping the lawsuits could Danone show everyone it regretted earlier decisions to bring the dispute to court and the media rather than seek an amicable solution.

The workers' union, a loose organisation of about 12,000 employees, has been in support of Wahaha founder Zong Qinghou (pictured) in the battle with Danone.

Mr Li said he had dealt with only three major officials of the union on the lawsuit and did not know how the union's decision to support the company had been made.

One of the union's key concerns, according to Mr Li, is that Danone wanted to dismiss more than 300 managers in the joint venture to restructure the operation. As the workers' representative, the union felt it had to protect their members' interests.

Mr Faber said last Friday that his firm had no plans to change marketing teams as Wahaha had been doing well in that area.

But he said a board reshuffle was necessary as some board members were putting their personal interests above those of the company.

The comments were regarded as a clear reference by observers of the dispute to Mr Zong, who has been accused by Danone of illegally using the Wahaha brand for his own companies.

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

He had said the dispute between the two companies was a result of a cultural divide and complained that Danone had never helped Wahaha to grow and said it lost money when Danone took control of its largest domestic rival, Robust Group.

Legal battles

Danone and Wahaha have been trading accusations and lawsuits

The number of managers the workers' union claims Danone wanted to dismiss: 300