AP News, April 11th, 2007
French yoghurt maker Groupe Danone SA on Wednesday accused its Chinese partner Wahaha of violating the terms of their joint venture amid an escalating war for control of the Chinese company's brand name.
Emmanuel Faber, president of Danone for the Asia-Pacific, told reporters his company had set a 30-day deadline for defusing the feud through talks with Wahaha.
"If they can't see eye-to-eye with us on this issue, Danone will first take legal action," Faber said. He would not say exactly what action Danone might take, but said its target would be a local distributor the French company believes is illegally using the Wahaha brand name in violation of the terms of the companies' joint venture contract.
"We reserve our rights to move forward," Faber said.
Faber accused Zong of setting up parallel operations that directly compete with the joint venture, Hangzhou Wahaha Group, contrary to the contract's terms.
Both sides agree that the contract bans Wahaha from producing products that compete with the joint venture, although Zong has complained that the terms of the arrangement are unfair to his company, Wahaha Group.
Faber termed Zong "irresponsible" for disclosing the dispute to the media in an online interview broadcast by Sina.com, a Chinese Web portal, over the weekend.
The fracas over the beverage and snacks joint venture is just the latest of many controversies over foreign acquisitions of local companies. In some cases, major deals have been delayed or scaled back in response to complaints over pricing and ownership.
Both sides appear to be seeking government backing _ China's state-run media has given the row prominent coverage.
"The French government is monitoring this carefully and now they are showing more concern at a fairly high level nationally and internationally," Faber said.
Faber said that one of Wahaha's key contributions to the joint venture, set up with Danone in 1996, was the right to use its popular brand name, which is meant to sound like a child's laughter.
Zong has complained that the limits imposed on his company are unfair, given that Danone has investments in rival Chinese beverage makers.
Danone has a 51 percent stake in the joint venture with Wahaha. Company spokesmen would not comment on the company's total investment in its China operations.
