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Wahaha-Danone dispute deepens with labor lawsuit

The dispute between French food and beverage maker Groupe Danone SA (達能) and its Chinese joint venture partner Wahaha (娃哈哈) has deepened, with Wahaha's labor union saying it is suing Danone.

Danone had no immediate comment yesterday after the labor union of Hangzhou Wahaha Group said it filed a lawsuit against the French company in Weifang, a city in eastern China's Shandong Province, seeking 10 million yuan (US$1.4 million) in damages.

That announcement followed Danone's announcement last week that it was suspending lawsuits against Wahaha. It urged the Chinese side to take "concrete" moves toward reconciliation.

The standoff, one of the most contentious public squabbles between a foreign company and its Chinese counterpart, centers over the rights to the popular Wahaha brand name -- one of China's best known labels for bottled water and other soft drinks.

The French company has accused Wahaha founder Zong Qinghou (宗慶後) of privately producing and selling Wahaha joint venture products on the side, saying that violates their original joint venture agreement set in 1996.

The lawsuit filed by the Wahaha labor union accuses Danone of holding shares in companies that compete against the two big companies' 39 joint ventures. It also charges Danone with hurting Wahaha's reputation by "distorting facts" through the media, the union's lawyer Qian Weiqing (錢衛清) said.

The Wahaha union includes around 7,000 employees at the 39 Wahaha-Danone joint-venture companies, and nearly 10,000 at Wahaha's non-joint venture businesses, according to Li Su (李肅), chief executive of H&J Vanguard, a consulting firm that has issued a report on the dispute.

Danone has protested an arbitration ruling in Hangzhou, where Wahaha is based, giving the Chinese side the right to use the Wahaha brand name outside the 39 joint ventures operated by the two companies.

A report by the China Business Post noted that the local government in Hangzhou, where Wahaha is based, has taken actions to support Zong -- one of the wealthy city's most prominent businessmen, and has suspended its annual inspections of the joint venture, putting its legal status in jeopardy.
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