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Chinese beverage giant Wahaha Group confirmed on Tuesday that it had started a major lawsuit in Shenyang against an executive of Danone, Wahaha's French joint venture partner, who is charged with working for Wahaha's competitors.

 

Wahaha sources stated that Qin Peng, China director for Danone Asia, was named to a directorial position at Shenyang Wahaha Beverage Ltd. in 1996. Since then, Qin Peng held concurrent posts as director and board chairman in over 20 of Wahaha's business rivals.

 

Wahaha argued Qin Peng had breached China's corporate law, which requires loyalty of directors who will not be employed by competitor companies, and had damaged Shenyang Wahaha's interests.

 

Qin Peng has worked as a director or board chairman in Robust, Shanghai Zhengguanghe among other companies. Wahaha said earlier that Danone's purchase of three drinks companies - Robust, Shenzhen Yili and Shanghai Zhengguanghe – was contrary to Danone and Wahaha's non-competition agreements.

 

Shenyang Lingdong Industrial Development Company -- which holds a 5 percent stake in Shenyang Wahaha – filed the lawsuit against Qin Peng at the Intermediate People's Court in Shenyang, capital of Liaoning Province.

 

Wahaha said the court has accepted the case and would hear it soon. The Wahaha-Danone joint venture holds the other 95 percent in Shenyang Wahaha.

 

Shenyang Lingdong requested the court order Qin Peng to cease all duties with Wahaha's competitors, be removed as a director in Shenyang Wahaha, and give all earnings acquired from Wahaha's competitors totaling 3 million yuan to Shenyang Wahaha.

 

Shenyang Lingdong further demanded 1 million yuan in compensation for itself and another million yuan for Wahaha.

 

Ding Ying, an authorized PR agent for Danone, said on Tuesday that Qin Peng and two other Danone executives that Wahaha plans to sue had neither breached company law or damaged the interests of the Danone-Wahaha joint venture.

 

However, Ding said that company law might have been broken by Zong Qinghou, chairman of Wahaha Group.

 

The move is the latest escalation in the feud between the Chinese drink group and the French giant that emerged in April.

 

Wahaha said a week ago that it would sue Emmanuel Faber, who recently replaced Zong Qinghou as chief of Danone and Wahaha's 39 joint ventures, Qin Peng, China director for Danone Asia and Francois Caquelin, a financial director.

 

Zong Qinghou said he would sue for a total of 1 million yuan (US$131,000).

 

Wahaha lawyer Liu Xiangwen claimed that the three men had been involved in projects for over 20 rival firms to Wahaha-Danone in the beverage industry.

 

On June 26, Wahaha said it had decided to "seek justice" after Danone filed lawsuits against it.

 

Danone, which owns a 51-percent stake in the 39 joint ventures, has accused Wahaha of creating independent companies and using them to sell identical products to the joint ventures. Danone is demanding a 51-percent stake in the non-joint venture companies, a requirement Wahaha Group has rejected.

 

Danone filed its first lawsuit against Wahaha on May 9 in Stockholm.

 

On June 4, Danone filed a second lawsuit in the Los Angeles-based Superior Court against Ever Maple Trading Ltd. and Hangzhou Hongsheng Beverage Co. Ltd, and two individuals related to the companies.

 

Ever Maple Trading Ltd. is the controlling shareholder of Hangzhou Hongsheng Beverage, which is the parent company of Hangzhou Wahaha Food and Beverage Sales Co., Danone's joint venture partner in China.

 

(Xinhua News Agency July 11, 2007)