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Last Updated: Tuesday, 26 June 2007, 11:33 GMT 12:33 UK
Danone faces Chinese legal threat
Wahaha bottled water on sale in Beijing store
Wahaha is a well-known brand name in China
China's largest soft drinks maker, Wahaha, has threatened to counter-sue French firm Danone in an escalating dispute between the two firms.

Danone is suing Wahaha, accusing it of illegally selling copies of its drinks, and Wahaha has now responded with a threat of its own lawsuit.

Wahaha and Danone have been partners since 1996 but their relationship has deteriorated in recent months.

Wahaha founder Zong Qinghou recently quit as boss of their joint business.

Bottle battle

Mr Zong said he was leaving Wahaha Joint Ventures because Danone had harmed his reputation.

We have reliable evidence of their violations
Wahaha statement

Now the multimillionaire businessman has threatened to pursue Danone for damages, claiming the French firm has violated the terms of their agreement.

"Danone has no evidence of legal violations by us," the Chinese company said.

"We have reliable evidence of their violations and will pursue their illegal activities according to the law."

Mr Zong has described Danone's lawsuit, lodged in the US, as "despicable and laughable".

In response, Danone has accused Mr Zong of "inappropriate behaviour" while stressing that it believed an "amicable settlement" was still possible.

Strain

Under the terms of their 11-year agreement, Wahaha is prohibited from making products that compete with Danone's range.

Danone recently agreed to invest a further four billion yuan (262m; $519m) in the deal, in return for control over several Wahaha subsidiaries and the right to sell foodstuffs under the Wahaha brand.

It is these subsidiaries that make the disputed products.

Mr Zong founded Wahaha in 1987, selling milk products from a school store.

The Danone deal enabled Wahaha to invest in advanced production facilities, doubling its output between 1996 and 1997.

With its headquarters in Hangzhou in eastern China, Wahaha has 70 subsidiaries spread across 40 manufacturing sites.




SEE ALSO
New twist in Danone's China row
08 Jun 07 |  Business
Chinese war of words hits Danone
06 Jun 07 |  Business

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