GROUPE Danone SA faces mounting problems in its dispute with China's Hangzhou Wahaha Group Co after the labor union of its estranged Chinese joint venture partner filed lawsuits against the French firm alleging unlawful competition.
The labor union sued the French dairy maker and its two wholly-owned subsidiaries in Weifang, Shandong Province, for investing in competitive companies that allegedly damage the interests of their joint ventures and employees, according to a joint statement issued by H&J Vanguard Consulting Group and Dacheng Law Offices.
"The move (to invest in competitive firms) is an obstacle to the development of the joint ventures and it also violates the interests of the labor force," the statement added.
The labor union has demanded that Danone pay 10 million yuan (US$1.4 million) compensation for the alleged infringement and withdrawal of all legal procedures by Danone in the most prominent dispute between a Chinese firm and an overseas investor this year.
An intermediate people's court in the province accepted the case on December 6.
Ogilvy & Mather, Danone's public relations firm, said the French company has launched an investigation and will respond at the appropriate time.
As the minority shareholder of more than 39 joint ventures formed by Wahaha and Danone in 1996, the labor union is also considering similar claims against the French firm's other affiliates nationwide.
Analysts said Danone would face battles with both employees and managers of Wahaha in a series of brand and contract disputes between the two parties within and outside China.
Paris-based Danone has also accused Wahaha's chairman Zong Qinghou of illegally manufacturing and selling products that use the famous Wahaha brand - a breach of the joint venture agreement the two firms signed in 1996.
Zong has publicly rejected Danone's proposal to buy his independent companies in April and said the non-competition clause was unfair.