China Law Blog

The Wall Street Journal had a story up on its website this morning, entitled, "China Seizes Evian Bottles Amid Bacteria Concern Groupe Danone SA."  Within hours, it was greatly modified, but I liked the original version better and this post is based on that.  The new story [subscription may be required] can be found here.  The story is on how China seized bottles of Evian water for containing too much bacteria, but the real story is the sub-story, which the new article ignores.  The sub-story arises from the fight between Danone, the company that produces Evian, and Wahaha, a huge Chinese beverage company with which Danone is embroiled in a large scale legal war.  For more on that war, I suggest you read my post, entitled, "Danone v. Wahaha, Which Of Us Is The Most Chinese Rookie?"

The original story explicitly discussed a linkage between the seizures of the Evian bottles and Danone's litigation:

The news of the Evian seizures, which was reported in some Chinese press Tuesday, also comes as Danone faces a legal battle with its beverage joint-venture partner in China, multimillionaire Zong Qinghou.

Danone is seeking to solve a dispute with Mr. Zong over alleged violations of noncompetition and exclusivity agreements. Mr. Zong is chairman of Hangzhou Wahaha Group Co., which is a shareholder in several Danone joint ventures.

Mr. Zong has called the noncompetition and exclusivity agreements unfair and last month openly waged a media battle against Danone, partially appealing to Chinese nationalism. Wahaha is one of China's top bottled-water brands.

Danone said in early May that it "commenced appropriate proceedings" after last month warning its joint-venture partner in China against selling products without authorization.

Analysts at European brokerage firm Natexis Bleichroder said the Evian water problems "are not unrelated to the conflict between Danone and its Chinese partner," but added that China is a small market for Evian.

The Evian issue could come into the limelight in coming days. Influential Internet portal Sina.com, which set up a page to follow the battle between Danone and Mr. Zong, also set up a page to follow the Evian issue. The page lets Chinese readers vote on whether they will continue to drink Evian.

The new article completely ignores the Wahaha imbroglio.  Completely.

I have no idea whatsoever whether Wahaha influenced the government's Evian seizure, but I do know such tactics are part and parcel of lawsuits in emerging market countries like China.   The sad truth is that legal matters in China often involve more than just the courts and it is fairly common for Chinese companies to seek to use their influence to try to shake off or influence their opposition.  Not sure what foreign companies can do when confronted with this and, of course, the strategy will vary with the situation. 

But, no reason to keep all of this a secret.