Business Intelligence on Retailing, Franchising, and Consumerism in China

LVMH Accused Of Breaking Chinese Retailer Agreement

The world's largest luxury products group Moet Hennessy Louis Vuitton is now involved in a lawsuit for breaking an agreement with its agent in Hangzhou.

The accused party is LVMH Hong Kong, which is the head office for LVMH in China. Hangzhou Baoliangkeyi Company, which is the agent for LVMH, has accused the latter of breaking its contract and is asking for RMB8 million as compensation.

Baoliang states in its court petition that LVMH decided to set up Tag Heuer and Dior stores through them in April 2005, but after they set up a special company named Luoke (Hangzhou) Trade Company according to the agreement they had signed, LVMH stopped supplying goods to them, without any reason, in August 2006.

Ying Lingping, general manger of Baoliang, says that LVMH has now sent a letter to Baoliang, blaming it for allowing a third party–Luoke–to sell the products of LVMH. But Ying says this is just an excuse for LVMH to break the agreement as it already knew Luoke would sell the products when it signed the agreement.

This case will be heard in January 2007.

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