Business Intelligence on Retailing, Franchising, and Consumerism in China

Sanlian Suit Against Gome Rejected By Shandong Supreme Court

Sanlian Commerce, a subsidiary of the Shandong-based electronics retailer Sanlian Group, has published a report stating the Shandong Supreme People's Court has rejected Sanlian Group's lawsuit against Gome about the share auction of Sanlian Commerce.

On January 7, 2008, China's CITIC Bank Jinan branch applied to sell the 27 million stakes in Sanlian Commerce owned by Sanlian Group by auction to pay for Sanlian Group's CNY39 million in outstanding bank loans. On February 14, 2008, the Intermediate People's Court of Jinan designated Shandong Qilu Ruifeng Auction Company to be responsible for the open auction. The 27 million shares, which accounted for 10.69% of the total stake of Sanlian Commerce, was subsequently acquired by Shandong Longjidao Construction Company for CNY541 million. On February 20, 2008, Sanlian Commerce received an ownership transfer decision from the Intermediate People's Court of Jinan, according to which, Longjidao become the largest shareholder of Sanlian Commerce.

Sanlian Group said the auction was not properly handled and it sued all relevant companies, including Gome Electrical Appliance, Gome Jinan branch, Longjidao, Shandong Yongdao Investment Company, CITIC Bank Jinan branch and Shandong Qilu Ruifeng Auction Company at the Shandong Supreme People's Court, asking the court to decide that the auction is invalid and extract CNY50 million in compensation from the defendants.

After an investigation, the Shandong Supreme People's Court said if Sanlian Group has objections to the auction, it should solve the issue through an objection procedure. However, the group raised a civil procedure instead, which does not meet the conditions of admissibility, so the court decided to reject the case in accordance with the law.

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