A minor shareholder of a major Chinese dairy maker plans to file a lawsuit against Groupe Danone SA for allegedly causing hostile competition and hurting other shareholders by investing in multiple Chinese beverage companies.

H&J Vanguard, a Beijing-based consultancy that owns a tiny percentage of Bright Dairy & Food Co, has employed a law firm and is about to deliver a notice to the French beverage and food giant, the third-largest institutional shareholder with about 20 percent share in Bright Dairy & Food.

Danone, embroiled in a legal wrangle with one of its Chinese joint venture partners, Wahaha, China's largest beverage producer, is facing a second possible legal dispute in China as Wahaha has had its arbitration filing approved by a court in Hangzhou and is requesting a trademark transfer between it and Danone to be terminated.

"We've been following the issue for quite a while," an H&J Vanguard spokesman told China Daily yesterday, referring to Danone's alleged hostile acquisition bid on Wahaha.

"Danone's bid on Wahaha jeopardizes a national brand and threatens the nation's economic security," he said. "We demand an immediate halt on such behavior of Danone."

He said the company consciously selected the time, as Danone's legal dispute with Wahaha heats up, for the lawsuit to render a heavy blow on the French firm as Wahaha is gaining sympathy and support of its peers.

H&J Vanguard is calling upon other shareholders of companies with Danone's investment to file collective lawsuits against Danone.

Bright Dairy & Food said the move is only by individual shareholders and not representative of the major shareholders.

Danone stressed it has always complied with local laws and regulations.

In an earlier statement, Li Su, president of H&J Vanguard, had said his company proposed to take Danone to court for breaching securities laws and hurting shareholders' interests by investing in seven Chinese beverage makers.

Danone, which holds a 51 percent stake in 39 joint ventures with Wahaha, also owns 92 percent in Robust, 49 percent in joint ventures with Mengniu Dairy, 50 percent in Shanghai-based Aquarius, and 24.32 percent in Huiyuan Beverage and Food.

"It violated commercial principles of competition of listed companies in the same industry, infringing on the fundamental interests of other shareholders," Li said. "If Danone acts wilfully in its erroneous strategy, we'll launch a war against unfair and immoral commercial deal and illegal trademark transfer."

Danone has accused Wahaha of setting up unauthorized independent companies and selling products identical to those of the joint ventures, in violation of a 1996 agreement. It is demanding a 51-percent stake in the non-joint venture companies, which Wahaha Group's chairman Zong Qinghou has rejected.

(China Daily June 20, 2007)