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Legal dispute engulfs cosmetics chain   2012-02-07 - VNS

A series of complicated legal disputes involving Shiseido Cosmetics Viet Nam (SCV), its local partner Thuy Loc Company Ltd and some investors in their retail network has resulted in the shutdown of 40 retail outlets, leaving 200 employees without jobs.

Thirteen individuals who made 30-60 per cent investments in several retail outlets have said they were preparing to sue both Shiseido Cosmetics Viet Nam and Thuy Loc Company to the tune of VND97 billion (US$4.7 million) for losses suffered because of unfair trade practices.

They blame the Japanese-invested firm as well as Thuy Loc Company for having promotions exclusive to outlets fully owned by SCV, undercutting sales in the jointly-owned shops.

Meanwhile, SCV and Thuy Loc are also embroiled in a legal dispute over money that each party says the other owes it. SCV sued Thuy Loc for VND29 billion and got the HCM City People's Court to freeze the latter's bank accounts a couple of days ago.

Dang Thi Thanh Huong, one of the thirteen investors, told local media during a press briefing held by Thuy Loc Company on Thursday that she and 12 other investors would sue for a compensation of VND97 billion (US$4.6 million).

Huong said that in 1997, Thuy Loc Company became the exclusive distributor for Shiseido products in Viet Nam. And a year later, she and other investors invested in some of the outlets to help develop a nation-wide network for the Shiseido brand.

In January 2010, Shiseido Cosmetic Viet Nam took over the distributorship from Thuy Loc, turning the latter into a retailer, said Le Hoai Anh, the company's general director.

Once the takeover happened, revenues at the 18 outlets not fully owned by Shiseido Viet Nam dropped even as it rose at other outlets by up to 60 per cent a month, Huong said.

Worse still, the recent trade dispute between SCV and Thuy Loc, details of which were not clear, led to the closure of the 40 outlets, inflicting heavy losses on the individual investors.

The closure came after Shiseido Cosmetics Viet Nam decided to terminate the co-operation contract with its local partner Thuy Loc Limited Company early this year, according to the Lao Dong (Labour) Newspaper.

The paper quoted Anh, general director of Thuy Loc Company, as saying her company has marketed Shiseido's products in Viet Nam since 1997, developing a professional nation-wide retail network with hundreds of well-trained staff.

Huong said they did not know how long the dispute between Shiseido Cosmetics Viet Nam and Thuy Loc Company would drag on, but in the meantime, cosmetics stored in the shops that have shut down would expire, and inflict heavy losses on them.

Meanwhile, Anh has said that her company would also sue Shiseido Cosmetics Viet Nam for violating a management contract.

Shiseido Cosmetics Viet Nam had previously sued Thuy Loc claiming that the latter owed it VND45 billion ($2.1 million). On Wednesday last week, the HCM City People's Court decided to freeze the bank account of Thuy Loc Company, which Anh said had a balance of VND100 billion ($4.7 million).

She said the company wanted to pay salary to the staff of the retail outlets, but was unable to do so now. She also claimed that SCV actually owed her company VND40 billion ($1.9 million).

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