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Supermart chain sued over ad promotion

By Qiu Quanlin (China Daily)
Updated: 2009-04-16 14:42

SHANGHAI -- The country's largest digital media group, Focus Media, is suing a Taiwan-based supermarket chain for contract breach, demanding more than 88 million yuan ($12.87 million) in compensation, a Shanghai court was told Wednesday.

On Sept 3, 2007, Shanghai Focus Defeng Advertisement Co Ltd, a subsidiary of the Nasdaq-listed company, signed an exclusive five-year lease contract with RT-Mart, attorney Shen Yun told Shanghai No 2 Intermediate People's Court.

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By the agreement, Shanghai Focus was made the exclusive provider for installing LCD television screens in each of RT-Mart's 74 stores on the Chinese mainland, having exclusive sales rights of adverts to the chain's suppliers. But this was not binding on RT-Mart or a third party installing similar facilities and advertising products for temporary promotion activities, Shen said.

Shanghai Focus paid 44.4 million yuan a year as rent and another 20 million yuan ($6.4 million) as deposit to the chain. One year later, when the chain opened four more stores, Shanghai Focus paid another 3 million yuan to include these into the network.

"But RT-mart violated the contract since mid-2008," said Shen.

The stores have been advertising products on screen facilities installed by themselves or their suppliers on a long-term basis, Shen told the court. "Focus lost potential clients to the stores," he said.

The stores blocked the Focus screens, cut the electricity or unplugged the wires connected to the screens, the indictment said.

"They have failed the purpose of the contract," Shen said. "We want the contract terminated, have RT-Mart return the 20 million deposit and 20 million rental and compensate Focus 48 million yuan for contract breach."

"The exclusive operation is not applied to the stores' own screen facilities, those of our suppliers for temporary promotion and those installed before the contract," said RT-Mart's attorney Zhou Zhiming.