U.S. retail giant Wal-Mart has entered the media spotlight again in China -- this time over a store rent dispute.
The Wanguo Shopping Plaza Co. in the northeastern coastal city of Dalian said Wal-Mart has not paid rent since mid-2002 when a building with a floor area of 16,508 square meters was transferred to the retailer for use.
The company said the two parties signed a 15-year lease at a rate of over 10 million yuan (1.6 million U.S. dollars) a year.
The Wal-Mart subsidiary in Dalian had applied to terminate the contract in 2003 and 2005 on allegations including delayed construction, illegal delivery, a lack of housing ownership certificate and unfinished projects.
The China International Economic and Trade Arbitration Commission, however, rejected its contract termination demands in 2005 and 2008.
The retailer never opened a store at the building due to the allegations, and, instead, opted to open a new store at another location in Dalian and started construction at that location in June 2010.
The arbitral rulings, like final court verdicts, are law-abiding and, therefore, the lease contract is still in effect, said Yu Zhou, a judge at the Municipal Intermediate People's Court in Dalian.` The court is pushing for the dispute to be settled in accordance with relevant laws after Wal-Mart failed to abide by the arbitral rulings over the past few years, according to the judge.
Meanwhile, Wal-Mart said in an e-mail that, in accordance with the Contract Law, they notified the landlord of the contract termination in 2007 as it delayed the store's deliveries and the landlord's business license had been revoked.
Shortly after the lease contract was signed, it paid 23 million yuan in rent, down payment and construction costs, a larger sum than was stipulated in the contract, to the cash-strapped company, the retailer added.
The Intermediate People's Court in Dalian cited an investigation saying that the payment recognized by both sides was 13 million yuan and denied that the construction permit and business license of the Wanguo Shopping Plaza Co. had ever been revoked.
This case is the most recent dispute that could tarnish Wal-Mart's image. In October, 13 Wal-Mart stores in the southwestern city of Chongqing were shut down by local authorities for 15 days for selling incorrectly labelled pork products.
The Wal-Mart stores in Chongqing were fined 2.69 million yuan for the incident, according to the Municipal Government of Chongqing, which said it had previously penalized the chain 21 times since 2006 for exaggerated advertising and selling expired and substandard food.
Local police implicated 37 people in the scandal, arresting two Wal-Mart employees, detaining 25, putting seven under house arrest and releasing three on bail.
Local authorities conducted twice daily inspections in the stores during the temporary closures, and the company also sent supervisory teams to the stores to improve management and overhaul product labeling.
Scott Price, president and CEO of Wal-Mart Asia, said the corrective actions of the Chongqing Wal-Mart stores will help the company provide better goods and services to customers.