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BBQ, BHC involved in ugly legal tussle.

Korea's second- and third-largest chicken franchise chains are locked in an ugly legal tussle, which stems in large part from growing corporate espionage allegations. Each side is asking for compensation, benefiting legal attorneys as the estimated total compensation over lawsuits exceeds 300 billion won ($277 million).

According to industry sources on Monday, No. 2 BHC and No. 3 Genesis BBQ have continued expanding their legal actions since 2013. The total number of lawsuits filed during the period stands at 11 while five are pending.

The most recent one was filed on Feb. 27, in which BHC claimed it suffered losses when BBQ unilaterally canceled a contract on providing logistics service and demanded BBQ compensate some of the losses worth 53.7 billion won.

BBQ claimed, "Adding that, the amount of compensation sought now reaches 300 billion won and this seems to be a strategy to shake BBQ."

"As soon as BHC's sale was completed, it started to challenge the contract, and the relations between the two companies have worsened as much as they can," BBQ said in a statement. "Under such circumstances how can we maintain the contract? And the cause for these litigations seems suspicious."

The saga started in 2013. BHC was a child company of Genesis BBQ. BBQ initially attempted to put BHC up for an initial public offering, but sold it in June 2013 to Rohatyn Group, a U.S.-based investment fund management company, for 113 billion won.

Upon BHC's sale, BBQ included its logistics center in Gwangju and a food factory in Gyeonggi Province in the deal to raise the price. Then, the two signed the contract in which BHC would provide logistics services, sauces and other ingredients to BBQ for 10 years.

A year later, Rohatyn Group filed a complaint with the International Chamber of Commerce claiming BBQ exaggerated the number of BHC franchises in the deal.

After several years, BBQ was ordered to pay 9.6 billion won to Rohatyn Group, but still questions the complaint, on the grounds that "BHC head Park Hyun-jong led the deal for BBQ when he was a senior official at BBQ. How can he question the deal led by himself?"

As BBQ payed only a part of the compensation, BHC filed a lawsuit with the Seoul Eastern District Court and the court ordered a collection on BBQ.

BBQ countered by terminating the contract last April, saying it has to protect the secrets of its new recipes. BHC immediately filed a compensation suit, demanding 13.5 billion won and increasing the amount to 236 billion won in October.

BBQ claims BHC is exaggerating the losses, saying they remain around 20 billion won.

BHC said of these, "the point is BBQ has breached the contract and there would be no reason for us to file litigation."

Along with the two major issues, both BBQ and BHC have exchanged fire over these cases.

In 2014, BHC won a suit after claiming BBQ dumped due compensation to franchise owners after BHC's sale. BBQ also sued a BHC employee citing differences in the inventories on the books and in actual storage.

In 2015, BHC sued a BBQ employee on charges of stealing the secret of its new sauce, while BBQ filed a complaint with the prosecutors.

In July last year, BBQ filed a criminal suit against current and former senior officials at BHC, claiming they made unauthorized access to BBQ's intranet and stole its new menu, business plans and marketing data.

BBQ continued last November, accusing BHC head Park of breach of trust and fraud, claiming Park miscalculated the number of franchises during the acquisition deal but caused BBQ to compensate for the losses.
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Publication:The Korea Times News (Seoul, Korea)
Date:Mar 5, 2018
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