Not everyone is happy seeing high decibel advertisements by Chinese companies in India. Madison Media Group will tell you why. Leo Burnett, an advertising agency of the Group has been left high and dry by Chinese mobile phone company LeEco after it failed to pay up for using their services for their advertisements. Now both the agencies havegone legal and filed lawsuits to recover the amount.
Madison is suing LeEco for Rs 39 crore plus interest in a Hong Kong court, while Leo Burnett has filed a case in the Bombay High Court for none-payment of dues to the tune of Rs 2.65 crore.
The Chinese smartphone maker reportedly issued bank guarantees to these advertising agencies through LeEco Hong Kong and LeEco India respectively.
Leo Burnett and Madison is banking on Hong Kong court to handle the case swiftly and help it recover the dues from LeEco.
The incident does throw up some uncomfortable questions for those offering their services to the Chinese enterprises that descend on India to do business. If the transactions involve deferred payments, can the entities be trusted to make their payments without fail? What stops them from just folding up the operations and going back to their country? How are the Indian companies going to recover the amounts from them?
In the present case, there were bank guarantees. Will all Chinese companies agree to provide similar protection and even if they do, are they really enforceable in law, Indian or Chinese? Even within the Indian experience, when there have been payment disputes between two businesses the encashment of bank guarantees has not been found to be very effective and prompt.
LeEco, on its part, has not officially responded, but agreed that it has virtually no operations left in the country though they have not fully wound up their presence. At its peak, LeEco splurged around Rs 50 to Rs 80 crore a month on advertising.