Little Penguin vs. Laoganma, a tragic "Goose Grievance"

Compiled from: Zhihu, Southern Metropolis Daily
  
Case review
Initially: Tencent sues Laoganma for overdue advertising fees of over 10 million yuan
 
Tencent stated that in March 2019, it signed a Joint Market Promotion Cooperation Agreement with Laoganma. Tencent allocated resources for the promotion of Laoganma's chili oil series and fulfilled its obligations under the agreement. However, Laoganma failed to make payment as stipulated in the contract. After multiple unsuccessful attempts to urge payment, Tencent had no choice but to file a lawsuit in accordance with the law.

 
 

On June 29, the People's Court of Nanshan District, Shenzhen, published a civil ruling regarding Tencent's request to freeze and seize 16.24 million yuan in assets belonging to the Laoganma company. It turned out that in 2019, Laoganma placed tens of millions of yuan worth of advertisements on Tencent, and Tencent fulfilled its relevant obligations in accordance with the agreement, but Laoganma failed to make payment as stipulated in the contract. Left with no choice, Tencent filed a lawsuit in accordance with the law and applied for asset preservation, after which the court ruled to freeze Laoganma's corporate account.
 
In response, netizens joked: “So Lao Gan Ma, which claims it never advertises, finally did?” “Lao Gan Ma advertised on Tencent? How come I've never seen it?” On one side was Tencent, a domestic internet giant, and on the other was Lao Gan Ma, a chili sauce beloved by the nation. Just as netizens were still enjoying the drama, an unexpected twist suddenly arrived.
 
Twist: Tencent, you were scammed. I never cooperated with you.
On June 30, Lao Gan Ma issued a statement: “Our company has never entered into any business cooperation with Tencent.” The internet giant Tencent was actually scammed? This immediately caused an uproar online, with many netizens saying, “Could it be that the one who placed the ads was ‘Lao Qian Ma’?”
 
Another twist: Three people forged the seal of Lao Gan Ma company to sign a contract with Tencent.
On July 1, Guizhou police reported: "Our preliminary investigation has found that three individuals forged the seal of the Laoganma company, impersonated the manager of the company's marketing department, and signed a cooperation agreement with Tencent."
 
By this point, everyone understands what happened. Tencent initially believed it had signed an advertising contract with Lao Gan Ma, and after fully performing its obligations under the agreement, Lao Gan Ma failed to pay the 16.24 million yuan in advertising fees. Tencent then aggressively sued Lao Gan Ma in court. Unexpectedly, even after the court issued its ruling, Lao Gan Ma claimed it had never cooperated with Tencent. Just as Tencent was swiftly embarrassed, Guizhou police stepped forward and stated that they had determined that three individuals had impersonated Lao Gan Ma's company and signed a contract with Tencent. In just three days, with endless twists and turns, netizens ultimately ended up feeling sorry for Tencent, saying that not only did Tencent fail to get its money, but it also became the butt of everyone's jokes.

 

 
Focus of the case
The case now ultimately rests on the three individuals reported by Guizhou police. So, what legal responsibilities do these three people bear for forging Laoganma's company seal and signing a contract with Tencent?
 
1. Apparent agency
Apparent agency refers to a situation where the agent in fact has no authority, but the counterparty has reason to believe that the agent has authority to conduct legal acts, and the legal consequences of such acts are borne by the principal.
 
Apparent agency can produce two consequences: First, the rights and obligations set by the acts of the apparent agent are borne by the principal. Second, if the principal suffers losses due to bearing the consequences of apparent agency, they have the right to claim damages from the apparent agent.
 
In this case, these three individuals were not authorized by Laoganma Company. However, if there is a certain factual or legal relationship between these three individuals and Laoganma Company (i.e., an appearance of authorized agency exists), then in such a situation, the counterparty (i.e., Tencent Company) has reason to believe that these three individuals have authority. If a contract is signed with them, it is naturally permissible. However, Tencent Company's basis for belief cannot be too weak. Therefore, generally speaking, if these three individuals were once employees of Laoganma Company or once possessed Laoganma Company's seal, it would be very easy for the counterparty to believe they have authority. In such a case, the actions of these three individuals constitute apparent agency.
 
The resulting consequence is that Laoganma Company must first pay the advertising fees to Tencent, and then Laoganma Company can seek recourse from the three individuals who acted as apparent agents.
 
2. Unauthorized agency in the narrow sense
Unauthorized agency in a narrow sense refers to the act of conducting civil actions in someone else's name without being entrusted or authorized by that person, without legal basis, and without designation by a people's court or a designated entity.
 
In this case, it means these three individuals had no relationship with Laoganma Company; they simply privately engraved a seal and signed a contract with Tencent. Under these circumstances, since there was no appearance that could lead others to believe they were authorized agents, and Tencent still signed the contract with them, the matter is unrelated to Laoganma Company, and Tencent should directly seek compensation from the three individuals.

 
 

 
[1] The author's perspective
From this perspective, for Laoganma Company, if it can prove that the seal was indeed forged and that the fraudsters had no connection to it, then Laoganma Company can distance itself and avoid liability. Therefore, Laoganma Company's immediate decision to call the police and have the authorities investigate and report is undoubtedly a way to prove its innocence.
 
In my opinion, it is difficult for Tencent to attribute liability to Lao Gan Ma in this case. On the one hand, Tencent did not conduct strict due diligence on its partner. Many aspects of this cooperation violated basic business principles—for example, whether Tencent received advance payment as required by procedure, and whether it confirmed the copyright images of the partner. These are in fact Tencent’s own faults. On the other hand, based on the current situation, there is no room for applying apparent agency in this case, because Tencent may have only sought recourse from Lao Gan Ma after the advertisements had already been placed, which does not meet the standard of a “bona fide third party.”
 
Here, I would like to remind everyone to thoroughly verify the other party's identity information and authorization scope before signing a contract. If one can be more careful and diligent, such criminals will likely be nipped in the bud. Only through genuine mutual benefit can a win-win outcome be achieved.