Animal feed producer sues distributor on counterfeit claims

The distributor of US animal feed producer Vitech Bio-Chem is facing legal action after allegations of counterfeit feed and packaging in China.

The speciality feed maker, based in California, claims VBC Peptide Inc, also based in California, has been developing counterfeit feed in China and also selling product in counterfeit Vitech packaging. It also states the practice was occurring while the two companies negotiated a distribution deal in 2014.

Vitech said it has lost more than $2m in sales as a result of the counterfeit actions. It is suing Peptide for fraud and to establish that the distribution deal is void.

The allegations come as a result of Vitech discovering there was a discrepancy in the sales figures. It found that sales to Peptide had dropped yet sales of Vitech products in China were unchanged. When queried, Vitech was told there was excess product in storage.

On further investigation, Vitech discovered that Peptide was adulterating the Vitech feed with locally produced soybean meal to bulk out the product to make it go further. Later investigations found feed was also packaged in counterfeit Vitech packaging.

Meanwhile, a long-term exclusive distribution deal was being negotiated between the two companies. The initial agreement would see Peptide purchase a certain amount of Vitech feed and place orders for the genuine product while the final agreement was negotiated. However, despite the initial agreement being signed in December 2014, Vitech said no purchases occurred and the final agreement was not finished.

"Instead, [Bilian] Wang, [Peptide principal] and Peptide USA manufactured excuse after excuse as to why product could not be purchased. In addition, Wang and Peptide USA refused to engage in good-faith negotiations to reach the detailed, full-form agreement referenced in the framework distribution agreement," Vitech said.

Vitech claims it has evidence in the form of communications between Peptide and Chinese customers that suggest counterfeit product was being produced and sold as a Vitech product during the negotiations for the distribution deal.

"[The] defendants' conduct was fraudulent, despicable, malicious and oppressive, and was undertaken in conscious and wilful disregard of plaintiff's right and with the specific intent of injuring and depriving Vitech USA of right," the feed company said.

Vitech is seeking $2m in damages, as well as legal costs.