Luckin Coffee, a rapid expanding Chinese coffee shop, released an open letter on Tuesday, accusing Starbucks of its monopoly causing unfair competition in the market and hindering their business development. It also intended to file a lawsuit against the global coffee chain.
In its open letter, Luckin Coffee pointed out Starbucks’ monopolistic practices. In the contracts Starbucks signed with many property management companies includes exclusivity provisions. Luckin Coffee says that, the response from many property management companies is that, they cannot lease the idle space they have to Luckin Coffee because the contracts they signed with Starbucks earlier included exclusivity provisions that prevent them from doing so.
The exclusivity provisions target dozens of domestic and foreign coffee chains, as well as shops where 30% their operating income is generated by the coffee business, or businesses with names related to the word “coffee”.
Starbucks has also frequently forced the suppliers of Luckin Coffee to choose between the two companies. Luckin Coffee says that all of its selected suppliers are the best in the world, many of which are also Starbucks’s suppliers.
Recently many suppliers of machinery and equipment, packaging materials and food raw materials gave notice to Luckin Coffee that Starbucks has asked them to choose sides and to stop suppling to Luckin Coffee. Luckin Coffee has already received several notices of contract termination from some of its suppliers.
Li Zhongsheng, Luckin Coffee’s lawyer and a partner at King & Wood Mallesons, an international law firm headquartered in Hong Kong, says business operators with dominant market positions shall bear more legal obligations.
Article 14 of the Anti-monopoly Law in China stipulates that business operators and their trading parties are prohibited from entering into monopoly agreements. In Article 17 it also says a business operator with a dominant market position cannot require a trading party to trade exclusively with itself or trade exclusively with any designated business operator(s) without any justifiable cause.
In order to resolve the problem as soon as possible, Luckin Coffee expressed that they “have entrusted King & Wood Mallesons to file complaints to the national anti-monopoly law enforcement agency on the above issues and will formally file lawsuits to the courts in relevant cities.”