Lin Yufeng sat alone in the Old Tree Vine Café with a cup of coffee for over two hours, and even when he left, the coffee remained unfinished. At 2:30 PM, he returned to his office to find a new desk against the west wall, equipped with a large TV and a VCD player, and the sofa and coffee table rearranged for comfortable viewing.
He locked his briefcase, containing a pistol, in the safe and headed to the restroom. Turning on the cold tap, he repeatedly splashed icy water on his face, feeling instantly refreshed. He didn't want to appear dejected or depressed in front of Zhao Qing and Lawyer Jiang. He needed to show them Lin Yufeng's spirit and attitude. In the five hours since learning that "the situation isn't good" and the imminent meeting with Zhao Qing and Lawyer Jiang, he had experienced a complex emotional journey and reorganized his thoughts to face the tough situation with a determined mindset.
At 3:10 PM, Secretary Fang returned from the airport with Zhao Qing and Lawyer Jiang, accompanied by Director Yan Xicheng from Shenzhen Minghua Law Firm.
Lin Yufeng shook hands with Director Yan and asked, "Director Yan, what brings you here?"
Director Yan replied, "I received a call from Hanchen in Beijing after exchanging evidence. I also went to the airport to pick them up and discussed the situation with Hanchen on the way here, setting the tone for our firm."
Zhao Qing noticed Lin Yufeng's usual demeanor, his brows showing the decisiveness and confidence typical of a decision-maker. This was contrary to Zhao Qing's expectation of Lin being overwhelmed by frustration, shame, and despair. He felt a slight comfort, like a beam of light penetrating a deep, dry well.
Lawyer Jiang took out the evidence materials from his briefcase and said, "Chairman, Director Yan, let's review the evidence from Gelushi Company before discussing further."
Secretary Fang placed four bottles of mineral water on the coffee table and closed the office door as she left.
The evidence presented by Beijing Gelushi Company included:
Invoices for speaker components such as drivers, enclosures, terminals, nameplates, and packaging.Detailed cost sheets for Gelushi speakers.Minutes from the Gelushi Company's preparatory shareholders' meeting on October 26, 1996.Resolution on the company's objectives from March 7, 1997.Purchase contracts between Wangmiao Village and Gelushi Company for speaker enclosures.Video recordings of individual businesses in Wangmiao Village producing speaker stands.Business licenses, testimonies, and witness lists from individual businesses in Wangmiao Village.Original records of production costs and cost accounting sheets from individual businesses in Wangmiao Village.
The evidence proved that:
Gelushi speakers were produced in Beijing, with no fraudulent origin claims and no misleading statements about product quality.Gelushi Company did not sell products below cost.
Zhao Qing turned on the TV and played the evidence CD. The screen showed Wangmiao Village's individual businesses producing speaker stands in dilapidated houses. From cutting materials to cold pressing, base coating to hand-polishing with piano lacquer, sand casting to lathe processing—every step was performed in rundown farmhouses, with courtyards turned into factories and main rooms into warehouses. The living space for farmers was compressed to almost negligible proportions. Men, women, the elderly, and children were involved, with no conventional factories, dormitories, or canteens, no dust extraction, noise reduction, or protective equipment, no gas masks, work uniforms, or gloves.
A subtle detail in the footage startled Lin Yufeng. A shot showed a mother picking up a piece of sandpaper discarded by her daughter. After feeling its surface and deeming it usable, she took the new sandpaper from her daughter's hand, gave back the old one, and angrily hit the girl's back. The girl appeared no older than ten, as her school bag lay nearby and a red scarf was tied around her neck.
Lin Yufeng was stunned. The exquisite Gelushi speakers were produced under such primitive, harsh conditions. Unbelievable! And cost control had even extended to a small piece of sandpaper!
Lawyer Jiang commented, "This production method involves no investment in land, factories, or management facilities, no costs for safety protection, environmental pollution, or various social insurances, no fixed asset depreciation, no holidays, no labor condition restrictions… This primitive capitalist slave-extraction production method has incomparable costs to legally regulated industrial production."
Director Yan asked, "Didn't your Beijing team notice any clues about this situation?"
Zhao Qing replied, "Commercial confidentiality is common sense, and it's human instinct to cover up the unflattering parts. What we saw were authoritative German evaluation reports of Gelushi speakers, European distributors in major cities like London, Berlin, Paris, high-end speakers and exquisite manuals, BMW cars, and the background of people like Ding Yuan Ying. It's hard to imagine how these legitimate elements connect with the scenes in the footage."
Lin Yufeng pointed to a document titled "Gelushi Company Legal Representative's Certificate" and asked, "Who is Xiao Yawen? How did she become the legal representative of Gelushi Company?"
Zhao Qing handed Lin Yufeng the relevant documents and explained, "Xiao Yawen participated in the evidence exchange. Both we and the judge questioned this. After failing to settle, Gelushi's shareholders, Ye Xiaoming, Feng Shijie, and Liu Bing, fearing personal financial losses from losing the lawsuit, transferred all their shares to Ouyang Xue. Xiao Yawen then acquired 51% of the shares by paying 350,000 yuan and assuming 400,000 yuan of debt from Ouyang Xue, becoming the chairman, general manager, and legal representative, and the defendant's representative in this case. This woman graduated from the Police Academy, has a dignified demeanor, some legal knowledge, and social experience. She previously worked for a headhunting company."
Lawyer Jiang added, "This evidence exchange was a preliminary hearing before the formal trial. The evidence indicates that the chances of winning based on comparing product costs are slim. So, what is our legal basis for suing for unfair competition? Gelushi's production violates labor laws, environmental protection laws, and regulations prohibiting child labor. This illegal production method makes Gelushi's products cheaper than normal production costs, leading to unfair market competition. If there is unfair competition from the production stage, it inevitably extends to the market sales stage."
To help Lin Yufeng understand, Director Yan recited the relevant provisions of the "Labor Law of the People's Republic of China," the "Environmental Protection Law," and the State Council's decree prohibiting child labor.
Lawyer Jiang continued, "Gelushi did not submit a defense because of internal shareholder issues, indicating a lack of confidence in winning. Their understanding of the company's situation led them to predict the possibility of losing, focusing on the production method."
Director Yan said, "Yufeng, Gelushi is just the front. Your real opponent is Ding Yuan Ying. Whether as your litigation agent or as a friend, I must tell you that winning is unlikely. Proving that Gelushi engaged in unfair competition during production requires demonstrating the dependency relationship between the company and the farmers. While they operate as a single system designed by Ding Yuan Ying, legally proving this is challenging. Even if the dependency is established, it may not lead to a win. The existence of unfair competition in practice doesn't equate to legal recognition. Violations of the labor and environmental laws don't necessarily constitute unfair competition. In anti-dumping laws, it's clear, but Chinese laws in this area remain undeveloped."
Zhao Qing asked, "Didn't Ye, Feng, and Liu understand this? Their conclusion was opposite. They focused on the same point, so what's their basis?"
Lawyer Jiang explained, "Traditional concepts. One is the traditional belief that 'facts speak louder than words,' another is the traditional principle of presumption of guilt, and a third is the traditional belief in a fair and just legal system. Chinese people have been taught to believe in the sanctity of the law, that it won't wrongfully convict an innocent person or let a guilty one go free."
Director Yan said, "Yufeng, given the slim chance of winning, I would understand if you choose to withdraw the lawsuit. Losing after taking the client's money isn't dignified for us either. But withdrawing means accepting Gelushi's speaker prices, which implies that Lesheng's flagship prices should be within 2000 yuan, a cost Lesheng cannot bear. The consequences are obvious. Winning, however, would justify the expenses. Win or lose, there's a possibility of hope. So, I suggest a fight to the end. The legal fees can be adjusted, split into win and lose categories: 150% of the original contract for winning, and 50% for losing."
Lin Yufeng asked, "What's the slim hope?"
Director Yan explained, "Gelushi submitted the 1996 'Preparatory Shareholders' Meeting Minutes' to prove no dependency relationship between the farmers and the company, avoiding issues of origin and exploitative production. This is 'protesting too much,' inevitably exposing Mr. Ding. We don't question Gelushi's charitable goals; the minutes and company purpose prove Ding Yuan Ying as the planner of the whole system, even before the company's establishment, preparing for this lawsuit. This indicates the company and the farmers have never been truly independent."
Lin Yufeng nodded silently.
Lawyer Jiang opened a bottle of mineral water and handed it to him.
Director Yan continued, "The Gelushi incident appears to affect only Lesheng Company, but it impacts the entire speaker market, even broader. The most frightening aspect is it spreads a competitive notion: 'I can compete this way.' If the law tolerates this, all suitable products will be drawn into such vicious competition, disrupting market prices. The court has a duty to uphold public interest, honesty, fair competition, and maintain market order and public welfare."
Lin Yufeng turned off the TV, took out the evidence CD from the VCD player, organized the evidence materials, and pushed them to Director Yan. "Old Yan, Lesheng's honor and disgrace rest on you. Fight to the death. Have Zhao Qing take you to the computer room to make two copies of the evidence. We can study them in our spare time. Draft a new agency contract, with fees as you suggested."
Director Yan gestured to Lawyer Jiang to collect the evidence materials, shook hands with Lin Yufeng, and said, "Yufeng, we'll give our best. Don't worry. Keep thinking and contact us anytime with ideas."
Zhao Qing then took Director Yan and Lawyer Jiang to the computer room to copy the evidence.