On the afternoon of August 5, 1998, at 2 PM, the first case of unfair competition in China's audio industry officially opened for trial in Beijing. The national emblem hung high in the fourth courtroom of the court, with the presiding judge sitting in the center of the bench, and the associate judges on either side. The plaintiff, Shenzhen Lesheng Audio Co., Ltd., was represented by General Manager Zhao Qing, litigation agent Yan Xicheng, and lawyer Jiang Hanchen. The defendant, Beijing Glories Audio Co., Ltd., was represented by Chairman Ouyang Xue and General Manager Xiao Yawen.
Due to extensive media coverage and the involvement of various hot topics such as business ethics, audio price trends, the high-priced acquisition by the Earl Company, and the drastic consequences of losing the case, the lawsuit had garnered widespread attention. The courtroom gallery was packed, with reporters from 16 news agencies, audio industry insiders, social issue researchers, and audio enthusiasts. The Beijing Xingji Cable TV legal channel was broadcasting the trial live to the Beijing area.
Meanwhile, 12 kilometers away from the courthouse, at the Beijing Meilin Palace Hotel, Lin Yufeng, the central figure of the case, sat alone in the living room of a luxury suite, following the trial proceedings on a cable TV broadcast.
Seated in a large, comfortable sofa, Lin Yufeng had an iced bottle of Coca-Cola, a pack of cigarettes, and a glass ashtray on the coffee table in front of him. The sound of the courtroom proceedings mixed with the faint hum of the central air conditioning in the room. He watched the courtroom scene on TV intently, feeling reassured by the packed gallery and significant media presence. He no longer cared about the outcome of the lawsuit; his goal was to expose Ding Yuanying to the media through the trial. The only discomfort he felt was that the defense consisted of just two young women in their twenties, with no lawyer to represent Glories. This imbalance of numbers, gender, age, and expertise made Lesheng's lineup appear as mere foils for the two women, further underscoring Ding Yuanying's disdain.
In the televised broadcast, the court investigation phase was in progress—
Plaintiff's attorney Jiang Hanchen was speaking: "The defendant used methods that violated labor laws, environmental protection laws, and regulations prohibiting the use of child labor to achieve production costs below the normal level. By misrepresenting the origin of the goods, they falsely claimed the quality of the products, constituting unfair competition from the production stage onward. This unfair competition continued into the market, misleading consumers into believing that Lesheng's products were overpriced and fostering resentment and rejection, thereby damaging Lesheng's reputation as the most trusted brand among enthusiasts. The defendant's unfair competition has caused Lesheng's production and sales systems to collapse, severely harming Lesheng's economic interests and brand image, and they must be held legally responsible."
Jiang then presented the evidence to the court:
The evidence included 23 cost assessment opinions from speaker manufacturers, industry experts, audio associations, and technical testing departments, along with a comprehensive minimum cost evaluation report for Glories speakers prepared by Lesheng. The key evidence, however, was originally submitted by the defendant: minutes from the Glories Company preparatory shareholders' meeting on October 26, 1996, a resolution on the company's mission dated March 7, 1997, and a video recording of the production process of audio stands by an individual business owner in Wangmiao Village, Gucheng.
With the judge's permission, Jiang played the video of the production process and continued: "To clarify the truth, we must mention an important figure who appears unrelated to this case on the surface: Ding Yuanying, the chief planner for Glories and the production base in Wangmiao Village. We admire Mr. Ding's philanthropic efforts, but as you can see, this production method involves no investment in land or factory buildings, no safety measures, no environmental protection costs, and no social insurance costs. There are no holidays, no benefits, no consideration for the elderly or children. This so-called philanthropy is, in fact, exploiting our rural brothers by having them work under harsh conditions for meager pay, enabling Glories to engage in unfair competition. It is nothing less than slave-like exploitation, incomparable to the legal and civilized industrial production."
The court scene was filmed by two cameras, with the footage constantly switching angles. Lin Yufeng watched Jiang's passionate and severe speech while closely observing the reporters' and audience members' reactions. Jiang's speech, filled with emotional appeals and legal citations, outlined the plaintiff's stance. When Jiang mentioned "chief planner Ding Yuanying," the audience and reporters showed varying degrees of surprise and curiosity.
Following the court's investigation procedure, it was now the defendants' turn to present their arguments.
Xiao Yawen, with her background in police academy criminal investigation and some social experience, maintained her composure. Holding her prepared defense outline, she calmly stated: "Your honor, judges, the plaintiff's attorney has already recounted the events, so I won't repeat them. I would like to make the following points: First, all commercial competition is inherently exclusive, so I won't deny the exclusivity of our company's legitimate competition. Second, the plaintiff's claim that we falsified the product origin is baseless. If ordering cabinets from Wangmiao Village constitutes product origin, then Lesheng's flagship components, which account for 63% of Glories' speaker costs, would make Shenzhen the product origin. There is no legal basis for this claim. Third, the relationship between Wangmiao Village's individual businesses and Glories is not determined by someone's assertion but by facts. In reality, the relationship is one of independent legal entities engaged in debt-credit relationships and market economic transactions." She then presented the following evidence:
Invoices for speaker components, including drivers, cabinets, binding posts, nameplates, and packaging boxes from Beijing Glories CompanyGlories speaker cost breakdownMinutes from the October 26, 1996, Glories Company preparatory shareholders' meetingResolution on the company's mission dated March 7, 1997Contract for ordering speaker cabinets between Wangmiao Village and GloriesVideo of the production process in Wangmiao VillageBusiness licenses and testimonies of individual business owners in Wangmiao VillageCost accounting and original production cost records for individual businesses in Wangmiao Village
After both parties presented their arguments and evidence, the court's investigation quickly focused on two key issues. Both sides knew that facts do not always prevail over eloquence; facts benefit from eloquence. The court aims to align legal truth with objective truth, but this pursuit inherently involves distance. Ultimately, the court recognizes legal truth based on evidence.
The presiding judge stated: "The plaintiff claims the defendant falsified the product origin and that Wangmiao Village's individual businesses are subsidiaries of Glories to prove that unfair competition existed from the production stage. The key issues in this case are: First, whether Wangmiao Village's individual businesses are subsidiaries of Glories; second, whether their production method constitutes unfair competition. Both parties, please present your evidence and arguments on these points."
Xiao Yawen requested permission for their witnesses to testify, which the judge granted.
Four witnesses from Wangmiao Village took the stand: elementary school teacher Zhao Lijing, Christian church packaging operator Wang Man, board processing worker Li Tiejun, and finish processing worker Wu Zhiming. They were visibly nervous, with beads of sweat forming on their faces, perhaps due to tension or the insufficient cooling of the courtroom's air conditioning.
During the routine procedure of identity confirmation and witness obligations, the TV broadcast cut to a series of commercials, replacing the images of the witnesses. Lin Yufeng took the opportunity to drink a beverage, light a cigarette, and relax.
After the commercials, the broadcast returned to the courtroom, where the witnesses testified one by one.
Zhao Lijing, the elementary school teacher, said: "I am a teacher and not very familiar with the production situation in the village. I can only confirm that the minutes of the 1996 Glories Company preparatory shareholders' meeting were written by me. I recorded what they said during the meeting, and everyone present signed the minutes."
Jiang asked, "Why did you take these minutes?"
Zhao replied, "I don't know. Maybe Brother Ding wanted proof that everyone agreed with his proposal to avoid complaints later. Complaints are common in rural areas."
Li Tiejun, the board processing worker, testified: "Ouyang invited us to Beijing to testify about our relationship with Glories. I thought about it and couldn't figure out what to say. If you say there's no relationship, the company lent us money for equipment and materials. If you say there is a relationship, I've never dealt with the company directly. The company only contracts with packaging operators, and I only deal with polishing operators. I take orders and deposits from packaging operators, buy boards, cut materials, and sell them to polishing operators. The process is step-by-step cash transactions."
His testimony, akin to a tongue-twister, amused the audience.
Wang Man, the packaging operator and a devout Christian, made the sign of the cross before speaking: "I swear to God that I am telling the truth. The relationship between the packaging operators, who are part of the church, and the company is purely contractual, apart from the company's financial support. The women at the church earn packaging fees."
Jiang asked, "What products? Do your products and packaging have your production marks? Who sets the prices?"
Wang replied, "At first, there were no set prices. After a while, prices became clearer. The products vary, like cabinet boards or empty speaker cabinets. We produce whatever the contract specifies. There are no trademarks because we're not making finished products, just components. Essentially, the company helped us establish a production system. We understand that raising prices would make our products unsellable, affecting our earnings."
Jiang suddenly asked, "How much does the company pay you?"
Wang was taken aback by the irrelevant question and answered, "No one pays us wages. Farmers earn profits, sometimes even incurring losses."
Xiao Yawen immediately protested: "Objection! The plaintiff's lawyer is leading the witness."
The judge upheld the objection and reminded the plaintiff's attorney to refrain from leading questions.
Jiang apologized and retracted the question.
Wu Zhiming, the finish processing worker, testified: "The others have said everything. I don't know what else to add. The truth can't be falsified. Honestly, the villagers don't want the company to lose the lawsuit. If the company collapses, we lose our orders. We're in debt and can't afford to lose. It's about integrity."
Jiang asked, "If Lesheng or another company places orders, would you accept them?"
Wu eagerly replied, "I'd be thrilled! We take any work we can get. Brother Ding taught us to create opportunities. Otherwise, what's the point?"
Jiang knew the witnesses' testimonies wouldn't yield favorable results but had to ask every possible question.
After the witnesses stepped down, the trial continued.
The judge asked if either party had additional evidence.
Jiang requested to question Ouyang Xue.
The judge granted permission.
Jiang read two excerpts from the 1996 Glories Company preparatory shareholders' meeting minutes:
First excerpt: Ouyang Xue stated: "I joined for three reasons: I trust Brother Ding; it's a charitable act; and I can afford to lose the money. I'll invest one million but with the condition that I won't manage daily operations."
Second excerpt: Ding Yuanying stated: "Glories exists from now on. I set two hard targets: register the company and apply for patents by March, and ship top-quality speakers to Europe by June. Farmers must establish individual businesses by March and complete products by April. This winter will be tough."
Jiang asked, "Ouyang, how did you fulfill your role as chairman with your stated limitations? Ding issued commands. Could shareholders and farmers disobey? Wasn't everything under Ding's control?"
Ouyang replied: "For major decisions, I consulted Brother Ding. Shareholders and farmers couldn't disobey because they sought his help and granted him authority. Ding ensured both the farmers' and company's future. Independent farmers were motivated to succeed, securing the company's safety. Ding's approach avoided perpetuating poverty."
Jiang argued: "Rural hardships don't justify illegalities. Legal allowances differ from societal norms. Without Glories' support, these individual businesses wouldn't exist. Glories effectively administered these businesses, creating an inherent subsidiary relationship."
Xiao Yawen countered: "Market dependency isn't equivalent to ownership. If the plaintiff equates them, provide legal grounds. Ding's approach promoted self-reliance, a principle long upheld by our party."
Jiang retorted: "The past and present differ."
Xiao Yawen protested: "Objection! The plaintiff's lawyer misrepresents the party's stance."
The judge sustained the objection and cautioned Jiang.
Jiang apologized again and continued: "Glories produced speakers with Lesheng's components, selling them cheaply at an expo. The company's actions show exploitation, leaving farmers with legal troubles."
Xiao Yawen responded: "Define true philanthropy. I will learn from it."
Jiang couldn't answer.
Yan Xicheng, observing the trial's direction, felt it was time to speak. He noted Xiao Yawen's reliance on legal gaps and felt prolonged debate would favor Glories, making them appear philanthropic. He stood up and addressed the court: "Your honor, as a lawyer, I never expected to win this case due to legal gaps and the lack of a proper defendant. We can't legally prove a subsidiary relationship or unfair competition."
His statement caused a stir, with murmurs and sighs from the gallery and reporters taking photos of Xiao Yawen.
Yan continued: "We admire Ding's philanthropy, but his actions manipulated legal gaps, exploiting the poor and avoiding responsibility. Lesheng's only escape is to cooperate with Glories, sharing their resources, costing Lesheng 6 million. Ding's method is worse than robbery."
Xiao Yawen protested: "Objection! This is defamation."
The judge upheld the objection and warned Yan.
Yan apologized and continued: "In the Hi-Fi market, Lesheng is one of the few domestic brands competing with foreign products. Glories' actions harm our industry, promoting internal conflict while facing foreign anti-dumping measures."
Xiao Yawen rebutted: "This isn't about nationalism but legal adjudication."
Lesheng's General Manager Zhao Qing finally spoke: "Markets force competition. Capital moves to low-cost areas. If the court deems our actions wrong, we will repent and learn from Glories."
Watching this, Lin Yufeng felt satisfied. The trial had exposed Ding Yuanying and fulfilled its purpose. He turned off the TV, planning to find Ding for a final confrontation.