BYD faces legal, PR crisis over alleged advertising fraud case

Chinese automaker BYD Auto Co has become embroiled in a potentially serious legal and public relations crisis as details continue to emerge after the carmaker accused several people of illegally using its name in business deals that involve domestic advertising firms, suppliers and a UK soccer club.

Since BYD issued an initial statement in June, accusing certain “entities or individuals” of illegally using its name, a Shanghai-based woman named Li Juan was arrested by Shanghai authorities.

But things have not cooled down, with some questioning BYD’s handling of the case.

Many advertising companies have pointed to loopholes in BYD’s statements about the incident and questioned BYD’s contention that it did not know Li had been using BYD’s name to conduct business deals.

“As a listed company, someone offers you free services worth 1.1 billion yuan [$16.44 million], and BYD only ‘discovers’ it three years later,” domestic news website thepaper.cn reported Saturday, citing a supplier involved in the case.

According to a supplier, the contract – which BYD denied awareness of – was for three years and was worth 1.1 billion yuan.

BYD didn’t make further comment when contacted by Global Times on Sunday except for asking to refer to the statement released Thursday.

In a lengthy statement on Thursday, BYD said that in May 2017, Li, using a Shanghai-based media company, initiated contact with BYD and conducted free advertising.

The company also said in April 2018, Li, using the same company name, pushed for advertising deals between BYD and UK soccer club Arsenal in various ways, including “provision of resources and discounted prices.”

In May 2018, after receiving some external inquiries about Li, BYD discovered that Li and others had rented an office in Shanghai and claimed it was a branch of BYD.

Li had identified herself as the general manager of Shanghai BYD Electric Vehicle Co. They also forged a BYD stamp and undertook advertising deals with “many entities,” said the statement.

After the discovery, BYD said it reported to authorities in Shanghai, which resulted in the arrest of Li.

“BYD does not know and is not related to any contracts signed by Li and others, using identities as BYD executives and forged BYD stamps, with any entities,” the statement read. It followed two earlier briefs.

“Evidence we submitted to lawyers has shown communication between Li and BYD has been going on for three years. We don’t believe that BYD does not know Li or Li does not know BYD,” one supplier is quoted as saying.

In its statement, BYD said that it would cooperate with the police and urged all parties to resolve the issue through legal challenges.

In a statement posted Friday, Arsenal said it was investigating the situation and discussing it with senior level BYD representatives “who were involved in the launch of the partnership.”