Chinese social networking giant Tencent has applied to the court to freeze 16.24 million yuan (about $2.3 million) in assets of companies related to Lao Gan Ma in a lawsuit, Sina reported on June 30, 2020.

This is a very interesting event because Tencent is the largest social network company in China, while Lao Gan Ma is a well-known chili sauce brand. Both companies are household names in China, but they have very little connection before.

The court did not release details of the prosecution, which led to confusion among many netizens when the event explored. They even speculated that there was a safety problem with Lao Gan Ma’s products, which were supplied to Tencent’s canteen.

But it is clear that such a event involving such a large amount of money cannot be that simple.

According to Tencent’s explanation later, the case was caused by Lao Gan Ma’s long-term arrears of advertising fees.

Court order

In March 2019, Tencent signed a “Marketing Cooperation Agreement” with Lao Gan Ma. Tencent put resources into the promotion of Lao Gan Ma chili sauce series. The company has fulfilled its obligations in accordance with the contract, but Lao Gan Ma failed to pay in accordance with the contract, so Tencent has to sue in accordance with the law. At present, the case is in the specific trial process of the court.

In addition, netizens also found that Lao Gan Ma also sponsored the annual tournament of Tencent’s mobile game QQ Speed in 2019. Lao Gan Ma’s brand image has been displayed many times in the competition, and clothes with Lao Gan Ma image have been presented in the game.

As we mentioned before, Lao Gan Ma lost some market share from 2015 to 2018 because of her own business. As an improvement, the founder of the company returned to the management of the company in 2019 and launched a series of marketing strategies for young people.

Sponsoring QQ Speed’s annual tournament is considered as one of these strategies, because the game is very popular among young people in Asia. (QQ Speed’s name in other regions may be Speed Drifters or Bakuso Drifters).

Update: Lao Gan Ma responded that Tencent was cheated by fake companies. The real Lao Gan Ma company has never reached a cooperation with Tencent. According to the police investigation, three people did forge Lao Gan Ma’s official seal and related contracts and defrauded Tencent through these tools. At present, the three people have been criminally detained by the Chinese police.