Toshiba battles boycott in China

When Toshiba made an out-of-court settlement of $1.05 billion (€1.11 billion) last year to compensate US consumers for a defect in its laptop computers, the giant Japanese company may have thought that was the end of the matter. But the settlement has suddenly blown up into a crusade against Toshiba in China, where the official media has been voicing outrage that Chinese owners of the company's laptops have not been offered similar compensation. Faced with what they regard as a national affront, dealers have been taking Toshiba off the shelves as a boycott of the computer company gets under way across the country.

The campaign has been laced with anti-Japanese sentiment, never far below the surface in China. More significantly, it has confronted foreign companies here with the previously unknown phenomenon of consumer activism. What began as an affair of pique could be the beginning of an era of expensive consumer litigation in the world's largest potential market. It started last week when reports began circulating on the Internet about Toshiba's settlement of the US lawsuit, alleging a defect in the floppy disk controllers of its laptops that could potentially corrupt data on floppy disks.

Toshiba agreed to incorporate new floppy disk controllers in personal computers bought in the US and to provide tokens ranging in value from $100 to $225 to each purchaser. Toshiba has said its decision was not an admission of a defect with the controller, though in rare cases data could be altered or lost. No such losses have been reported by consumers, either in the US or China, and Toshiba has not offered payments to any customers outside the US, including Japan, China and Europe. It has made a free software patch available over the Internet which it says prevents the problem. What really angered the Chinese was the fact that Toshiba never told anyone in China until May about the problem or the way to fix it. A court in Beijing is now deciding on whether to allow a suit filed by three Toshiba laptop users, Zhu Guoqiang, Wu Jingsong and Yang Jinping, asking for 93,000 yuan (€10,158) in compensation, a public apology and legal costs.

In the present climate it is hard to see the court refusing, and if it goes ahead hundreds of similar cases will be taken throughout China. In an angry commentary yesterday, the China Youth Daily likened Toshiba management to Japanese politicians who apologise for crimes committed by their country during the second World War, using sweet words but lacking sincerity.

"It is not the first Japanese company to have this problem and will not be the last," it said. Toshiba is so worried that it sent its vice-president Masaichi Koga to Beijing to face a press conference attended by 100 hostile Chinese reporters last week. One journalist shouted: "You look down on Chinese!". The most venomous anti-Toshiba comments have been posted on Internet chat rooms, some calling Chinese people "traitors" who buy Japanese goods.

Chinese lawyers have been meeting all week to consider how best to pursue Toshiba through the Chinese courts, as class action suits against foreign companies are virtually unknown in China. An expert in civil law with the National People's Congress, He Shan, said manufacturers or service providers who have cheated consumers must pay damages amounting to about double the cost of the goods or services under a 1993 law on the protection of the rights and interests of consumers.