KFC Sues Chinese Companies Over Alleged Eight-Legged Chicken Rumors

By Laurie Burkitt 

BEIJING-- Yum Brands Inc.'s KFC is suing three companies in China for allegedly spreading rumors about the quality of its food, including that its chickens have eight legs, a move that comes as the fried-chicken company fights to regain lost ground in one of its most critical markets.

KFC said on its Chinese-language website that three Chinese media companies tarnished its image by spreading false information about its products on social media. KFC alleged in its statement that the companies spread rumors, "misleading the consumer," on microblogs and through photos and articles that claimed its chicken had six wings and eight legs. The fast-food chain said it is requesting compensation of up to 1.5 million yuan (about $245,000) from each company, an apology and an end to the alleged practices.

The companies are Ying Chen An Zhi Chenggong Culture Communications Ltd. in the southern Chinese city of Shenzhen, and Wei Lu Kuang Technology and Ling Dian Technology in inland Shanxi province. The three companies couldn't immediately be reached for comment.

Yum didn't release further details about its court action, and its representatives didn't immediately respond to requests for comment.

KFC cited the Chinese government's intensified campaign to clean up what it deems rumors on social media. It is very hard for companies to protect their reputation on the Internet, KFC said.

The move also comes as Yum attempts to win back consumers that it has lost in China, which accounts for roughly half of its revenue. In April, Yum posted profit and revenue declines in the fiscal first quarter ended March 21, as it struggles to overcome setbacks in China. Yum's China sales in the quarter were down 9% from a year earlier, to $1.26 billion, following declines in the third and fourth quarters of last fiscal year. Overall net income slid 9% to $362 million in the quarter from a year earlier on sales of $2.62 billion.

Yum's woes began with a Chinese media report in November 2012 alleging that a KFC supplier had been using growth hormones and antibiotics to help chickens grow faster. The claims spread quickly online and tapped into widespread consumer worries in China over food safety.

Government officials investigated and recommended Yum strengthen its poultry-supply-chain practices, which Yum says it has done. Yum's chief executive of China operations, Sam Su, apologized at the time for failing to address problems quickly and for poor internal communications. Mr. Su also said the company planned to cut small chicken suppliers and strengthen supplier management and oversight.

Defamation is common on China's Internet, and courts have convicted Internet marketers for illegal business practices. Still, it is rare for a Western company to take action publicly on an alleged incident.

"China's social media is full of companies that will create content--positive and negative--for brands," said Sam Flemming, founder of social media analysis company Kantar Media CIC.

Olivia Geng contributed to this article.

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