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December 29, 2015

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Trial of OSI case starts in Shanghai

THE long-awaited China trial of US food supplier OSI Group opened in Shanghai yesterday, kicking off the final act of a scandal that dragged in fast-food giants McDonald’s Corp and Yum Brands Inc.

In July 2014, a Chinese TV report alleged to show workers at a Shanghai unit of OSI using out-of-date meat and doctoring production dates, a scandal which rippled as far afield as Japan and prompted apologies from OSI clients McDonald’s and Yum.

The criminal trial opened at the Shanghai Jiading People’s Court, a court official and lawyers said. In September, Shanghai prosecutors charged two OSI China units and 10 employees for producing and selling sub-standard products.

A large fine against OSI could threaten the firm’s business in the country and would signal an aggressive approach by China toward food-safety regulation, long a major risk for restaurant chains and retailers in the world’s second-largest economy.

Under China’s criminal law, firms and individuals can face large fines and jail sentences if found guilty of knowingly producing and selling sub-standard products.

A spokesman for MWE China Law Offices, which is representing OSI, declined to give details about the case.

Operations at OSI unit Shanghai Husi Food Co were suspended following the 2014 report, some executives were detained, local authorities launched an investigation and OSI’s CEO said he was appalled over missteps at the plant.

OSI, however, criticized the handling of the case by the local food regulator earlier this year, a rare act in China where firms are usually careful not to openly challenge the authorities.

The trial is set to last two to three days, although the verdict is likely to be decided following a period of deliberation by a panel of judges after the trial.

Food safety is one of the top issues for Chinese consumers after scandals from smuggled “zombie meat” to a tragedy in 2008 where dairy products tainted with industrial chemical melamine led to the deaths of six infants and made many thousands sick.

China has vowed to crack down on food safety violations, with the country’s top court calling for “heavy penalties” in August after new food safety laws earlier in the year set out tougher punishments and tighter regulation.

Food-safety scares have had a major impact on some international firms in China, hitting sales at McDonald’s, KFC parent Yum, France’s Danone SA and Wal-Mart Stores Inc.


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