Durban - The order for the Africa distributor of Playboy products was a tall one: a 12m container of condoms, the same of lubricants and $1.2 million (R19m) worth of electronic cigarette vapour products every year.
On top of that, Blue Rock Capital Limited - based in Jacobs, Durban, but registered in Mauritius - had to sell $500 000 worth of condoms in India and order another $1m worth of vapour products for that country from the California suppliers, United Medical Devices and United Convenience Limited, which have the rights to the famous brand.
But the love story between the companies has ended and their bust-up is being played out in the Durban High Court, each accusing the other of breaking promises.
Blue Rock first approached the court days before Christmas last year in a successful urgent application to attach the rights and title to the Playboy and Rabbit Head Design (RHD) trademarks in South Africa and to confirm the court’s jurisdiction to hear the dispute.
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Blue Rock manager Prasanth Seevnarayn said the 10-year-contract, signed in April 2014, gave the company exclusive rights to advertise, market, distribute and sell the branded condoms, lubricants and vapour products in various African countries, including South Africa, and in India.
The agreement stipulated the minimum annual purchases which, if not met, would result in “a default for the purposes of the user agreement”.
It also stipulated the annual distribution fee payable, ranging from $1m in year one to $1.8m in 2023.
Seevnarayn said all products had to be delivered with the master licensor’s official hologram attached, and no other person was allowed to sell the products within the designated territories.
He alleged that the two American companies had reneged on this by not ensuring that the hologram was affixed and giving another distributor, known as “Kelvin of China”, the right to manufacture and distribute the vapour products at lower prices than theirs.
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He said in September last year, the companies had given written notice cancelling the agreement “without entitlement”, because they had agreed to waive the minimum yearly purchase requirement and Blue Rock had already paid the distribution fee.
“We rejected the cancellation and demanded that they replace all items without holograms, and they stop Kelvin from selling in our territory. But they raised factual disputes and need to be adjudicated in the intended action [for damages].”
When the matter came back to court on Sunday, the American companies applied for the interim attachment order to be set aside, describing it as “disingenuous and abuse of the court”. Senior vice-president Judy Kawal said in her affidavit that the companies did not own the trademarks but just had a right to use them and subcontract their use.
She said all obligations had been met from their side, but the annual quotas had not been.
“It is a wide prohibition on our ability to do business in South Africa which we have been doing since 2012. The potential revenue loss from this is $1m,” said Kawal.
“On top of that, in December we started negotiations with another distributor in South Africa. Negotiations are in the final stages. I am advised that this application will take four to six months, or even longer. We cannot simply cease business in South Africa and then start up again.
“Any harm to the Playboy brand arising from our failure to supply products will also jeopardise our relationship with Playboy international,” she said.
The matter was adjourned.