Mobile phone maker Nokia may dominate the Chinese market with a 40-percent share but it has upset some of its distributors so much they are threatening to hold a protest outside the Finland embassy in Beijing.
The distributors are angry over the fines imposed on them if they sell a product outside a specified area, normally a provincial or city boundary.
Liu Youming, a Nokia distributor, said with sales falling 10 percent in the first half of this year they are under extreme pressure and need to sell wherever they can.
"In the current economic situation, many distributors have no choice but to risk selling products in other provinces," said an industrial analyst who asked not to be identified.
Liu said Nokia had imposed fines of as much as 5 million yuan across seven provinces in South China in July last year. Most of the fines imposed before August last year were refunded when distributors threatened action, which it was feared might disrupt the Olympics. However, the fines imposed after the Olympics, at a rate of up to 10,000 yuan for every phone sold outside its assigned zone, were not refunded. Some estimates put the total fines last year at 400 million yuan.
Distributors have also sent letters to various Chinese authorities, accusing Nokia of imposing a monopoly on prices and of tax evasion, citing the fact they never received invoices for the fines they say were imposed and kept.
In a statement, Nokia said the distributors who were protesting did not have a direct business relationship with the phone giant but were part of a second tier of distribution. It denied the allegations made against the company.
"The protestors cannot represent interests of most of our distributors," said Cai Yun, head of Nokia's public relations department. She said the reason that Nokia does not allow products to be sold across the assigned regions is to protect the interests of local distributors, who have already invested a great deal in marketing and establishing local networks. She said the fines that Nokia imposed are "insignificant".
