In short: The Beijing Haidian Court has reportedly accepted a case alleging that a contract was breached between Xiaomi and a man referred to as 'Mr. Yang'. According to the plaintiff, he was promised a hosted meal with company co-founder Lei Jun through a sales promotion run on Xiaomi's store website from August 3 to December 31 of last year. Yang claims that he participated in the promotional contest, selling 523 Redmi Note 5A handsets during the period. The contest rules are said to have required participants to sell 300 units or more of that handset. Despite numerous interactions with the company, Xiaomi is alleged to have refused to acknowledge Yang as the winner. Yang is suing for compensation and legal fees – which total out to around $3,491 or 24,000 yuan.
Background: Historically, Xiaomi has managed to keep itself mostly out of public controversy with a few exceptions. More recently, it has been sued by Coolpad at least twice for patent infringement, although the first of those cases appear to have been settled without help from the courts and the proceedings of the second haven't been very widely reported outside of China. However, the company has not faced a large number of cases, if any, brought by self-proclaimed fans of the brand. Bearing that in mind, the lawsuit in question isn't very likely to have any serious consequences for Xiaomi from a financial perspective. Instead, any damage from the case will mostly be relegated to harm in terms of public perception.
Impact: If Yang can prove his case and the court determines that it had formed a legally binding agreement through the alleged promotion, then it will ultimately be forced to admit to not upholding its end of the contract. That the plaintiff is a fan of the brand and a consumer, rather than another large business entity, could serve to make matters worse since public trust will have been broken. On the other hand, the case could swing in the other direction as well. Xiaomi may choose to honor the prize and award what would now almost certainly be an awkward dinner or pursue an out-of-court settlement.