Archived press release

Tesco Profits - at whose expen se?

20 April 2004

Tesco's record profits, announced today [1], were made at the expense of the livelihoods of British farmers and small shopkeepers, working conditions in developing countries, and environmental damage, Friends of the Earth said today. The environmental campaign group is calling on the Government to act to bring the retail giant under tighter control.

1. Tesco treats British farmers unfairly and things are getting worse:

   According to the Competition Commission's report on supermarkets in 2000 [2] Tesco paid the lowest prices to suppliers. Although a Supermarket Code of Practice was introduced in 2002 to stop unfair trading practices, the Competition Commission and Office of Fair Trading have found that it has made no difference to the way in which Tesco operates [3]. In fact things have got worse for Tesco suppliers - in 2003 the Competition Commission's report on Safeway said that suppliers said their negotiating strength with Tesco had been `much reduced' over the last four years.

2. Tesco squeezes overseas suppliers leading to uncertain jobs and poor conditions for workers

   Recent research by Oxfam in South Africa revealed how "Tesco loads many of the costs and risks of its fresh-produce business onto farmers, who are passing them on to workers - especially women - in the form of precarious employment"[4]. Oxfam found that women working for supermarket suppliers were struggling to make ends meet to feed their children, most got no paid sick leave or maternity leave and many had to work in poor conditions without protective clothing.

3. Tesco's dominance puts smaller shops out of business.

   Tesco now controls 27% of the grocery market and is increasing its share of sales of non-food goods. In 2000, the Competition Commission warned that the massive buyer power of the big supermarkets made it hard for smaller shops to compete. But now Tesco has been allowed to expand further by taking over chains of high street convenience stores creating a new threat to local stores. One local trader in Withensea, North Yorkshire, called on the Office of Fair Trading to intervene when Tesco opened a store nearby and cut prices by 40%, saying that Tesco was trying to put him out of business [5]. If Tesco's growth continues unchecked consumers will soon be left with little choice of where to shop.

4. Tesco has been found to be selling furniture from illegally logged timber

   Last year Tesco was found to be selling tropical wood garden furniture made from illegally sourced Indonesian timber. Tesco was thrown off the WWF `1995 Plus Group' of which it had been a member for eight years, supposedly committing the company to buying timber products independently certified by the Forest Stewardship Council as legal and sustainable. Illegal logging causes major social and environmental damage, fuelling corruption and organized crime.

Friends of the Earth Food and Farming Campaigner Sandra Bell said:

"Tesco boss Sir Terry Leahy may be laughing all the way to the bank but his success comes at a high price to British farmers, local shops, overseas workers and the environment. And if Tesco's is allowed to continue its bully behaviour and aggressive takeover plans, consumers will be left with little choice of where to shop. The Government must step in and set stricter rules to control Tesco's trading practices and call a moratorium on any further takeovers".

Friends of the Earth says that it is clear that Tesco is abusing its powerful position in the market and is calling on the Government to act to impose stricter controls. Friends of the Earth is demanding:

• A much stricter statutory Code of Practice to stop unfair trading practices and protect British and overseas farmers, and an independent Supermarket Watchdog to enforce it. This demand is backed by an alliance of 14 farming, consumer and environmental organisations

• A moratorium on Tesco taking over other chains of convenience stores, the impacts of which have not yet been fully assessed.

• Stricter planning regulations to protect local shops and town centres.

• Corporate accountability legislation which would give directors of companies a duty of care for communities and the environment, making them legally accountable for the actions of their companies overseas.

Notes

[1] www.tesco.com/corporateinfo/

[2] Competition Commission, 2000, Supermarkets

[3] The Competition Commission carried out a survey of suppliers during the inquiry into the Safeway merger, the results are in its report on the mergers published in 2003. In February 2004 the Office of Fair Trading published a review of the Supermarket Code of Practice and concluded that it is not working effectively.

[4] Oxfam, 2004, Trading Away Our Rights, Women working in global supply chains

[5] Telegraph, 1^st February 2004, "Proudfoot cries foul at Tesco's tactics"

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Published by Friends of the Earth Trust