Like the game Six Degrees of Kevin Bacon, but with much more serious consequences, Costco (NASDAQ:COST) is being accused of being complicit in the use of slave labor to bring you cheap shrimp.
In the parlor game, players try in as few steps as possible to connect the prolific actor Kevin Bacon to any other actor, no matter how obscure. For example, William Shatner of Star Trek fame was in the movie Showtime with Robert DeNiro, who was in the movie Sleepers with Kevin Bacon. Shatner, therefore, has two degrees of separation from Bacon.
In a similar way, the warehouse club is accused of -- and is now being sued for -- furthering an actual slave trade in Thailand through a series of connections to shrimp.
Guilt by association
According to the lawsuit, the shrimp you buy at Costco is purchased from various Thai companies, including Charoen Pokphand Foods (CP Foods), which in turn buy feed for the shrimp from traders, some of whom allegedly enslave men to work their boats. As a result, Costco, along with other major retailers like Wal-Mart (NYSE:WMT), Carrefour, and Tesco, stand accused of supporting the slave trade.
Last year, British paper The Guardian published an investigative journalism piece into the prawn trade in Thailand. It contended there are large numbers of Thai men being forced to work against their will on fishmeal boats. They're made to work 20-hour days, sometimes going years without pay, and are subject to beatings and even execution-style killings. According to the Guardian, CP Foods is aware of the allegations but says it doesn't have "visibility" into the problem and can't do anything about it.
Following the publication of the story, though, online petitions were launched urging the retailers to help end the slavery by "enforcing their zero tolerance policies" and independently inspecting their food suppliers for signs of forced labor.
One person has gone a step further and now has three California law firms suing Costco on her behalf in a class action lawsuit calling for the retailer to label its shrimp as produced with slave labor -- or otherwise stop selling them.
In a statement posted on its website, Costco said it is working closely with the Thai government, the fishing industry, and a multi-party task force that "is focused on Thailand's shrimp supply chain and promoting better labor practices through accountability, verification and transparency." Costco goes on to say that, as always, if a customer is dissatisfied with any purchase, "they can return the item for a full refund."
In addition to the fact that the most recent situation involves allegations of horrific treatment of humans, this is different from the other situations Costco has faced recently that have resulted in online petitions being launched, urging it to take action. Organizers have chastened the retailer for failing to move quickly enough to use only egg suppliers who use cage-free birds, or cease using chicken and salmon that are injected with antibiotics to fatten them up. In those instances, Costco has a direct financial relationship with the company actually performing the act.
In the case of the shrimp, Costco is getting the seafood from a supplier who is buying feed for the seafood from some suppliers that are alleged to be using slave labor. Nestle (NASDAQOTH:NSRGY) is also being accused of supporting the Thai slave trade because its Purina Fancy Feast brand of cat food is made with fish that have similar ties to the human traffickers.
An agent of change
Not that Costco (or Nestle) can't still be a force for change. One of the benefits of the globalization of the supply chain has been the changes U.S. companies have forced around the world.
Nearly 15 years ago, Nike (NYSE:NKE) stood accused of using child labor to produce its footwear. Although it had policies in place against using such practices -- at the time it had some of the toughest standards in the world -- it admitted it "blew it" as some suppliers were able to bypass its restrictions and still employ kids as young as 10 years old in their factories.
The PR disaster for the company caused it to begin auditing its suppliers, and Nike became the first company to publish a complete list of suppliers, actions that contributed to abating many of the worst violations in its supply chain.
And in 2013, U.S. retailers were accused of being complicit in a factory collapse in Bangladesh because their pursuit of profit from cheap labor contributed to the squalid conditions in which the workers toiled away. The collapse of the factory and deaths of hundreds of workers had people quickly pointing fingers at the retailers.
Yet as the Bangladesh Center for Worker Solidarity pointed out, while half of the country's garment factories don't meet safety standards, those that have improved conditions have done so only because of pressure exerted by Western retailers.
It will likely be the same for the Thai fisherman. Rather than condemn Costco through sensationalist allegations and lawsuits as promoting the slave trade, which it clearly isn't, it should be encouraged to keep the pressure on those responsible for the Thais' work conditions to improve them, just as Western businesses have continuously done since going global.
Rich Duprey has no position in any stocks mentioned. The Motley Fool owns and recommends Costco Wholesale and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.