“This item may be the product of slave labor.”
Those jarring words could end up on candy bar wrappers, packages of frozen shrimp and even cans of cat food if some California lawyers get their way.
Forced labor permeates supply chains that stretch across the globe, from remote farms in Africa and the seas off Southeast Asia to supermarkets in America and Europe. Almost 21 million people are enslaved for profit worldwide, the United Nations says, providing $150 billion in illicit revenue every year.
Governments are pushing companies to better police suppliers, including proposed SEC reporting rules in the United States. But that’s not enough for a group of law firms. They’ve sued name-brand companies doing business in California, like Hershey, Mars, Nestle and Costco Wholesale Corp., hoping to use the state’s novel consumer protection laws to put the suffering of millions squarely in front of shoppers.
“These lawsuits are vehicles for forcing business ethics,” said Niall McCarthy, an attorney with one of the class action firms taking up the issue, Cotchett Pitre & McCarthy. “You cannot ignore human suffering to make a buck.”
The companies say there’s no state law mandating warnings and that they’re doing their best to avoid working with anyone using slave labor. This week, Nestle prevailed in Los Angeles, where a federal judge agreed there’s no requirement to warn consumers about seafood from Thailand. The lawyers behind that lawsuit have vowed to appeal, while McCarthy’s firm will argue a similar case against Costco in San Francisco later this month.
A victory for consumer lawyers may force companies into a corner: Give shoppers a moral dilemma every time they go to the supermarket or pay suppliers a lot more to eliminate any temptation to use slave labor.
Forced labor in supply chains burst into public view after recent reports about the savage conditions some workers endure. Tales in the Guardian and Associated Press of indentured servitude on Thai fishing boats, where starvation, beatings and even murder can occur, triggered an outcry among human rights groups. The lawsuits soon followed.
Then, on Nov. 24, Nestle said forced labor taints Thailand’s seafood industry, part of the company’s supply chain for whole prawns. Consumer lawyers said it’s also a source of ingredients for Nestle’s cat food brand Fancy Feast. Nestle Executive Vice President Magdi Batato said at the time that the Swiss company is “committed to eliminating forced labor in our seafood supply.”
The announcement by the world’s largest foodmaker, and its pledge to stamp out abuses, shifted the debate. Companies have said it’s impossible to prove their products are tainted by forced labor, given how many suppliers and middlemen make up modern supply chains. Now one of the biggest was conceding it was a distinct possibility.
“We need business to own up to the abuses in their supply chains and then work collectively to eradicate them,” said Steve Trent, executive director of Environmental Justice Foundation, which tracks slavery in the Thai fishing industry. He hailed Nestle’s statement as a huge step forward. Chris Bayer, a researcher at the Germany-based nonprofit Development International, advises companies on compliance issues. He agreed with Trent, and not just for moral reasons.
“Companies that have such policies and systems in place are far less vulnerable to reputational risk,” Bayer said. “It would behoove any reputable company that qualifies to make sure it’s at least legally compliant.”
Transparency initiatives don’t include giving in to the lawsuits, however. Edie Burge, a spokeswoman for Nestle’s U.S. unit, echoed other defendants when she said there’s no legal justification for requiring warnings on company products.
Under California’s supply chain transparency law, the first of its kind, companies with more than $100 million in revenue must publicly disclose their efforts to fight slave labor. It doesn’t require them to have a policy – but if they do, they have to say what it is.
“This was a very simple approach to an important problem,” said Darrell Steinberg, the former state senator who sponsored it. “If large companies trace their supply chains and publish the results on their websites, by definition that will be a major deterrent.”
Some of the lawsuits use Steinberg’s bill as a starting point: They claim companies like Nestle and Costco violated California law by not also stating publicly that slave labor probably had a part in making their products.
The proposed class actions envision an individual right to sue, arguing that shoppers are being illegally deceived because some wouldn’t buy a product potentially tainted by slave labor. In ruling for Nestle, U.S. District Judge Cormac Carney said state legislators had the chance to require slave labor warnings, and passed.
Steve Berman, whose firm Hagens Berman Sobol Shapiro is behind most of the cases, said suing on behalf of consumers instead of victims of forced labor avoided questions over jurisdiction. He said the judge was wrong and that he’d appeal.
For their part, the companies Berman sued reject that they can be held responsible for the actions of “sub-suppliers.” In court filings, they say corporate declarations to fight slave labor aren’t guarantees it won’t exist somewhere in the supply chain.
They also caution that the litigation could have unintended consequences, driving companies from countries where their presence allows them to push labor reforms.
