Unions urge Commission to block Wal-Mart deal

Date: 22/07/1999

By Renée Cordes

EUROPE'S labour unions have launched an unprecedented challenge to retail giant Wal-Mart's planned acquisition of the UK's third-largest supermarket chain, claiming that the deal puts basic workers' rights at risk.

The move comes just weeks after US-based Wal-Mart announced plans to buy a 11.53% controlling stake in ASDA. If the deal is cleared by EU regulators, it will be the biggest acquisition Wal-Mart has made and will double its international sales.

While retail analysts agree that the deal would not create a dominant position, trade unions are lobbying the European Commission intensely to block it unless Wal-Mart pledges to pay workers at least the legally required minimum wage and to consult them on all future big company decisions.

The Geneva-based international federation of commercial, clerical professional and technical employees FIET and the UK Union of Shop Distributive and Allied Workers (USDAW) have written to the Commission asking officials to block the acquisition.

"We are not afraid of competition, but if new competition undercuts prices and offers lots of poorly paid jobs, it will not do anybody any good," said Barry Allen, a spokesman for USDAW, the major trade union for UK retail workers with 305,000 members.

FIET and USDAW argue that Wal-Mart's history of prohibiting its workers from joining labour unions and paying them wages below the legally required minimum would pose a "serious threat" to ASDA's 78,000 UK workers. They also contend that the practice contravenes fundamental principles and employment rights of the International Labour Organisation.

"In its home country, the United States, Wal-Mart is known as a company which shows no regard for the social implications of its employer policies," stated FIET in its letter to the Commission. "Offering substandard employment conditions, Wal-Mart is actively opposed to its American personnel joining the trade union of their choice."

The unions also fear that because Wal-Mart pays employees less than competitors, it would be able to sell goods at prices substantially below those of its rivals, forcing other retailers to reduce their own prices - and in turn their wages.

This argument is, however, rejected by employment lawyers, who say that Wal-Mart would not be able to pay below the minimum wage, which is €5.50 in the UK.

"If Wal-Mart came into this country and cut pay for ASDA staff, they could only go so far before they hit the minimum wage," said James Davies, an employment lawyer at Lewis Silkin in London.

Although the retailer would not be obliged to set up works councils at this stage, legal experts say it could run into trouble when EU-wide legislation on informing and consulting workers takes effect in the UK in mid-December.

The EU Works Council Directive, which was adopted by all the other 14 member states in September 1994, requires multinational companies with more than 1,000 employees in at least two member states to set up works councils to keep workers informed and consult them over matters such as wages and reorganisation. "The directive will have an impact on larger companies," said Julie Nazerali, a lawyer at Beachcroft & Stanleys Solicitors.

Wal-Mart made its first foray into Europe in December 1997, when it acquired Wertkauf, a 21-strong German hypermarket chain. It subsequently purchased 74 German stores from the Interspar chain last December.

Opposition from small retailers is nothing new for Wal-Mart, which entrepreneur Sam Walton built from a single general store in 1962 in Rogers, Arkansas, into the fourth-largest Fortune 500 company with €120 billion in sales by the time he died in 1992.

But even his staunchest critics agree that Walton did much to change the retail sector in America, spawning an entire industry based on low-overhead, low-inventory selling.

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