Walmart Banning Factories Unfairly, Bangladesh Suppliers Say


Factory owners in Bangladesh are complaining that Walmart's (NYSE:WMT) "red list" of unauthorized suppliers is locking them out of doing work for other retailers and apparel makers, even when the banning is unjustified, Reuters reported on Thursday (June 6).

In one case, a garment maker named Simco Group made Walmart's list, which was published May 14, despite having passed all safety audits at its four factories during 22 years as a Walmart supplier. Simco was banned after a subcontractor, Tuba Garments Ltd—which was also an authorized Walmart supplier—sub-subcontracted an order to a third company, Tazreen Fashions, without Simco's knowledge. Because 112 workers died in a Tazreen factory fire last year, it was banned by Walmart—and so was Tuba, and so was Simco.

But Simco was also told by a Chinese company that JCPenney (NYSE:JCP) had canceled an order for 500,000 pairs of pajamas because Simco was on Walmart's list. "Normally the big retailers in U.S. share such information with each other," according to an e-mail from an executive at the Chinese company, which had hired Simco to make the pajamas for JCPenney. "JCP, Target, etc will follow Walmart's unapproved fty (factory) list this time, and suspend these 245 ftys in Bangladesh for now."

JCPenney and Target (NYSE:TGT) both denied following the Walmart list.

The situation raises yet another question about Walmart's approach to factory safety in the wake of the April 24 factory collapse that killed 1,130 workers. Walmart and most other U.S. retailers have refused to sign onto an international program to fund factory safety in Bangladesh, citing concerns that they could be sued when there's another disaster.

But with no way to appeal its banning by Walmart, a lawsuit is the only way Simco can clear its name and make up for the $7 million a year it's losing because of its red-listing, not counting the damage to its reputation. That sort of business-death-by-association is nothing like real human death. But if Walmart's reaction to the factory collapse doesn't help solve the problem and sees it dragged into court, there's something wrong with the plan.

For more:

- See this Reuters story

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