Litigation Fallout from All this Supply Chain Transparency Legislation

A consumer asserted that prawns from Southeast Asia that Costco sold to consumers were farmed using forced labor

The National Law Review

August 26, 2015—In previous posts, we’ve talked about emerging legislation designed to increase visibility and transparency in supply chains to bring about desirable social ends. We’ve discussed, for instance, the California Transparency in Supply Chains Act and the UK Modern Slavery Act, both of which require companies to disclose their efforts to eradicate slavery from their supply chains. But now it is becoming clear that companies’ attempts to comply with these laws, if not managed properly, can precipitate major litigation.

On August 19, 2015, a consumer filed a putative class action against Costco Wholesale Corporation and several of its suppliers in the United States District Court for the Northern District of California, asserting that prawns from Southeast Asia that Costco sold to consumers were farmed using forced labor. Paragraph 2 of the complaint states the gist of the action:

“This case arises from the devaluing of human life. Plaintiff and other California consumers care about the origin of the products they purchase and the conditions under which the products are farmed, harvested or manufactured. Slavery, forced labor and human trafficking are all practices which are considered to be abhorrent, morally indefensible and acts against the interests of all humanity.”

In the 49-page complaint, the plaintiff alleges that Costco’s use of forced labor is inconsistent with its California Transparency in Supply Chains Act disclosure. Costco’s Supply Chain Disclosure stated among other things that Costco, “has a supplier Code of Conduct which prohibits human rights abuses in our supply chain.” The Disclosure also stated that Costco conducts supply chain audits and imposes consequences to prevent and correct violations. The plaintiff’s complaint alleges consumer fraud and other violations, claiming damages “in excess of $5,000,000.”

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