Workers and small farmers should put their tin helmets on in response to Tesco and Carrefour’s announcement last week that they would be forming a ‘strategic alliance’ to cover joint purchasing for their own brand products. According to the companies, the alliance will bring higher quality products to their shelves at a lower cost. Or as the Financial Times put it, they will "wring better deals from suppliers". Tesco scored 42/100 and Carrefour 21/100 in the Corporate Human Rights Benchmark, a ranking of the companies’ policy and performance in respecting human rights in their supply chains and operations.

Consumers may well benefit from lower prices and the two supermarkets will almost certainly benefit from healthier profit margins. But deals like this can heighten risks and vulnerabilities for workers and small-scale farmers across the globe. As suppliers feel the squeeze, decent wages and conditions for workers can be the first to go.

For decades food sales in developed and emerging economies have increasingly concentrated to just a few large players tightening their grip on supply chains (more on that here). In the last year, Sainsbury’s and Asda announced a merger; Tesco took over Booker, a food wholesaler, this year; and Co-op bought Nisa, a chain of small grocery stores. Now there is a trend towards market-power consolidation. Alongside the Tesco/Carrefour tie-up, French retailers, Auchan Retail, Casino Group, Metro and Schiever have announced a similar ‘strategic alliance’.

This is in part driven by the growth of the low-cost German retailers, Lidl and Aldi, but it is Amazon who have ensured this is a trend that won’t be going away. In the USA, Amazon has made its play for a huge slice of the food retail sector, through its acquisition of Whole Foods, and left supermarket bosses worried in all major economies. This isn’t just happening in the US and Europe; China’s e-commerce giant, Alibaba has also expanded aggressively into the food retail sector.

Increasing power of just a few supermarkets comes at the cost of declining power of small-scale farmers and workers in supply chains. Oxfam pointed out in its ‘Ripe for Change’ report last month that the growing power of supermarkets seeking to lower costs, creates a demand for exploitation in supply chains, and increasingly powerless workforces create a supply. Oxfam also points out that “whether on small-scale family farms or among workers, deeply entrenched gender norms mean the impact is most severe on women”.

The Tesco and Carrefour alliance is not of two relatively small players joining up to take on larger competition; these are the two largest supermarkets in Europe.  Their combined purchasing power means this is also a golden opportunity. Together, they could lead the food retail sector in combining quality food with upholding decent working conditions and fair treatment, as the Fair Food Programme in the USA does for tomato-pickers. Tesco has already reported better action to eliminate slavery than many of its FTSE 100 peers under the UK Modern Slavery Act, and in the treatment of Syrian refugees in its Turkish garment supply chains.  

Supermarket’s global supply chains can contribute to valuable export growth for national economies. But workers in those supply chains, the majority of them women and often migrants, who pick the fruit and vegetable and cut the flowers rarely share the benefits. They often face exploitation and abuse with poverty wages for long hours, on short-term contracts, no sick leave or maternity leave. The danger is that the consolidation of market power of massive retail brands at the top of the supply chain, has come at the cost of low wages and precarious employment for those at the bottom.

Tesco and Carrefour’s announcement was notably quiet on protection to workers in their supply chains. Both supermarkets should set out now how this deal will enhance workers’ rights in their supply chains, rather than undermine them. Crucial to this will be ensuring there are no restrictions on workers’ ability to organise, and that they look at what impact the prices they pay for their goods had on suppliers.

This tie-up is not expected to face serious regulatory scrutiny because competition regulation tends to focus on the demand side, not supply, and the companies’ retail operations don’t overlap in many countries. However, given market power consolidation is becoming the norm rather than the exception, government and competition regulators should catch up to protect workers in supply chains.