12/2/07

UFCW uses front group to flirt with RICO violations

Tesco has suffered a legal setback in its ambitious expansion plans in the US, after a California court ruled that its main warehouse did not comply with environmental planning law.

Tesco executives acknowledged that the ruling could, in theory, lead to the closure of the depot, the logistical backbone of its US operation. But they said this was highly unlikely and that similar disputes had been settled without such radical measures. "We will review the ruling to understand what further compliance might be necessary but there is nothing in the ruling handed down that we believe will affect the operation or further roll-out of the business," Tesco said in a statement.

Simon Uwins, marketing director of Tesco's US Fresh & Easy subsidiary, said: "It is just the latest round in an ongoing court case". But he said Tesco had contingency planning in place to deal with any potential distribution difficulties.

The ruling came as Tesco announced it was drawing up plans for a second warehouse complex at Stockton in northern California. Tesco has opened 15 stores in the US and plans to bring the total to 50 by the end of the year and 200 by the end of next year. Its first 10,000 sq ft US Fresh & Easy store was opened this month. The company has said it will spend £250m a year over five years on its US expansion.

The case was brought in Riverside County Court by Health First, a previously unheard-of group established with the support of the United Food and Commercial Workers union.

The UFCW, which represents workers at the big three traditional supermarkets, has sought unsuccessfully to negotiate with Tesco over union representation. The union has used tactics like those employed to block the expansion of Wal-Mart in California.

Health First argues that the distribution centre should have been subject to a full environmental review, including a public consultation. It says it is particularly concerned about increased traffic from truck volumes.

Tesco says the distribution centre, on the site of a former military base, is covered by the environmental approvals secured for the base redevelopment.

One of Tesco's UK suppliers, 2 Sisters Food Group, faces a similar lawsuit.

(news.moneycentral.msn.com)

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