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Delhaize, Food Lion Deny Labor Charges; Cite Smear Campaign

November 12, 1992

BRUSSELS, Belgium (AP) _ Belgian food retailer Delhaize Le Lion SA and its U.S. unit, Food Lion Inc. denied charges today of U.S. labor and sanitary law violations and accused a U.S. union of a smear campaign.

Following media reports that Food Lion violated child labor laws and relied on unsanitary practices, Delhaize and Food Lion executives said the charges stemmed from a smear campaign by the union that represents supermarket employees, the United Food and Commercial Workers.

Food Lion workers do not belong to the UFCW, which has sought to organize them in the past. Carl Trieshmann, an attorney who advises Food Lion, said the UFCW’s goal was to pressure Food Lion into unionizing its employees, which he said the union has been unable to do itself.

According to a report in The Washington Post last week, the U.S. Department of Labor is probing charges that Food Lion has violated child labor laws.

Separately, the ABC television network last Thursday broadcast a report alleging unsanitary practices at Food Lion delicatessen and meat packing operations, including repackaging of meat and poultry that had exceeded ″sell-by″ dates.

Shares in both Food Lion and Delhaize, which owns a controlling 44.5 percent stake in Food Lion, plummeted following the news. Food Lion accounts for about 80 percent of Delhaize’s sales.

Food Lion’s stock was off 37 1/2 cents in midday trading today on the over-the-counter market, trading at $8.87 1/2 .

Food Lion spokesman Mike Mozingo reiterated today that the Department of Labor has told Food Lion that 90 percent of the child labor violations under investigation involve the use of a cardboard box baler, which must be operated by employees over 18 years of age.

He said the company has taken steps to assure that 16- and 17-year olds do not operate the machines. ″Food Lion does not employ young children,″ Trieshmann said.

Food Lion also charged that the ABC program was produced in cooperation with UFCW officials. It said the program had falsified images and misrepresented Food Lion practices.

″Food Lion stands behind our stringent policies and procedures and believes ABC has created news, not reported news,″ the company said in a statement.

The Delhaize share was down 12 percent from last Wednesday but the slide was flattening out over the last days and slightly recovered today. Analysts were cautious about whether the fallout from the news reports has been completely discounted in share prices of the two companies.

″It’s never good to see this type of thing hanging over a company,″ said one Brussels-based analyst, who asked not to be identified. ″I find it difficult to believe this won’t have any impact″ over the longer term, she added.

Philippe Bille, an analyst with Dewaay et Cie., said the initial impact on Food Lion and Delhaize shares was an ″overreaction.″

Displaying UFCW-produced leaflets urging customers not to shop at Food Lion because of its Belgian ownership, the Food Lion and Delhaize executives said the union was orchestrating a ″corporate campaign″ against the supermarket chain.

Delhaize chief executive Gui de Vaucleroy expressed confidence in Food Lion’s management. He said the Belgian parent had no intention of becoming more involved with Food Lion operations as a result of the charges.

Delhaize’s Belgian unions have threatened last week to strike over Food Lion’s alleged anti-union practices, though the action has yet to materialize.

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