Thai Trouble for Tesco

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Political game or not, Tesco is not taking the criticism lightly. Journalists in Thailand and the UK have slammed the company for trying to silence Kamol with such heavy-handed tactics, but a Tesco spokesman responded by saying: "Tesco is of course not trying to intimidate Mr Kamol or Mr Jit, but we do have a right to defend our company and our colleagues against false allegations. We took this action reluctantly but felt we had no choice after a sustained campaign of misinformation spread by the two individuals over many months.

"Tesco does not have a history of acting through the courts and will only do so under extreme provocation. In fact until 2008 we had never taken any libel action at all. It would therefore be irresponsible and misleading to suggest that Tesco had a policy of attempting to suppress criticism."

Tesco is clearly afraid that the constant scaremongering could make its business a target for popular revolt, similar to the protests against ThaiBev when it tried to list on the Thai stock exchange. That seems unlikely—the image of wholesome mom and pop stores serving the community is a nice one, but it doesn't bear much scrutiny.

"These small stallholders are the ones who are most likely to evade taxes, ignore labour laws and sell liquor and cigarettes to children, so it's interesting to think of them as the fabric of Thai society," says Supavud Saicheua, an economist at Phatra Securities.

Instead of pursuing its problems through the courts, Tesco might be better off trying to make peace in other ways. It first came to Thailand in partnership with Charoen Pokphand, the country's leading retailer, but the group sold its minority stake in Tesco Lotus (and in Dutch-owned Makro) in 2003 to focus on its majority shareholding in 7-Eleven. Since then both Tesco and 7-Eleven have grown considerably, and largely in competition with each other, but only Tesco has drawn the ire of critics. That could provide a clue for how Tesco can most effectively silence its critics.

"Tesco could dilute into the stockmarket," says Kongkiat Opaswongkarn, chief executive of brokerage firm Asia Plus. "Giving some ownership to the Thai people would probably help to alleviate its problems. They don't need the cash of course, but cash is not the only angle—making friends at least gives you a local shareholder base to protect you in the future."

Judging by how popular its stores are, despite the critics, Tesco Lotus would be a popular stock. And what better way to keep people happy than by selling them stuff they want at cheap prices, on the one hand, and earning them a nice yield on the stock exchange on the other. It would certainly get a more favourable reaction in the press than suing journalists.