The idea of a private label tea sounds reasonable: a company sells tea that can be packaged and given a brand name of its own. It makes a lot of sense for restaurants, hotels, spa's, and any other businesses that wish to sell their own brand of tea, but either aren't knowledgeable enough in the tea market to source directly, or simply don't want to take on this added responsibility.
However, there is an ugly side to the phenomenon of private label teas.
The Tea and Coffee Trade Journal has an excellent article on this subject, by Randy Altman, titled "The Secret and Lucrative Private Label Tea Market" (from 2007, the article is now not viewable on the original journal's site but can be read on The Free Library). The private label business is a secretive one, especially when the source company also sells directly to individuals: any company selling such private label tea needs to hide the source of their tea, for if the customer found out, they could purchase the tea directly from the source. The customer might also feel cheated, especially if the markup were too high, and this could harm the company's loyalty--including in areas beyond their sales of tea (which might not be a main source of revenue).
Many providers of private label tea solve this problem by only selling wholesale. However, the markup is still high--it's just now even more effectively hidden from the customer. Nothing has changed; it's only harder for the prices and markup to be spotted.
In addition to the question of a fair price for tea drinkers, there is a very ugly economic justice aspect to private label tea: the extra profit generated by the markup in this extra step is pocketed solely by the companies buying and selling the private label tea--it typically does not "trickle down" to the original producers. SOMO's 2008 report, Sustainability Issues in the Tea Sector, identifies as one of the major sustainability issues facing the tea industry the fact that producers earn such a tiny share of the profits from tea, whereas the company engaging in the last step, selling to the customer (in this case the company selling their own private label) earns the lion's share of the profits. In a sense, it's the opposite of the goal/principles of fair trade, which boils down to the idea of cutting out middlemen and ensuring that the price paid by the end customer reflects a fair living wage paid to the original producer.
By buying private label tea, you're effectively making the rich richer and keeping the poor poor.
What can be done about this?
Fortunately, there are easy solutions to these problems! Buying from companies that source directly (like Yunnan Sourcing or ) not only gets you a better price--you're getting the full value of what you pay for instead of just lining someone's pocket's--but, especially when you buy fair trade tea and/or tea sourced directly from small farmers (especially from farmer-owned companies like Obubu Tea), you're empowering the producers. Many companies, like Rishi Tea, take a multifaceted approach, working with fair trade and organic certification, and engaging in other sustainability-promoting initiatives. Equal Exchange also goes above and beyond the standard fair trade certification to work for economic justice. And Shanti Tea not only works with fair trade and organic producers, but is committed to biodynamic agriculture as well.
These are only a few of the many companies out there and many more are doing similar things; apologies to any I have omitted! Ultimately, these approaches result in a better quality product. Empowered producers have the resources for both preserving and developing new local tea cultivars, varieties, and traditions.
So what to do?
I would hardly suggest boycotting companies that sell private label tea...their ranks include Harney & Sons, SpecialTeas, and a number of other companies that sell directly to the consumer. But a good solution is to buy directly from these companies, rather than buying from companies reselling their teas for a higher price. Also, knowing the market can help you make wise purchasing decisions. As Marlena of Tea for Today pointed out in the comments, in some circumstances private label tea can actually be priced below the prices offered by a supplier, and this can represent a great opportunity. It's always important to be price conscious when shopping for tea--but it's also important to know how the company you are buying from sources their teas. If you're going to pay a premium, make sure you're paying for quality, and make sure that money is going to be put towards ensuring future generations will be able to enjoy diversity and quality of tea, rather than just allowing your money to go towards lining someone's pockets.