The Competition Authority of Kenya (CAK) has fined Carrefour Supermarket a whopping Sh1.1 billion for what is has termed as “abusing its buyer power over its suppliers.”
CAK says it had conducted an investigation that revealed that Carrefour had abused its bargaining position against Pwani Oil Products Limited and Woodlands Company Limited.
Woodlands supplies refined natural bee honey from Kitui County to retail stores across Kenya while Pwani Oil mainly supplies edible oils, skin care products and washing soaps.
CAK ordered Majid Al Futtaim Hypermarkets Limited, which trades as Carrefour in Kenya, to amend all its supplier contracts and expunge all clauses that facilitate abuse of buyer power.
“Buyer power refers to the ability of a powerful buyer to obtain terms of supply outside the scope of normal business practices or that are disproportionate, unfair and detrimental to a supplier or unrelated to the objective of a supply contract,” explained CAK.
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The supermarket was further ordered to refund Pwani Oil and Woodlands Sh16.7 million deducted from their invoices in rebates and Sh500,000 that was billed as marketing support.
“At the core of the Authority’s mandate execution is promotion of inclusive economic development,” said CAK Acting Director General Dr Adano Wario.
He added: “Abuse of buyer power defeats this aspiration by crippling suppliers, who are mostly SMEs, and whose contribution to our economy cannot be overstated.”
CAK revealed that Carrefour charged its suppliers three non-negotiable rebates of up to 12 per cent deducted monthly and annually and rose each year hence reducing supplier profits.
The regulator further revealed that suppliers to Carrefour were forced to avail free products and pay listing fees for each new branch it opened and post employees to its branches.
“These practices amount to transfer of the retailer’s costs to the supplier, which is prohibited by the Competition Authority,” said CAK further revealed in a statement.
According to the authority, Woodlands was forced to provide one carton per stock unit (SKU), and pay Sh50,000 more as a condition to start supplying Carrefour’s new branches.
Similarly, Pwani Oil was made to provide two free cartons per SKU and pay Sh200,000 to the retail chain before being allowed to commence supplying its products to its new branches.
CAK noted that most of Carrefour’s suppliers were SMEs and were forced to accept the punitive conditions before being able to supply their products to their vast retail network.
“While appearing to enable an offender to offer lower prices to consumers, this apparent benefit is short-term and unjustifiable when placed against the long-term damage caused to the upstream supplier market, including forced exits, especially by SMEs in the manufacturing sector,” warned CAK.
The verdict by CAK was in reaction to a plaint filed against Carrefour by Woodlands in December 2022 in relation to the alleged abuses committed between 2021 and 2022.
On the other hand, Pwani Oil filed its complains against the supermarket headquartered in Dubai in august 2022 over the alleged crimes committed between early 2021 and mid-2022.
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