CAK fines Carrefour Sh1.1 billion over abuse of power

Nairobi,

Tuesday, December 19, 2023

KNA by Kelvin Waribu 

The Competition Authority of Kenya (CAK) has fined Majid Al Futtaim Hypermarkets Limited (Carrefour) a total of Sh1.1 billion for separately abusing its superior bargaining position over two of its suppliers. 

The authority has ordered Carrefour to refund rebates deducted from Pwani Oil’s invoices in 2022 and 2023 amounting to Sh.15.9 million. Carrefour has also been ordered to refund Pwani Oil Sh.400, 000 as monies paid as marketing support for store opening during the same period.  

CAK Board Chairman Mr. Shaka Kariuki said that they received complaints from Pwani Oil Limited and Woodlands Company Limited about Carrefour’s abuse of power including the reduction of rebates and fees which reduced their profit margins.

Kariuki, speaking in Nairobi on Tuesday said that investigations determined that Carrefour’s suppliers are required to provide free products and pay listing fees for every new branch opened as well as post employees to the supermarket’s branches.

“These practices amount to transfer of the retailer’s cost to suppliers which is prohibited by the Competition Act,” said Kariuki.

He explained that specifically Woodlands was required to provide one carton per Stock Keeping Unit (SKU) and pay Sh.50,000 as a condition to commence supplies at new branches.

“Pwani Oil was required to provide two new cartons per SKU and pay Sh200, 000 for similar purposes,” explained Kariuki.  

Kariuki said that they have also ordered the retail chain to amend all its suppliers’ contracts and expunge clauses that facilitate abuse of buyer power, including but not limited to the application of listing fees, collection of rebates, and unilateral delisting of suppliers.

The Authority’s Acting Director General Dr. Adano Wario noted that Abuse of Power (ABP) is meted out on SMEs who accept adverse conditions from their powerful buyers who control critical infrastructure and access to consumers, such as a countrywide network of branches. 

“While businesses have the freedom to enter into contracts with each other, these agreements should not unjustifiably disenfranchise the weaker party and must facilitate negotiations without reprisal,” said Dr. Wario.

Kariuki said, “CAK aligns its intervention with the government’s agenda of promoting the growth of Small and Medium Sized Enterprises (SMEs) and the manufacturing sector while ensuring that its actions positively impact as many Kenyans as possible.”

“Our role as a regulator is to promote healthy competition in our markets with the overall objective of creating a conducive business environment for attracting investment into the national economy and to the benefit of consumers,” Mr Kariuki added. 

CAK Buyer Power manager Dr. Priscilla Njako said that the authority is not opposed to a market player offering lower prices, but the problem arises when the market player gains a huge market share which is unfair to other market players. 

Courtesy; KNA