The Competition Authority of Kenya (CAK) has penalized Carrefour supermarket with a KES 1.1 billion fine over allegations of 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 unfair, detrimental to the supplier, or unrelated to the objective of the supply contract.
The authority fined Carrefour for abusing its superior bargaining power for over two named suppliers: Pwani Oil Products Limited and Woodlands Company Limited.
“The complainant provided various evidentiary information to support its allegations. including annual supply agreements, invoices, records of rebates deducted, and records of supplies to other leading retailers,” CAK said.
Woodlands presented a complaint against Carrefour in December 2022. They claimed that between 2021 and late 2022, the retailer engaged in ABP contrary to Section 24A(1) of the Competition Act and that the conduct unfairly reduced its returns and profitability, thereby affecting its ability to remain competitive in the market.
The company further alleged it was required to post its employees’ work at Carrefour premises, including conducting all-night stocktaking.
CAK claims the retailer admitted to issuing standard-term supply contracts with clauses facilitating the deduction of rebates and deducting the same.
The retailer is also expected to refund KES16.7 million in alleged irregular rebates and expunge all clauses in its contracts that facilitate abuse of buyer power. Rebates are a refund of a percentage of sales offered by a supplier to its customers.
In addition to this, the retailer is also expected to amend all its supplier contracts to remove all clauses that facilitate the abuse of power.
Carrefour was in a similar row with the authority back in 2021, after it was ordered to revise all its agreements with some 700 suppliers within a month after a tribunal found it had been exploiting traders.
It was required to expunge up to six items from its supplier contracts that were said to give the store the power to offer ultra-competitive pricing to boost sales and increase market share.
