Kenya’s retail giant Carrefour has suffered a major setback after the High Court upheld a ruling that it abused its dominant position as a buyer by imposing onerous terms on one of its suppliers.
In a judgment handed down on Friday, Justice L.M.E. A. Ong’injo dismissed Carrefour’s appeal against a 2021 decision by the Competition Tribunal, which had affirmed findings by Kenya’s competition watchdog that the French retailer engaged in conduct amounting to abuse of buyer power.
The High Court upheld core aspects of the Competition Authority of Kenya’s determination that Majid Al Futtaim Hypermarkets Limited, the franchise operator of Carrefour stores, violated Section 24(2A) of the Competition Act through actions including “applying and collecting rebates, unilaterally delisting the 2nd Respondent [supplier Orchards Limited], transferring commercial risks by returning goods nearing expiry, refusal to accept delivery and transferring costs by requiring the 2nd Respondent to post employees to the Appellant’s stores.”
In a 25-page ruling, Justice Ong’injo firmly rejected Carrefour’s assertions that it was denied a fair hearing by the competition regulator during the investigation process.
“There is no merit in the contention that the Appellant was not afforded an opportunity to be heard and to make oral representations,” the judge stated, pointing to extensive communications and opportunities provided to Carrefour to defend itself.
The court endorsed the Competition Authority’s reliance on international best practices from jurisdictions such as Japan and Australia in evaluating Carrefour’s conduct.
“From my reading of the provisions, this court is led to conclude that the conduct by the Appellant amounted to abuse of buyer power,” Justice Ong’injo wrote.
However, in a partial victory for Carrefour, the High Court set aside the Authority’s directive that the retailer must amend all its supplier agreements to remove abusive provisions. The judge found this overreached, as the contracts with Carrefour’s nearly 700 other suppliers were not examined during the probe prompted by Orchards Limited’s complaint.
“It was erroneous for the Tribunal to find that there were violations of statute when the contracts of the other suppliers were not before it and the said suppliers did not make presentations as to whether or not they had been aggrieved by the contracts,” the judgment stated.
In a statement, the Competition Authority welcomed the significant milestone judgment, asserting it promotes fair competition and protects suppliers’ interests, especially smaller enterprises.
