The Competition Authority of Kenya (CAK) has sanctioned consumer firm Unilever Kenya for altering payment terms with several of its suppliers following an inquiry that indicated the business exploited smaller dealers.
According to sources familiar with the verdict, CAK stated that the consumer giant misused its buying power in conclusions that will be made public this week.
Buyer power refers to a dominating firm’s capacity to get favourable trade terms from its suppliers. When the buyer has a large negotiation advantage over the seller, it may be exploited.
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Payment periods for Unilever’s 75 suppliers were extended from 60 days to three months. The dealers were given a week to meet the new conditions, or they would be dropped from Unilever’s list of preferred suppliers, demonstrating the company’s purchasing power.
The consumer powerhouse Unilever is fighting to maintain its dominance, which has come under intense attack from domestic rivals like Bidco Oil Refineries and overseas companies like L’Oreal and Procter & Gamble. The delayed payment was allegedly designed to harm its suppliers while improving Unilever’s cash flow.
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According to the Competition Authority, the new payment terms constituted buyer power abuse, which is punishable by a KSh10 million fine and a five-year prison term for executives of the infringing companies.
The CAK has ordered Unilever to raise spending on local supplies by more than KSh400 million over the course of the following three years commencing next month and to shorten the repayment term for suppliers to between 30 and 45 days.
Unilever argued that the suppliers approved of the new payment terms as justification for the change. In early 2018, supermarket suppliers complained that merchants were abusing their dominance to postpone payments, culminating in the bankruptcy and auction of firms supplying the stores.
Established over 100 years ago, Unilever is one of the world’s largest consumer goods companies known for brands such as omo detergents, skin care products, i.e. Vaseline, as well as knorr food spices.
Alongside Nigeria and South Africa, Kenya serves as one of Unilever’s three strategic centres in Africa. It conducts a manufacturing facility for consumer items in Nairobi’s Industrial Area and runs tea factories in the Rift Valley.
