Competition Authority of Kenya (CAK) has fined Majid Al Futtaim Hypermarkets Limited, the owner of Carrefour Ksh 1.1 billion for abusing buyer power involving two suppliers.
The authority says the retailer had been found to have abused its superior bargaining position over Pwani Oil Products Limited and Woodlands Company Limited.
The retailer has also been ordered to refund Ksh 16.7 million in irregular rebates and expunge all clauses in its contracts that facilitate abuse of buyer power.
“Our role as a regulator is to promote healthy competition in our markets with overall objective of creating a conducive business environment for attracting investment into the national economy and to the benefit of consumers. The penalty the Authority has issued serves a stern reminder and deterrent to businesses not to engage in any conduct that infringes the Competition Act. Effective competition benefits us all,” said Shaka Kariuki, CAK Chairman.
In the case of Woodlands Company Limited, Carrefour was found to have abused buyer power by unfairly reducing its returns and profitability by deducting various rebates and other feed from invoices for products supplied including fixed rebates of 11.5pc in 2021 and 12pc last year.
Additionally, Carrefour also required the Kitui County-based natural bee honey processor to post its employees on its premises including conducting all-night stocking.
In the case of Woodlands Company, the giant retailer was fine Ksh 554.2 million and ordered to refund rebates deducted from the honey processor in 2021 and 2022 amounting to Ksh 834,180, and a further Ksh 100,000 paid as marketing support for store opening during the period.
The retailer also landed in trouble with the competition watchdog for forcefully deducting various rebates and other fees from Pwani Oil invoices and further charged the fast moving consumer goods manufacturer listing and marketing fees, declined to negotiate the supply of contract and threatened to delist it if it failed to accept the terms.
In this case, CAK penalized Carrefour Ksh 554.2 million and ordered to refund rebate deductions to Pwani Oil amounting to Ksh 15.9 million for 2022 and 2023 invoices.
The retailer has also been ordered to refund Ksh 400,000 Pwani Oil paid for marketing support for store opening during the period in question.
“At the core of the Authority’s mandate execution is promotion of inclusive economic development. Abuse of buyer power defeats this aspiration by crippling suppliers, who are mostly SMEs and whose contribution to our economy cannot be overstated. While appearing to enable an offender to offer lower prices to consumers, this apparent benefit is short-term, including, forced exits, especially by SMEs in the manufacturing sector,” added Dr Adano Wario, CAK Acting Director General.
The supermarket chain is now required to amend all its supplier contracts and expunge clauses that facilitate abuse of buyer power, including but not limited to application of listing, fees, collection of rebates and unilateral delisting of suppliers.
