The Competition Authority of Kenya (CAK) has slapped Carrefour with a Ksh1.1 billion fine for abuse of buyer power.
This is after the agency carried out investigations that were separately lodged by the Woodland and Pwani Oil.
The Authority has also ordered Carrefour to refund the Woodlands and Pwani Oil a total of Ksh. 16,757,899 in rebates deducted from their invoices as well as Ksh.500,000 that was billed as marketing support (store opening/listing fees).
“In executing this mandate, the Authority has pursuant to investigations penalized Majid Al Futtaim Hypermarkets Limited, which trades in Kenya under the brand name Carrefour, a total of Ksh. 1,108,327,873.60 for separately abusing its superior bargaining position over two of its suppliers – Pwani Oil Products Limited and Woodlands Company Limited,” stated CAK.
Further, CAK directed the supermarket chain to amend all its supplier 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 Competition Watchdog also established that Carrefour contravened the Competition Act by transferring retailer’s costs to suppliers by requiring suppliers to provide free products and pay listing for every new branch opened.
“Specifically, Woodlands was required to provide one carton per stock-keeping unit (SKU) and pay Ksh. 50,000 as a condition to commence supplies at new branches. Pwani Oil was required to provide two free cartons per SKU and pay Ksh. 200,000 for similar purposes,” stated CAK.
CAK noted that this move has serious financial implications on the profitability and competitiveness of suppliers.
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“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,” said CAK’S Director General Adano Wario.
“While appearing to enable an offender to offer lower prices to consumers, this apparent benefit is short-term and unjustifiable when placed against the long-term damage caused to the upstream supplier market, including forced exits, especially by SMEs in the manufacturing sector.”
The Authority’s Board Chairman Shaka Kariuki said the CAK aligns its interventions with the Government’s agenda of promoting the growth of 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,” said Kariuki.
“The penalty the Authority has issued serves as a stern reminder and deterrent to businesses not to engage in any conduct that infringes the Competition Act. Effective competition benefits us all.”