The government through the Competition Authority of Kenya (CAK) slaps the Carrefour Supermarket chain with a Ksh1.1 billion penalty.
In a statement released on Tuesday, December 19, the Competition Authority accused Carrefour of abusing its buyer power over its suppliers.
The retailer was also ordered to refund Ksh16.7 million in irregular rebates relating to two suppliers.
“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,” the notice read in part.
“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 Ksh500,000 that was billed as marketing support (store opening/listing fees),” it added.
According to CAK, their investigations determined that Carrefour’s suppliers are required to provide free products and pay listing fees for every new branch opened as well as post employees to the supermarket’s branches. These practices amount to the transfer of the retailer’s costs to suppliers, which is prohibited by the Competition Act.
“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. Given that one product has several SKUs based on variants produced, this requirement has significant financial implications on the profitability and competitiveness of suppliers,” CAK detailed.
Following the directive, CAK ordered 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.