By Benard Mulwa
Majid Al Futtaim Hypermarkets limited, which trades in Kenya under the brand name Carrefour has been sanctioned for abusing its superior bargaining position over two of its suppliers – Pwani Oil Products limited and Woodlands limited.
This comes even as the Competion Authority of Kenya pursue to investigations a total of Ksh. 1,108,327,873.60 by the powerful buyer obtained terms of supply outside the scope of normal business practices, which is unfair and detrimental to a supplier.
The Authority has also ordered Carrefour to refund the Woodlands and Pwani Oil a total of Ksh. 16,757,899 in rabates deducted from their invoice as well as Ksh. 500,000 that was billed as marketing support – store opening or listing fees.
Woodlands processes and supplies retail store across the country with refined natural bee honey from Kitui County, while Pwani Oil processes and supplies Fast-Moving consumer goods and washing soap products.
The Authority acting Director General, Dr. Adano Wario said that Abuse of Buyer Power is typically meted out on Small and Medium-Sized Enterprises who accept adverse conditions from their powerful buyers who control critical infrastructure and access to consumers, such a country wide network of branches.
SME’s account for 98 percent of all business in Kenya, contributing up to 40 percent of GDP and are the source of livelihood for millions of Kenyans, directly or indirectly . However, their centrality to economic progress, SMEs in the country contend with various challenges leading to closure of many businesses in infancy.
“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 Dr. Wario.
Investigation also determined that Carrefour’s supplies are required to provide free products and pay listing fees for every new branch opened as well as post payment to the supermarket’s branches. These practices amount to transfer of the retailer’s costs to suppliers, which is prohibited by the Company Act.
“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 exit, especially by SMEs in the manufacturing sector,” whereas business have the freedom to enter into contracts with each other, these agreements should not unjustifiably disenfranchise the weaker party and must facilitate negotiations without reprisal, Dr. Wario added.
The Authority’s board Chairman, Mr. Shaka Kariuki said the ACK aligns its interventions with the government’s agender of promoting growth of SMEs and the manufacturing sector, while ensuring that its actions positively impact as many Kenyans as possible, he said, “ 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” he said.