Kenya: Carrefour Faces Kenyan Watchdog Wrath Over Unfair Supplier Deals

Kenya’s competition watchdog has fined Carrefour and ordered the French retail giant to review all its supply agreements within 60 days after the supermarket chain was found to be exploiting traders who supply it with goods.

The Competition Authority of Kenya (CAK) also ordered Carrefour, through its franchise holder Majid al Futtaim’s (MAF), to expunge six items from its supplier contracts that are said to give the store the power to offer ultra-competitive pricing to boost sales and increase market share.

The clauses include forcing suppliers to pay a non-refundable fee to do business with it and forcing merchants offering the retail chain goods to provide extra rebates or discounts.

Carrefour was found to be in breach of the law for forcing suppliers to post their own staff at its outlets at the expense of the suppliers. It was also accused of rejecting goods already delivered.

The regulator said that the retail chain has been abusing its buyer power and now risks a financial penalty equivalent to 10 percent of its gross sales, which stood at Ksh14 billion ($140 million) in 2018, if it fails to review the "offending provisions".

The French retail giant has already been fined Ksh124,767 ($1,247) for exploiting yoghurt supplier, Orchards Limited, and the fine is equivalent to 10 percent of the sales generated from the dairy products supplied by the firm in 2018.

"All current supply agreements of Majid Al Futtaim Limited relating to its Carrefour Hypermarkets in Kenya be amended forthwith and in any event within 60 days of service of this order to expunge all offending provisions," CAK Director-General Wang’ombe Kariuki ordered in a ruling seen by the Business Daily.

The retail giant has also been barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract, according to the ruling shared by suppliers.

Buyer Power is the ability of a buyer to obtain terms of supply more favourable than a supplier’s ordinary contractual terms.

Suppliers say Carrefour has used the supplier contract to depress their earnings and gain market advantage through competitive pricing.

Since launching its Kenya operations in 2016, the franchise has grown far faster than expected, attracting a strong client base among the country’s expanding middle class even as locally grown competitors like Nakumatt and Uchumi faced strong headwinds, leading to their collapse.Carrefour often offers shoppers refunds if they can find cheaper equivalent items in stores run by Tuskys and Naivas, its local competitors who […]

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