Carrefour fined Ksh.1.1 billion for abusing buyer power over suppliers

The Competition Authority of Kenya (CAK) has fined French retail chain Carrefour Ksh.1.1 billion for abusing its buyer power over its suppliers.

CAK said in a statement on Tuesday that the supermarket chain, operated by UAE-based Majid al-Futtaim, separately abused its ability to set terms for two of its suppliers; Pwani Oil Products Limited and Woodlands Company Limited.

The authority said its investigations had established that Carrefour charges its suppliers at least three types of non-negotiable rebates that are as high as 12 per cent.

Rebates are a refund of a percentage of sales offered by a supplier to its customer in exchange for a benefit such as early payment by the retailer, as a reward for surpassing designated purchasing targets, or as an incentive for an increase in volumes ordered by the retailer.

“The rebates are deductible annually and monthly and have been increasing on an annual basis, thereby significantly reducing the final pay-out to suppliers. Investigations also 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,” CAK said.

“These practices amount to transfer of the retailer's costs to suppliers, which is prohibited by the Competition Act.”

The regulator fined Carrefour Ksh.1,108,327,873.60 and 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.”

“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),” CAK said.

The penalty is the biggest ever handed out by CAK, it added.

Majid al-Futtaim opened its first Kenyan outlet in 2016 and has grown to become one of the largest retailers locally.