Retailer Majid Al Futtaim Hypermarkets Limited which operates as Carrefour has been ordered to part with Sh1.1 billion in fines by the competition watchdog over supplier abuse.
The order by the Competition Authority of Kenya (CAK) follows months-long investigations into the retailer’s supplier dealings following complaints forwarded by two manufacturers; Woodlands Company Limited and Pwani Oil Products Limited.
The abuses documented by CAK include the discounting of suppliers' invoices and the requirement for rebates which are passed on to consumers as discount offers.
“The (Competition) Act provides a non-exhaustive list of the manner through which abuse of buyer power manifests itself in the marketplace including reducing supplier prices by significant amounts or below competitive levels, threats of termination or unilateral termination of contract without reasonable justification, delaying payments, refusal to receive or return goods without justifiable reasons and transfer of costs and risk to suppliers,” CAK said on Tuesday.
Carrefour has further been required to amend all its supplier contracts and expunge clauses to facilitate the abuse.
The retail chain which operated 20 branches as of July 2023 is also expected to refund the two suppliers a total of Sh16.7 million in rebates and Sh500,000 billed as marketing support including free products to support new stores and fees to list the suppliers' products on Carrefour shelves.
Carrefour requires suppliers to honour at least three types of non-negotiable rebates that go to as high as 12 percent and are deductible annually and monthly on an incremental basis based on the turnover of each product supply.
The sanctions handed down by the competition watchdog as the largest by value in its enforcement history and trounce Sh338.8 million fines handed down to steel manufacturers over alleged price fixing in July.
The CAK says the retailer has employed the discounts and rebates to grow its market share since venturing into the Kenyan market in 2016 which has been done at the expense of suppliers.
“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,” said CAK Acting Director General Dr. Adano Wario.
Carrefour was ranked as the fourth largest retailer by branch network as of July behind Naivas, Quickmart and Chandarana.
