The Competition Authority of Kenya (CAK) has fined retail chain supermarket Carrefour Sh. 1.1 billion.
The retail chain has been fined the record Sh. 1,108,327,873.60 figure over what the Competition Authority has termed as abuse of buyer power against suppliers Pwani Oil Products and Woodlands Company Limited.
“The Authority has investigated penalized Majid Al Futtaim Hypermarkets Ltd which trades in Kenya under the brand name a total of Sh. 1,108,327,873.60 for separately abusing its superior bargaining position over two of its suppliers -Pwani Oil Products Ltd and Woodlands Company Limited,” CAK acting Director General Adano Wario stated.
Pwani Oil Products processes and supplies consumer goods including edible oils and fats (cooking fat), skin care products, and a variety of soaps.
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On the other hand, Woodlands processes and supplies natural bee honey from Kitui County. At the same time, Carrefour has been ordered to reimburse Pwani Oil and Woodlands a total of Sh. 16,757,899 in rebates that were deducted from their invoices, and Sh. 500,000 that was charged as marketing support.
The CAK has further directed Carrefour 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 Competition Authority defines buyer power buyer power as the ability of a buyer to obtain terms of supply that are more favourable than a supplier’s ordinary contractual terms.
“It means the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or service to obtain from a supplier more favourable terms, or to impose a long term opportunity cost including harm or withheld benefit which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings,” states the Competition Authority.