The Competition Authority of Kenya(CAK) has slapped Carrefour Supermarket, through its franchise holder Majid al Futtaim’s (MAF) with a fine amounting to Sh1.1 billion for separately abusing its superior buyer powers over two of its suppliers –Pwani Oil Products Limited and Woodlands Company Limited.
In a statement, the State firm has also asked the French retail chain to refund Sh16.7 Million to both suppliers in irregular rebates and expunge which it deducted from invoices as well as Sh500,000 that it billed as marketing support.
“The Authority has investigated penalized Majid Al Futtaim Hypermarkets Ltd which trades in Kenya under the brand name a total of Sh1,108,327,873.60 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 sated.
“Further, the supermarket chain is required 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.”
Supplier rebates are a refund of a percentage of sales money given back to customers to incentivise qualifying types of purchases. Suppliers offer them to win business or secure further sales.
According to CAK, Carrefour had transferred retailer’s costs to suppliers in contrast to the Competition Act.
“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. These practices amount to the transfer of the retailer’s costs to suppliers, which is prohibited by the Competition Act.”
The complaints had been filed separately by the two suppliers that trade edible oil and refined honey among other products.
In April 2021, Carrefour was ordered to revise all its agreements with 700 of its suppliers after CAK’s investigations found it was exploiting traders.
In a previous order in 2020, the French retail chain was also asked to remove six items from its supplier’s contracts to offer ultra-competitive pricing to boost sales. This included forcing suppliers to pay extra rebates and non-refundable fees to work with the supermarket.
