The Competition Authority of Kenya (CAK) has levied a substantial penalty against Majid Al Futtaim Hypermarkets Limited, operating under the Carrefour brand in Kenya, for engaging in abusive practices against its suppliers. The fine amounts to a hefty KES. 1,108,327,873.60, marking a significant enforcement action by the Authority. It is not clear how this huge number was reached, and whether or not Majid Al Futtaim will be able to pay such high fees.
Established under the Competition Act No. 12 of 2010, the CAK plays a crucial role in safeguarding Kenyan consumers’ welfare. A key focus of the Authority is to combat Abuse of Buyer Power (ABP). ABP occurs when a dominant buyer manipulates supply terms to the detriment of suppliers, often leading to unfair practices and economic imbalances.
Claimed Nature of the Abuse
Carrefour has been found to abuse its dominant position by imposing harsh terms on its suppliers, including Pwani Oil Products Limited and Woodlands Company Limited. These practices included enforcing significant supply price reductions, unjustified threats of contract termination, delayed payments, and unreasonable return policies. Additionally, the supermarket was found to transfer undue costs and risks onto its suppliers.
The CAK ordered the supermarket to refund a total of KES 16,757,899 in wrongfully deducted rebates, along with KES 500,000 charged as marketing support fees.
Impact on Small and Medium-Sized Enterprises (SMEs)
Dr. Adano Wario, Acting Director-General of the CAK, emphasized the detrimental effect of Abuse of Buyer Power (ABP) on SMEs, which constitute 98% of Kenyan businesses and are vital to the nation’s GDP and employment. He noted that such practices by powerful buyers like Carrefour hinder inclusive economic development and can lead to the premature shutdown of SMEs.
The CAK’s decision mandates Carrefour to revise its supplier contracts, removing clauses that enable ABP. This action aligns with the Government’s broader agenda to support SME growth and maintain a fair competitive environment. Mr. Shaka Kariuki, the Authority’s Board Chairman, highlighted the CAK’s commitment to fostering healthy market competition and warned against conduct that violates the Competition Act.
This landmark ruling serves as a stern warning to other large corporations in Kenya. The CAK’s actions underscore its dedication to protecting SMEs and ensuring a balanced and fair marketplace for all stakeholders. The Authority remains vigilant in its efforts to promote fair business practices and economic growth in Kenya.