Kenya's competition regulator warns retailers on unfair supplier terms

The Competition Authority of Kenya (CAK) has warned retailers that dictating terms to suppliers can break competition law, with penalties of up to KSh 10 million, five years in prison, or both, Capital FM reported. Director-General David Kemei said in a statement on 11 November that supply agreements should come from genuine negotiation, not from buyers with stronger bargaining power.

The authority can also impose an administrative penalty of up to 10% of a company's gross annual turnover in the preceding financial year. It named no retailer.

The statement lists practices that CAK says can amount to abuse of buyer power: shifting operating costs and risks to suppliers, demanding rebates and promotional contributions, lengthening payment periods, and imposing unfavourable terms through joint business plans. It also names delayed payments, unilateral termination of contracts, refusing goods without valid reason, demanding preferential terms, and stopping suppliers from selling to competing buyers.

CAK said it has never directed retail suppliers to enter joint business plans and that they must remain voluntary. Signing a supply agreement does not automatically mean its terms were fairly negotiated or lawful, it said.

CAK is monitoring the retail sector and will investigate specific retailers where evidence points to violations of the Competition Act.

Business Daily reported that the authority has launched investigations into top supermarkets for abusing buyer power, and that CAK's preliminary findings showed a number of top retailers forcing suppliers to bear extra costs, accept longer payment periods and pay rebates. Kemei said, as quoted by the newspaper: "Our interrogation of the sector will establish whether the conduct contravenes the Competition Act." He added: "Full investigations and enforcement action against specific retailers will follow where breach is established."

CAK urged suppliers facing unfair practices to keep supply agreements, draft contracts, correspondence and payment records, and asked retailers and other buyers to review their agreements for compliance. Business Daily reported that suppliers were also asked to lodge complaints through CAK's online portal.

Business Daily recalled earlier cases. In December 2023 CAK fined Carrefour a record KSh 1.1 billion over its dealings with an edible oils supplier and a honey manufacturer, and Carrefour appealed. In 2020 the authority found four supermarkets, including the now-collapsed Tuskys, had delayed supplier payments beyond 90 days; Tuskys paid suppliers KSh 2.77 billion in June 2020 under a CAK order.