Retail Giant Carrefour Slapped with Sh1.1 Billion Fine for Exploitative Buyer Practices

The Competition Authority of Kenya (CAK) has taken action against Carrefour, a French retail chain, for exploiting its influence as a buyer.

After completion of an inquiry, Carrefour has received a fine of Sh1,108,327,873.60 from the Authority due to harassment inflicted on two suppliers, Pwani Oil Products Limited and Woodlands Company Limited. The latter firm is renowned for providing quality, natural bee honey to retail stores across the country while the former is involved in distributing and manufacturing an array of consumer products. During the inquiry, some practices of Carrefour were deemed inappropriate hence attracting charges.

Carrefour has been directed by the Authority to repay two suppliers for withheld rebates and marketing support, totalling Sh16,757,899 and Sh500,000 respectively. These provisions may involve fees, the retrieval of rebates, and the one-sided termination of suppliers. The concept of buyer power pertains to the dominant buyer's capacity to obtain unfavourable supply conditions that are inequitable and harmful to the supplier.

This grants the buyer the ability to secure more advantageous terms than those outlined in the supplier's standard contract, which may potentially impact profitability. Carrefour has encountered past disputes regarding its dealings with suppliers. The tribunal has found Carrefour guilty of exploitative conduct toward traders. Utilization of price reductions known as rebates are widespread in retail, however, Carrefour obstructed its authority as a prominent procurer by abusing the trader's entrusted goods to obtain goods at lower prices.

During the year 2020, the CAK demanded Carrefour make revisions to current terms within their supplier contracts that promulgated exceptionally competitive pricing intending to stimulate profits and hold supremacy within the market space. Incorporated in these provisions were the stipulations of suppliers paying an irrevocable charge and requesting further concessions or markdowns from retailers. Carrefour introduced a "gradual refund" structure in 2018, which entailed deducting amounts from supplier bills without mutual agreement, contingent on their yearly sales or revenue.