Carrefour fined Sh1.1billion over abuse of buyer power
Majid Al Futtaim’s Carrefour has been sanctioned by the Competition Authority of Kenya (CAK) over abuse of buyer power.
According to an investigation by the authority, the retail store abused its superior bargaining power over its two suppliers; Pwani Oil Products and Woodland Company.
CAK has fined Carrefour Sh, 108,327,873.60 for the abuse.
Carrefour has also been ordered to reimburse Sh 16,757,899 in rebates reduction from the invoices and Sh500,000 for marketing support charged to the two companies.
The retail store opened its 22nd store in the country at Promenade Mall in Mombasa’s Nyali area, providing added convenience and accessibility for customers in the coastal region.
The retailers first established their number one store in Kenya in 2o16 and they have grown positively.
Buyer power is the ability of a powerful buyer for example a retail store buying products from suppliers obtain supply conditions that are outside normal business practice or even misappropriate, unfair, and detrimental to a supplier or unrelated to supply objectivity.
Competition Authority states that buyer power may manifest in the marketplace through the ‘powerful buyer’ reducing supply prices by significant amounts or below competitive levels, threats of termination of contract without a reasonable justification, delaying payments, refusal to receive or return goods without justifiable reasons, and transfer of costs or risks to suppliers.
Kenyans on social media shared their experiences on their interaction with the retailer oversupply some saying they had to cut short their contracts over delayed payment and at times supplying their products at zero profit while the retailer sells an even higher price.
“I had a contract with Carrefour but had to terminate it mid-way. Especially delayed payments. I will never forget what they did to me. I almost went bankrupt had not withdrawn my services.” Marube Kiage stated.
“Forcing suppliers to second their employees to man their products in their outlets.” Stephen Odero claimed.
“Hefty fees, plus shoving the costs to the suppliers. That’s painful. Arm twisting until you sell at near zero profit margin.” He added.
According to an entrepreneur consultant Anthony Irungu, the fine by CAK to Carrefour is hefty considering many businesses are abusing their buyer power over their suppliers who as per him must be punished, too.
“The penalty is hefty, and more businesses abusing their buyer power over their suppliers must be punished, too. Abuse of buyer power occurs when a company with significant market influence leverages its position to exploit suppliers, often at the expense of fair competition and consumer welfare. Imagine a supermarket giant squeezing its suppliers for impossibly low prices, forcing them to cut corners on quality or labor practices.” Irungu said.
He added that these are some of the poor business environment in the country that has made many investors leave in 2023 due to the policies do not favor them with the government exploiting them even more.
Some of the common practices in Kenya that exploit buyer power include: Demanding excessively low prices: Sell to us at this price, or keeping your goods, Late payments: Holding on to your payments, and you can’t go anywhere, Unilateral contract changes: We have changed the contract terms, and you can stay or leave, threatening to switch suppliers (Coercion), sell to us at this price, or we replace you with supplier B and Imposing excessive fees or penalties: Your Avocados were low quality, and we will only pay 20% of the invoice value.
Pwani oil processes and supplies consumer goods including edible oils and fats and laundry soap products while Woodlands processes and supplies natural bee honey from Kitui.
