Carrefour Ordered to Amend All Current Supply Agreements in 60 Days

Buyer Power is the ability of a buyer to obtain terms of supply more favourable than a supplier's ordinary contractual terms.

Franck Moreau, country manager, Majid Al Futtaim Hypermarkets Ltd

The Competition Tribunal has ordered Carrefour Supermarket to amend all current supply agreements within 60 days for Buyer Power.

The Tribunal wants the retailer to amend requirements in its contracts that require suppliers to pay a listing fee, unfair delisting of suppliers, and rebates to the retailer.

At the same time, Carrefour has been ordered to pay Ksh 545,106 to Orchards Limited for the termination of the contract to supply yoghurt.

“All current supply agreements of the appellant relating to its Carrefour Hypermarkets in Kenya be amended forthwith within sixty days of service of the order to expunge all offending provisions, specifically clauses that provide for, lead to or otherwise facilitate abuse of buyer power…”

Orchards Limited had moved to the Tribunal to complain after Carrefour Supermarket delisted it and blocked the supply code of its products without notice in 2019.

Orchards had been supplying probiotic yoghurt to Carrefour from 2015 before the contract was abruptly terminated leaving it with a “huge stock that had been procured specifically for the retailer.”

Under the commercial contract, Carrefour required suppliers to pay a rebate in form of a listing fee amounting to Ksh 50,000 for every listing of the products. This, according to the Tribunal is unfair.

An additional payment of 7 to 8 per cent would also be due which the supplier never honoured. Orchards were also supposed to pay a further rebate of 10 per cent on the second delivery in respect to new branches.

Though Orchards paid the rebate on top of agreed margins which is 1.25% of all annual sales, Carrefour refused to accept a new price list from the supplier as well as additional supplies in some branches prompting the Competition Authority to commence investigations on the deal through a Notice of Investigations dated 24th May 2019.

The Competition Authority of Kenya welcomed the decision stating that the ruling goes further to attend to the persistent problem of abuse of buyer power in the retail sector which Parliament identified following the collapse of some major players with suppliers’ unresolved payments.

“The Authority is of the opinion that this Ruling will go further to provide suppliers in this sector with a credible position to negotiate for better terms with buyers, thereby ensuring the continued supply of goods and services to the ultimate benefit of consumers,” CAK said through its Twitter Feed.