Supermarkets and other businesses in the retail sector risk fines of up to KSh10 million under a new warning issued by the Competition Authority of Kenya (CAK) over commercial practices that could violate the Competition Act.
In a cautionary notice dated Wednesday, November 11, CAK Director-General David Kemei warned buyers against imposing unfair terms on suppliers, saying the authority had identified ongoing cases of potentially unlawful commercial practices in the retail sector.
“As part of its continued surveillance of the market, the Authority has noted continued instances of commercial terms being imposed on suppliers in the retail sector, in circumstances that may contravene the Competition Act,” the statement read.
The authority said it was monitoring supply agreements involving retailers and suppliers to establish whether some businesses were abusing their stronger bargaining positions.
Commercial Practices Under CAK Scrutiny
CAK identified several practices that could amount to abuse of buyer power, including transferring costs and risks to suppliers, demanding rebates and promotional contributions, extending payment periods and imposing unfavourable terms in joint business plans.
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Other prohibited practices under the Competition Act include delaying payments, unilaterally terminating supply contracts, refusing to receive goods without justification and restricting suppliers from selling to competing buyers.
“The Competition Act sets out a non-exhaustive list of conduct that may constitute ABP, including delayed payments, unilateral termination or threat of termination of a contract, and refusal to receive goods without justifiable reasons and in breach of contractual terms.”
The authority cautioned that supply agreements must result from genuine negotiations and meaningful engagement, not terms dictated by buyers because of their stronger bargaining positions.
CAK also clarified that it had never issued a directive requiring suppliers in the retail sector to enter into joint business plans with buyers, emphasising that such arrangements must be voluntary.
Penalties for Businesses Found in Violation
Under Section 24A(9) of the Competition Act, businesses found guilty of criminal abuse of buyer power risk fines of up to KSh10 million, imprisonment for up to five years, or both.
Administrative penalties under Section 36 of the Act may also include financial fines of up to 10 per cent of an undertaking’s gross annual turnover in the immediately preceding financial year.
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“Administrative remedies under section 36 of the Act: These include the imposition of a financial penalty of up to ten per cent (10%) of the immediately preceding year’s gross annual turnover of the undertaking in question, among other remedies,” the authority stated.
CAK said it was undertaking market surveillance and monitoring commercial practices in the retail sector. Full investigations and enforcement action against specific retailers would follow where violations are established.
Suppliers who believe they are being subjected to unfair terms have been encouraged to submit complaints through [email protected] or the authority’s E-Filing Portal.
The authority also urged suppliers to retain draft and signed agreements, correspondence, payment records and other evidence relating to negotiations.
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