What you need to know:
- This is not the first time Carrefour is finding itself in hot water over its relations with suppliers.
- In 2021, the Competition Tribunal reinforced CAK’s order for Carrefour to revise all its agreements with some 700 suppliers after a tribunal found it has been exploiting traders.
- The retail giant was also barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract.
The competition watchdog has ordered retail chain Carrefour to stop charging rebates on Pwani Oil products' invoices, nearly two years after the retailer was also fined over unfair supplier discounts.
The Competition Authority of Kenya (CAK) has ordered Carrefour, through its franchise holder Majid al Futtaim’s (MAF), to stop compelling Pwani Oil to give extra discounts for its products until an investigation into allegations of abuse of buyer power by the retailer are concluded.
“The Competition Authority issues a cease and desist order against Majid Al Futtaim Hypermarkets Limited directing it to, with immediate effect, cease and desist from charging rebates on Pwani Oil Products Limited invoices until the ongoing investigations on alleged abuse of buyer power by Majid Al Futtaim Hypermarkets Limited are completed,” said CAK acting Director-General Adano Wario.
Relationship with suppliers
This is not the first time Carrefour is finding itself in hot water over its relations with suppliers. In April 2021, the Competition Tribunal reinforced CAK’s order for the retailer to revise all its agreements with some 700 suppliers within a month after a tribunal found it has been exploiting traders.
While rebates are common in the retail sector, the Tribunal found that Carrefour had abused its power as a major buyer of goods.
CAK had in 2020 ordered Carrefour to remove up to six items from its supplier contracts that were said to give the store power to offer ultra-competitive pricing to boost sales and increase market share. The clauses included forcing suppliers to pay a non-refundable fee to do business with it and compelling merchants offering the retail chain goods to provide extra rebates or discounts.
Carrefour in 2018 introduced a 'progressive rebate', which was to be calculated from the annual sales or turnover of the supplier. The retail giant would unilaterally make the deductions of the various rebates from the invoices of the suppliers.
Breach of law
Carrefour was also found to be in breach of the law for forcing suppliers to post their own staff at its outlets at the expense of the traders. It was also accused of rejecting goods already delivered.
That order came at a time the retail giant had already been fined Sh124,767 for exploiting yoghurt supplier Orchards Limited. Orchards filed the complaint on April 26, 2019 thus sparking a legal fight between the CAK and Carrefour that ended up at the Competition Tribunal.
The retail giant was also barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract.
The contractual discounts given to Carrefour by suppliers has enabled the retailer to offer steeper discounts to its customers compared to its competitors, which has partly contributed to the firm's fast growth since its launch in Kenya in 2016.
The fast growth has increased Carrefour’s store count to 19 countrywide, with 15 of these located in Nairobi while Kisumu and Mombasa have two stores each.