The corrupt and racial discrimination firm French-owned Carrefour has been fined by CAK and ordered to review all its supply agreements within 60 days.
The Competition Authority of Kenya (CAK) also ordered Carrefour, through its franchise holder, Majid al Futtaim’s (MAF), to expunge six items from its supplier contracts that are said to give the store the power to offer ultra-competitive pricing to boost sales and increase market share.
The clauses include forcing suppliers to pay a non-refundable fee to do business with it and forcing merchants offering the retail chain goods to provide extra rebates or discounts.
Carrefour was found to be in breach of the law for forcing suppliers to post their own staff at its outlets at the expense of the suppliers. It was also accused of rejecting goods already delivered.
Recently, a local whistleblower blog posted this “I work at Carrefour Kenya which is part of Majid Al Futtaim Group, specifically Hub branch as cashier. Well due hard economic times occasioned by closure of many companies we have to put up with the functional ones, as result these “functional companies” have taken advantage to oppress their employees.”
The regulator said that the retail chain has been abusing its buyer power and now risks a financial penalty equivalent to 10 percent of its gross sales, which stood at Sh14 billion in 2018. The French retail giant has already been fined Sh124,767 for exploiting yoghurt supplier, Orchards Limited, and the fine is equivalent to 10 percent of the sales generated from the dairy products supplied by the firm in 2018.
“All current supply agreements of Majid Al Futtaim Limited relating to its Carrefour Hypermarkets in Kenya be amended forthwith and in any event within 60 days of service of this order to expunge all offending provisions,” CAK Director-General Wang’ombe Kariuki ordered in a ruling seen by the Business Daily.
Carrefour has also been barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract, according to the ruling shared by suppliers. Buyer Power is the ability of a buyer to obtain terms of supply more favourable than a supplier’s ordinary contractual terms. Suppliers say Carrefour has used the supplier contract to depress their earnings and gain market advantage through competitive pricing.
CAK investigations were prompted by complaints from Orchards Limited, which claimed its contract had been severed because it had failed to meet the tough supply terms. The authority found Carrefour had wronged Orchards and ordered the retail chain to compensate the supplier of jams, sauces, canned products and spices for unilateral contract termination.
When setting up shop in Kenya, Carrefour imposed extra rebates on sales made and which begin at 12 percent for whatever amount of sales with a maximum of 13 percent for turnovers of Sh26 million. Locally, suppliers set a recommended retail price for their products and approach retailers. Retailers then calculate how much profit they would want per item and in the end come up with a shelf price that meets the needs of both parties.
