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Coming hot on the heels of increased fuel prices and heightened minimum taxes, a government tribunal has imposed operational restrictions on Kenya’s second largest retail chain Carrefour for among other reasons, offering goods that are too cheap compared to her rivals, and thus being uncompetitive.
The Supermarket chain has been ordered to revise all its agreements with some 700 suppliers within a month and expunge up to 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.
This is following an order by The Competition Tribunal after it found that the establishment has been exploiting traders.
The clauses that the retail giant is being compelled to relook 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 (a form of subsidy) 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 traders. It was also accused of rejecting goods already delivered.
The order by the Competition Tribunal, which largely affirmed earlier decisions taken by the Competition Authority of Kenya (CAK), sets a major precedent in the retail sector and could be relied on to remove similar trade practices among other players.
It also risks upending some longstanding norms in the retail business, with consequences that will also be felt by consumers.
Buyer power means the ability of a purchaser to extract more favourable terms from a supplier on whom it can also impose significant opportunity costs by, for example, delaying payments.
The retail chain came out fighting, promising to take the battle against the competition watchdog and the tribunal to the High Court.
“Carrefour has only received the decision of the tribunal this afternoon and intends to appeal it to the High Court,” the retailer said in a statement.
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