CAK warns retailers against imposing unfair terms on suppliers
NAIROBI, Kenya, Nov 11 – The Competition Authority of Kenya (CAK) has warned retailers against imposing unfair commercial terms on suppliers, citing practices that could violate competition laws. The regulator…
Kenya's Competition Authority (CAK) has cautioned retailers against imposing unfair terms on suppliers, warning that such actions could breach competition regulations. The regulator has uncovered instances where retailers pass on operational costs and risks to suppliers, seek rebates and promotional contributions, extend payment periods, and impose less favorable conditions through joint business plans.
On Wednesday, CAK Director-General David Kemei explained that supply contracts should be the result of fair negotiations and mutual agreement, rather than dictated by the buyer due to their dominant bargaining position. The authority stated that buyers, often having greater leverage, may take advantage of smaller suppliers through delayed payments, abrupt contract termination, refusal to receive goods without valid grounds, and demands for preferential terms.
Other practices that might constitute buyer power abuse include shifting business costs to suppliers and preventing them from selling products to competing retailers. While the CAK supports written supply agreements, it has never mandated suppliers in the retail sector to enter into joint business plans, insisting such agreements should be voluntary.
The regulator reiterated that signing a supply agreement does not guarantee fair negotiation or legal compliance, stating it will monitor retail sector commercial practices and investigate specific retailers where evidence suggests violations of the Competition Act. Penalties for abusing buyer power may include fines up to Sh10 million, imprisonment for up to five years, or both, under the law.
The CAK may also impose an administrative financial penalty of up to 10 percent of the affected company's gross annual turnover from the previous financial year. Suppliers facing unfair commercial practices are advised to keep supply agreements, contracts, correspondence, payment records, and other documents demonstrating the terms' negotiation.
The regulator also urges retailers and other buyers to review their supply agreements to ensure their commercial actions align with competition laws.
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