In a groundbreaking move, the competition regulator in Kenya has imposed a hefty fine of $7.1 million on Majid al Futtaim, the local franchise holder of Carrefour. The fine comes in response to accusations that Majid al Futtaim had been pressuring suppliers to accept lower prices, taking advantage of its dominant bargaining position. The Competition Authority of Kenya (CAK) also ordered the refund of $112,000 to the two companies directly affected by this unfair practice.
The investigation conducted by CAK revealed that Majid al Futtaim had been employing a discount system, called rebates, to slash final payments to suppliers by a significant margin of up to 12%. Moreover, the regulator discovered that the supermarket chain was unlawfully shifting its costs onto its suppliers by requiring them to provide free products, pay listing fees for every new branch, and station their employees at Carrefour outlets.
The practices employed by Majid al Futtaim were found to be in violation of the Competition Act, prompting the competition authority to issue a stringent directive to revise all supplier contracts and eliminate any clauses that facilitate the abuse of buyer power.
This is not the first time that the Carrefour franchise holder has faced scrutiny for its supplier practices. In 2021, the Kenya Competition Tribunal (CT) found Majid al Futtaim guilty of exploiting suppliers by imposing high listing fees and rebate rates. It is worth noting that these charges were brought forward by a Kenyan company that lodged a complaint against Majid al Futtaim.
While the franchise holder has not yet responded to the hefty penalty, it previously emphasized its commitment to fostering mutually beneficial relationships with suppliers. However, the issuing of this fine marks a pivotal moment in Kenya’s competition regulation, setting a precedent for stronger enforcement against unfair practices in the retail industry.
Carrefour currently operates 21 outlets in Kenya, spanning across major cities in the country. The supermarket chain’s aggressive discounts have garnered attention, reflecting on the true cost of these price reductions and their impact on suppliers and the overall market.
With this regulatory action, the authority aims to rectify the power dynamics between retailers and suppliers, creating a fairer and more equitable environment for all parties involved. It sends a clear message that anti-competitive practices will not be tolerated, serving as a warning to other companies operating in Kenya’s retail sector.
As consumers, we should remain vigilant and support companies that demonstrate ethical practices towards their suppliers. By doing so, we can encourage a culture of fairness and sustainability in the retail industry, leading to healthier market dynamics and ultimately benefiting all stakeholders.
