Carrefour Slapped with Record-breaking Ksh.1.1 Billion Fine for Supplier Exploitation
The Kenyan Competition Authority (CAK) imposed a penalty of 1.1 billion Kenyan shillings on Carrefour, a French retail giant, for exploiting its purchasing influence with its suppliers.
On Tuesday, CAK declared that the supermarket franchise, managed by Majid al-Futtaim based in the UAE, had individually exploited its authority to establish conditions for two suppliers, namely Pwani Oil Products Limited and Woodlands Company Limited.
The official stated that after conducting investigations, it was found that Carrefour imposes three mandatory rebates on its suppliers, reaching as much as 12 percent, which cannot be negotiated.
Rebates represent reimbursement of a portion of sales given by a supplier to its customer in return for advantages like prompt payment from the retailer, acknowledgment for exceeding specified purchase goals, or encouragement for a rise in the quantities ordered by the retailer.
“The rebates are deductible annually and monthly and have been increasing on an annual basis, thereby significantly reducing the final pay-out to suppliers. Investigations also determined that Carrefour’s suppliers are required to provide free products and pay listing fees for every new branch opened as well as post employees to the supermarket’s branches,” CAK said.
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“These practices amount to transfer of the retailer’s costs to suppliers, which is prohibited by the Competition Act.”
The regulator fined Carrefour Ksh.1,108,327,873.60 and ordered the supermarket chain to amend all its supplier contracts and expunge clauses “that facilitate abuse of buyer power, including but not limited to the application of listing fees, collection of rebates, and unilateral delisting of suppliers.”
“The Authority has also ordered Carrefour to refund the Woodlands and Pwani Oil a total of Ksh. 16,757,899 in rebates deducted from their invoices as well as Ksh.500,000 that was billed as marketing support (store opening/listing fees),” CAK said.
The penalty is the biggest ever handed out by CAK, it added.
Majid al-Futtaim launched its initial store in Kenya in 2016 and has since expanded to become one of the foremost retail giants in the region.
Carrefour Slapped with Record-breaking Ksh.1.1 Billion Fine for Supplier Exploitation
