Retail store Carrefour has suffered a setback after the high court in Nairobi trashed an appeal against an abuse of buyer power verdict by the Competition Authority of Kenya (CAK) that had been affirmed by the competition tribunal.
- •In 2021, the tribunal found Carrefour liable for abuse of buyer power in a case filed by Orchards limited, one of its suppliers.
- •The retail chain moved to appeal the decision which ordered it to refund the supplier Ksh 289,482 in deducted rebates and also pay Ksh 124,768 to the Competition Authority as a penalty for engaging in Abuse of buyer power (ABP).
- •Orchards, a yoghurt company, alleged that in January 2019 the company’s contract was terminated unilaterally mid negotiations, prompting the abuse of power ruling by the CAK a year later.
“This court is led to conclude that the conduct by the appellant amounted to abuse of buyer power. The court therefore finds that the tribunal was correct in declining to set aside Competition Authority of Kenya’s decision on Carrefour’s abuse of power,” said Justice Ong’injo in the ruling.
“In conclusion, this court upholds the decision of the tribunal save that the decision to amend all supplier agreements between Carrefour and its other suppliers is set aside as there were no parties to the cause and there were no pleadings affecting them before the competition authority of Kenya to warrant a decision being made in relation to their contracts,” she said.
“We remain committed to conducting our business with fairness and integrity, working collaboratively with our partners to ensure a sustainable, equitable, and mutually beneficial business environment and in accordance with Kenya’s Code of Retail, in which we were honoured to play a founding role,” Majid Al Futtaim Hypermarkets Ltd, which operates the Carrefour brand in Kenya, said in a statement on Friday.
Playing by the Rules
The judgement is the culmination of a case commenced in April 2019 when Orchards’ proprietor lodged a complaint with the Competition Authority of Kenya (CAK) against Carrefour. The yoghurt company also claimed that Carrefour required it to pay listing fees and at least three types of rebates, in excess of agreed margins.
- •Orchards alleged that some Carrefour’s outlets declined to take full delivery of goods after placing orders, while other items were unjustifiably returned for nearing their expiry date.
- •Orchards also accused the retailer of demanding free merchandise, which they later sold, and being required to deploy their own staff to man shelves.
- •In 2020, the Competition Authority of Kenya agreed with Orchards and determined that the retailer had contravened the Competition Act by abusing its superior bargaining power.
The Authority directed Carrefour to, among other orders, settle the rebates and pay a fine. Given the fact that the retailer’s supplier contracts were standardized, it also ordered the retailer to amend and expunge provisions facilitating ABP in all their supplier contracts, which numbered approximately 700 at that point.
Carrefour challenged the orders of the Authority at the Competition Tribunal which affirmed CAK’s findings and upheld the orders to amend all supplier contracts, refund rebate and pay a fine. The supermarket then appealed the Tribunal’s judgement to the High Court in April 2021.
Out of the seven issues raised by the retailer, the High Court threw out six and upheld one where Carrefour got a reprieve on the order to amend contracts with other suppliers. The Court held that the other suppliers were not party to the complaint or appeal and should have been joined as parties.
“Commercially oppressive contracts ultimately force suppliers, most of who are SMEs, to exit the market due to unfair business practices, thereby denying thousands of Kenyans their livelihoods and leaving consumers with a limited choice of goods and services,” said Adano Wario, CAK’s Acting Director-General said.
In late 2023, the CAK fined Carrefour KShs 1.1bn in a separate but similar case involving Pwani Oil Products Ltd and Woodlands Company Ltd.
Editor’s note: This article has been updated with Majid Al Futtaim’s statement following the ruling.