Carrefour Loses Abuse of Power Appeal, Ordered to Pay Supplier

French based Retailer, Carrefour, was on the spotlight this week after the enterprise lost an”abuse of buyer power”case against competition authority of kenya(CAK) and yoghurt supplier Orchards limited .

Orchards Limited moved to the Competition Tribunal accusing Carrefour of exploitation by pushing anti competitive prices to boost sales so as to increase it’s market share. The yoghurt company claimed that the retailer forced huge discounts on products that it ended up cashing in on.

Other accusations included levelled against Carrefour were that it was pressing supplies for discounts during annual contract agreements, charging Ksh 50,000 as a listing fee for every product supplied, forcing suppliers to post their staff at it’s outlets at their own expense and rejecting goods already delivered.

In January 2019 Carrefour alleged to have unilaterally delisted Orchards Limited as a supplier without notice as the two were negotiating terms of prospective contract. Orchards had been the retailer’s supplier for yoghurt products.

Carrefour is also said to have earlier returned a merchandise on grounds that it was near expiry date, which CAK termed as a transfer of commercial risk the retailer should have borne.

On their ruling the tribunal noted that “there weren’t provisions in the contract allowing for such returns and neither had the supplier been pre-warned of such action. ”

The tribunal retained an earlier order directing the retailer to refund rebates done on invoices in 2017-2019, amounting to Ksh 289,482 payable within 30 days. Besides, the retailer is expected to pay a 10 percent of the supplier’s gross turn over from the sale of yoghurts for the year 2018 amounting to Ksh 124,768 within 30 days.

Carrefour had moved to the Competition Tribunal on grounds that it had not been accorded a fair hearing by CAK.

The competition watchdog during the initial hearing directed the supermarket chain to review all of it’s supply contracts within 60days after the regulator discovered Carrefour was exploiting local suppliers.

CAK had asked the chain store , through its franchise holder Majid al Futtaim’s (MAF), to obliterate six items from its supplier contracts.

Among the items were the non-refundable fee paid by suppliers to secure business with the retailer and the forced discounts.,

The Competition Authority of Kenya welcomed the tribunal’s ruling, sighting that it attends to the bigger problem of abuse of buyer power, which the parliament noted as a factor in collapse of major players in supply sector. The ruling also offers suppliers with a better position to negotiate with buyers, ensuring continuity in supply of goods and services.

Buyer power is influenced exerted by a business over a weaker trading partner, in the market with the aim of getting more favorable terms at the other parties expense, which isn’t favorable for competition.

It’s illegal to abuse the position where it exists.

By John jim