Carrefour fined in Kenya for unfair trade practices

Feb 19, 2020

Carrefour MAF
The Competition Authority of Kenya (CAK) has fined Carrefour’s franchisee Majid al Futtaim’s (MAF) for unfair trade practices. It has ordered the retailer to review its supplier agreements within 60 days, and to remove what it considers punitive clauses in supplier contracts or face substantial fines.

The issues with supplier contracts reportedly include:

  • Sales rebates: MAF imposed rebate fees of 12% on sales, up to 13%.
  • Listing fees: Upfront costs to list products in Carrefour.
  • New product launch fees: Additional fees of KSh10,000 ($99) per store for each new SKU.
  • Right to exchange unsold products: unsold products could be exchanged by MAF for another product of the same value
  • Refrigeration fees: payable by soft drinks suppliers
  • In store field force: suppliers would be required to provide merchanding staff in store

These conditions are not exceptional for modern supermarket chains in Carrefour’s European markets.

But supplier duress is a sensitive issue in Kenya after the collapse of Nakumatt, which folded leaving several suppliers with substantial unpaid debts – in some case forcing them from the market.

The use of supplier debt to improve a retailer’s cash flow was rife in Kenya until 2016, also when Carrefour entered Kenya with MAF. Nakumatt was not the only chain withholding or delaying payments to suppliers: Tuskys, Naivas and Uchumi were all guilty of it.

The Competition Authority of Kenya may be taking a long term view to curb supermarket chain buying power at an early stage. It is also perhaps protecting other retailers.

MAF enjoys a reputation for prompt payment among suppliers. But its rapid growth has also threatened domestic supermarket chains, which will also want to restrict MAF’s power over suppliers. MAF risks a fine equivalent to 10% if it fails to change its supplier contracts.

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