Carrefour Kenya may have to revise its supplier contracts

Carrefour Kenya is being forced to revise supplier contracts after losing an appeal against the Competition Authority of Kenya. The appeal relates to the terms of its supplier contracts, particularly listing fees and supplier rebates.

Majid Al Futtaim (MAF), the Carrefour franchisee in Kenya (and Uganda and Egypt), will be forced to revise its supplier contracts after having lost an appeal at the Competition Tribunal. It will mean MAF has to revise around 700 supplier contracts.

The Dubai-based retailer has been pulled up on issues including:

  • the right to unilateral termination of supplier contracts
  • refusal of goods (for no reason)
  • returning near expiry goods at cost to the supplier
  • rebates
  • listing fees

The power of supermarket chains in Kenya has been a hot button topic since it emerged in 2016 that leading chains such as Nakumatt and Tuskys had been financing their expansion by delaying payments to suppliers.

The case against MAF has been brought by yoghurt supplier Orchards Limited, which supplied MAF for three years until 2018 and filed the complaint in October 2019. According to its complaint, MAF requires suppliers to pay a listing fee of Ksh50,000 ($462) for each SKU. It also alleged that failure to pay the listing fee attracted a penalty of 7%-8% of the outstanding amount. According to Orchards, MAF also required suppliers to pay a further rebate of 10% on the second delivery of supplies to new branches. Carrefour Kenya’s also demanded rebates equivalent to 1.25% of annual sales and were worth more than Ksh300m ($2.78m) annually.

MAF is set to open a new Carrefour store in Nairobi’s Garden City Mall, where Shoprite was the anchor tenant until late 2020. The new store comes nearly two months after the retailer opened its ninth branch at Nairobi’s NextGen Mall along Mombasa Road.

The elimination of supplier rebates could see Carrefour Kenya remove some of its price discounts. Carrefour is the second major supermarket chain to be investigated for abuse of buyer power after Tuskys, which was found to be delaying supplier payments.

Carrefour said it intends to fight the tribunal’s orders through an appeal at Kenya’s High Court.