NAIROBI, Kenya, Nov 11 – The Competition Authority of Kenya (CAK) has warned retailers against imposing unfair commercial terms on suppliers, citing practices that could violate competition laws.
The regulator says it has identified cases where retailers transfer operational costs and risks to suppliers, demand rebates and promotional contributions, extend payment periods and impose unfavourable terms through joint business plans.
In a statement issued on Wednesday, CAK Director-General David Kemei said supply agreements must be based on genuine negotiations and mutual engagement rather than dictated by buyers because of their stronger bargaining positions.
The authority said buyers with greater bargaining power may exploit smaller suppliers through delayed payments, unilateral termination of contracts, refusal to receive goods without valid reasons and demands for preferential terms.
Other practices that may amount to abuse of buyer power include transferring business costs to suppliers and restricting them from selling goods to competing buyers.
CAK clarified that although it encourages written supply agreements, it has never directed suppliers in the retail sector to enter into joint business plans with retailers, saying such arrangements must remain voluntary.
The regulator warned that signing a supply agreement does not automatically mean its terms were fairly negotiated or comply with the law.
It said it is monitoring commercial practices in the retail sector and will investigate specific retailers where evidence points to violations of the Competition Act.
Businesses found guilty of abusing buyer power face fines of up to Sh10 million, imprisonment for up to five years, or both under the law.
The authority may also impose an administrative financial penalty of up to 10 per cent of the affected company’s gross annual turnover in the preceding financial year.
CAK has urged suppliers experiencing unfair commercial practices to preserve supply agreements, draft contracts, correspondence, payment records and other documents showing how the terms were negotiated.
The regulator has also called on retailers and other buyers to review their supply agreements and ensure their commercial dealings comply with competition laws.
