Kenya’s Competition Authority has put Kenyan retailers on notice.
The retailers who refuse to pay their suppliers or introduce clauses that are unfair to their suppliers will now face stringent laws from the authority as it moves to bring order into the sector.
Competition Authority of Kenya (CAK) has formed a Buyer Power Department as a measure to accommodate emerging concerns in the economy.
According to a statement from the authority, the new department is expected to address concerns about businesses abusing their influence over suppliers.
In December 2016 Kenya became the first country in Africa to adopt specific legislative provisions on buyer power through the competition law framework.
The retail sector is particularly targeted by this fresh move by the authority where abuse of power has over time been reported. Some cases reported to the authority involve buyers failing to honor their contractual obligations with their suppliers, thereby threatening their businesses.
The authority will now be allowed to investigate such abuse, with the punishment for infringing the law being imprisonment for a term not exceeding 5 years, a maximum fine of Ksh10 million, or both, for criminal prosecutions.
Before this, CAK had no mandate to ask trade associations to provide details or even intervene in conflicts between suppliers and buyers.
According to a statement from the authority, culprits will from now on attract penalties for delayed payment by a buyer without justifiable reasons in breach of contractual terms. Unilateral termination (or threat of termination) of a commercial agreement without notice or a buyer’s refusal to receive or return goods without justifiable reasons and in breach of contractual terms will also land you in trouble.
Other misconducts that could attract punitive measures from the authority include: transfer of costs – buyers transferring costs or risks to suppliers by imposing a requirement on them to fund the cost of a promotion; and a buyer demanding preferential terms that are unfavorable to suppliers or demanding suppliers limit products sold to competitors.
According to CAK’s irector-general Mr Wang’ombe Kariuki, the Buyer Power Department will initially concentrate its investigations in the retail sector where there are allegations and indications pointing towards abuse of buyer power.
“This prioritization has been informed by the fact that the retail sector value chain has recently come under strain.” Mr Wang’ombe added.
The Authority has embarked on the process of populating the new Department which will, in its full capacity, have 19 investigators. This is the initial number of staff who will investigate and advise on allegations of abuse of buyer power in key sectors of the economy which have a bearing in the achievement of the Government’s Big Four Agenda.