Majid al Futtaim, the local owner of the Carrefour franchise, was hit with a record $7.1 million (£5.6 million) fine by Kenya’s competition commission for allegedly pressuring suppliers to accept lower prices.
The retail giant was fined the biggest amount ever by the competition authorities after the agency accused it of abusing its strong negotiating position against two suppliers.
One of Kenya’s biggest retail companies, Majid al Futtaim, has not yet replied to the fine. Apart from the financial fine, the Competition Authority of Kenya (CAK) has directed the owner of the Carrefour franchise to return $112,000 to two businesses: Woodlands, a processor of honey, and Pwani Oil, a manufacturer.
According to CAK, Majid al Futtaim used a rebate scheme to force suppliers to accept cheaper rates, which might have resulted in a 12% reduction in final payments. The regulator also claimed that the supermarket chain had illegally moved its costs onto its suppliers, claiming that suppliers had a duty to allocate workers to the supermarket’s locations, pay listing fees for new branches, and give complementary products.
“These practices amount to transfer of the retailer’s costs to suppliers, which the Competition Act prohibits,” CAK explained in a statement released on Tuesday.
The grocery chain has been instructed by CAK to amend all supplier agreements in light of the findings, eliminating any language that might permit the abuse of buying power.
This comes after Kenya’s Competition Tribunal (CT) ruled in 2021 that the Carrefour franchise had forced suppliers to accept lower prices by using excessive listing fees and rebate rates, so abusing them.
Majid al-Futtaim has remained silent about the current fine, but the company has said that it will work to build good ties with suppliers following the 2021 inquiry.
Kenya currently hosts 21 Carrefour outlets across various major cities.