Kenyan Supermarkets Face KSh10 Million Fine and Five-Year Jail Term Over Unfair Supplier Deals

The Competition Authority of Kenya (CAK) has warned supermarkets and other retailers against exploiting suppliers through unfair commercial agreements, cautioning that businesses found violating competition laws could face heavy penalties.

In a notice issued on Wednesday, November 11, CAK Director-General David Kemei said the authority had identified commercial practices in the retail sector that could amount to abuse of buyer power.

The regulator highlighted several concerns, including delayed payments, excessive demands for promotional contributions, forced rebates and retailers transferring business costs and risks to suppliers.

Some buyers have also been accused of imposing unfavourable terms in joint business plans and extending payment periods without proper agreement.

CAK explained that businesses with stronger bargaining positions should not use their influence to dictate unreasonable conditions to suppliers.

Under the Competition Act, companies found guilty of criminal abuse of buyer power risk fines of up to KSh10 million, imprisonment for up to five years, or both.

The authority may also impose administrative financial penalties of up to 10 per cent of a company’s gross annual turnover in the preceding financial year.

Importantly, CAK has not announced that any particular supermarket has been found guilty under this latest warning. It says it is monitoring commercial practices and will undertake investigations where necessary.

The regulator has also clarified that joint business plans between retailers and suppliers should be voluntary and based on genuine negotiations.

Suppliers who suspect unfair treatment have been encouraged to preserve contracts, payment records, emails and other correspondence that could support a complaint.

The warning is significant for Kenyan farmers, manufacturers and small businesses that depend on supermarket chains to distribute their products.

CAK says retailers should review their supply agreements and ensure that their commercial dealings comply with competition laws.

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