In a notice issued on Wednesday, November 11, the authority cautioned businesses against exploiting their purchasing power to dictate unfavourable terms to suppliers, particularly in the retail sector.
CAK identified several practices that could amount to abuse of buyer power, including delaying payments, demanding rebates, requiring suppliers to finance promotional activities and transferring operational expenses to them.
The regulator also raised concerns over retailers imposing extended payment deadlines and unfavourable conditions through joint business plans with suppliers.
According to the authority, businesses cannot use their stronger market position to force suppliers into accepting contractual conditions without giving them room to negotiate.
"Terms should not be dictated by a buyer merely because it enjoys buyer power," CAK stated.
The authority further clarified that retailers have not been directed to introduce joint business plans with their suppliers. Instead, such arrangements should be voluntary and mutually negotiated.
CAK also warned that signing a supply agreement does not necessarily prove that the conditions were fairly negotiated or that the contract complies with competition laws.
Businesses found violating the Competition Act could face criminal fines of up to Ksh10 million, imprisonment for a maximum of five years, or both.
Additionally, the regulator has the power to impose administrative financial penalties of up to 10 per cent of a company's gross annual turnover recorded in the preceding financial year.
The authority said it was closely monitoring commercial dealings in the retail industry and would investigate specific businesses suspected of violating the law before taking enforcement action.
Suppliers who suspect they are being subjected to unfair contractual conditions have been encouraged to report the matter to CAK.
The regulator also urged suppliers to preserve important records, including signed and draft agreements, payment statements, correspondence and joint business plans.
These documents could help establish whether contractual terms were imposed by retailers or reached through genuine negotiations.
https://www.kenyans.co.ke/news/129296-cak-warns-businesses-ksh10-million-fine-over-unfair-supplier-terms
Leave a Reply