CAK has warned businesses against imposing unfair commercial conditions on suppliers.
The competition regulator warns retailers against delayed payments and imposed charges, with offenders also risking jail and turnover-based penalties.
Businesses that impose unfair supplier terms risk fines of up to Ksh10 million, the Competition Authority of Kenya has warned. Offenders could also face up to five years in prison, or both penalties.
In a cautionary notice issued on Wednesday, November 11, CAK flagged continuing concerns about commercial practices in retail. It said some arrangements between retailers and suppliers could breach the Competition Act through abuse of buyer power.
The regulator highlighted delayed payments, demands for rebates and promotional contributions, and the transfer of operational costs to suppliers. It also identified extended payment periods and unfavourable conditions within joint business plans as potential violations.
CAK warns against unfair supplier terms
CAK said buyers must not use their commercial power to dictate contractual conditions to suppliers. Instead, suppliers should have a chance to review proposed terms, discuss them and negotiate their agreements.
The authority also clarified that it had not directed retail suppliers to enter joint business plans with retailers. Such arrangements must remain voluntary, rather than a requirement that retailers impose on their suppliers.
However, a signed supply agreement does not, by itself, prove that both parties negotiated its terms fairly. CAK warned that a signature alone also does not establish compliance with the law.
Alongside criminal penalties, the regulator may impose an administrative financial penalty of up to 10 per cent of gross annual turnover. That calculation would use the business’s immediately preceding financial year, and other remedies may also apply.
Suppliers urged to keep negotiation records
Meanwhile, CAK said it continues to monitor commercial conduct across the retail sector for possible breaches. It would carry out full investigations and take enforcement action against specific retailers where it establishes violations.
The authority urged suppliers to preserve records of their commercial dealings, including draft contracts and signed agreements. They should also retain joint business plans, correspondence, payment records and documents showing how they negotiated contractual terms.
These records include both the final agreements and the exchanges that preceded them, as outlined in CAK’s notice. Suppliers who believe buyers have imposed unfair commercial conditions should lodge complaints with the authority.
