Kenya fines Carrefour franchise Majid al Futtaim $7m

Kenya's competition watchdog has imposed a record $7.1m (£5.6m) fine on the local Carrefour franchise holder, Majid al Futtaim, following allegations of coercing suppliers into accepting reduced prices.

The regulator accused the retail giant of leveraging its dominant negotiating position against two suppliers, resulting in the highest-ever penalty issued by the competition authority.

Majid al Futtaim, operating one of Kenya's largest retail chains, has not yet responded to the fine. In addition to the monetary penalty, the Competition Authority of Kenya (CAK) has mandated the Carrefour franchise holder to reimburse two companies – Woodlands, a honey processor, and Pwani Oil, a manufacturer – with $112,000.

CAK claims that Majid al Futtaim compelled suppliers to accept lower prices through a rebate system, reducing final payments by up to 12%. The regulator further alleged that the supermarket chain unlawfully shifted its expenses onto suppliers, stating that suppliers were obliged to provide complimentary products, pay listing fees for new branches, and assign staff to the supermarket's outlets.

"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.

In response to the findings, CAK has directed the supermarket chain to revise all supplier contracts, removing clauses enabling buyer power abuse.

This development follows a 2021 ruling by Kenya's Competition Tribunal (CT), which found the Carrefour franchise guilty of exploiting suppliers by compelling them to accept reduced prices through high listing fees and rebate rates. 

Despite the ongoing silence from Majid al-Futtaim regarding the recent penalty, the company had previously asserted its commitment to fostering mutually beneficial relationships with suppliers after the 2021 investigation.

Kenya currently hosts 21 Carrefour outlets across various major cities.