KENYA: BUYER POWER

Kenya has in some respects become the leading African authority in the regulation of buyer power in December 2016 when it adopted specific legislative provisions on buyer power through its competition law framework.

The CAK has long viewed buyer power as a concern as in its view, unequal bargaining power, particularly in the retail sector has had serious anti-competitive effects in the market, leading to the foreclosure of suppliers, particularly in the retail sector.

The Competition Authority of Kenya (CAK) formally initiated a market inquiry into the branded retail sector, with one of its key objectives being the bargaining power between retails and their suppliers. See the ATT exclusive here

Ostensibly in light of the identified concerns, the CAK assisted in developing a new industry code (which is being proposed in terms of the Kenya Trade Development Bill). In terms of the industry code, retailers are prohibited inter alia from:

  • Making late payments to suppliers;
  • Forcing suppliers to contribute to marketing costs;
  • Forcing suppliers to pay for shrinkage;
  • Unilaterally terminating commercial agreements (without reasonable notice and on good cause);
  • Imposing unfair risk/liability on suppliers.

The purpose of the code of practice is to encourage self-regulation and harmonise retailers’ and suppliers’ ways of engagement and in so doing, also apply international best practice applicable to the Kenyan situation,” says Kenya Trade Principal Secretary Chris Kiptoo

The industry code also establishes a Retail Trade Dispute Settlement Committee, who will act as an industry ombudsman to settle disputes arising out of the code.

The CAK also formed a specific ‘Buyer Power Unit’ within the CAK to oversee market conduct and to enforce compliance with the buyer power provisions of the Kenya Competition Act which attracts a sanction of imprisonment for a period not exceeding 5 years and/or a fine of Sh10million. Previously, the CAK had limited powers to intervene in commercial dealings between retailers and suppliers.  Ruth Mosoti, director of Primerio Kenya says with the code, together with the provisions of the Competition Act, “we are bound to see an increase in enforcement action by the CAK given that the legal framework is in place as well as the fact that the ‘Buyer Power’ department is fully operational”.

Further south, the South African Department of Economic Development has published draft guidelines on buyer power, in terms of the South African Competition Amendment Bill. The Bill and Draft Guidelines, prohibits a dominant firm from imposing unfair prices or trading conditions on “a supplier that is a small and medium business or a firm controlled or owned by historically disadvantaged persons…”.  It is similarly an offence for the dominant firm to refuse to or avoid purchasing from such a supplier.

According to Andreas Stargard, also at Primerio, these latest developments are in line with the broader public interest initiatives which are increasingly prevalent in African competition enforcement. African competition authorities have identified competition enforcement as a key to driving growth in African economies through the protection and inclusion of local and small businesses.

The role of public interest in competition law enforcement has made competition compliance in these jurisdictions particularly complex as quantifying socio-economic effects is a particularly subjective exercise, says John Oxenham.

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