- The Competition Authority of Kenya (CAK) has found Unilever Kenya guilty of exploiting smaller traders by revising payment terms. Investigations into alleged breach of Abuse of Buyer Power provisions of the Competition Act has revealed that the company abused its buyer power.
The Competition Authority of Kenya (CAK) has found Unilever Kenya guilty of exploiting smaller traders by revising payment terms. Investigations into the alleged breach of Abuse of Buyer Power provisions of the Competition Act have revealed that the company abused its buyer power. Buyer power indicates the ability of big firms to obtain advantageous terms of trade from their suppliers. A buyer power law was set up in 2018, to protect firms with weaker bargaining power from unscrupulous large companies. In many instances, retailers’ use of their dominance to delay payments triggered the collapse and auction of firms feeding the stores with goods.
According to reports, Unilever revised the payment periods for its 75 suppliers, mostly local traders, from 60 days to three months. The traders were given one week to accept the changed terms or get dropped from their list of suppliers. However, 23 of its large and foreign suppliers were exempted from the delayed payment order. While the delayed payment boosted the cash flow of Unilever it hurt its suppliers.
The competition watchdog concluded that the revised payment terms amounted to an abuse of buyer power that deserved a penalty of Sh10 million and jail terms of five years for executives of firms in breach.
Unilever sought to settle the allegations raised by the CAK to avoid financial penalties and jail for its executives. The CAK has ordered Unilever to cut the repayment period for a supplier to between 30 and 45 days. The CAK has also directed Unilever to increase its spending on procurement from local suppliers by over Sh400 million over the next three years from next month onwards.
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In a similar case, supermarket chain Carrefour was found to be breaching the law. In April last year CAK ordered Carrefour to revise all of its agreements with some 700 suppliers within a month after it was found that it had been exploiting traders.
