CAK issues strict warning to retailers over supplier exploitation and buyer power abuses

The Competition Authority of Kenya (CAK) has issued a warning to supermarkets and retail operators across the country, cautioning them against imposing unfair commercial terms on their suppliers.

The market regulator has cited widespread concerns regarding the suspected abuse of buyer power within the retail sector, signaling that heavy administrative and criminal penalties will follow for non-compliant entities.

In a strongly worded advisory notice, the authority flagged a series of exploitative practices that have long strained trade relationships between major retail chains and local manufacturers, farmers, and distributors.

Among the primary concerns highlighted by the regulator are delayed payments, aggressive rebate demands, unexpected promotional contributions, and the arbitrary transfer of operational costs onto unsuspecting suppliers.

The regulator emphasized that such practices undermine fair competition and threaten the financial viability of small and medium-sized enterprises (SMEs) that rely heavily on large retail networks to move their goods.

“The Competition Authority of Kenya is warning retailers against imposing unfair commercial terms on suppliers, citing suspected abuse of buyer power,” the authority noted, highlighting its commitment to restoring fairness in trade.

A core focus of the CAK’s latest directive targets the structuring of Joint Business Plans (JBPs) and supply contracts. The watchdog made it clear that commercial arrangements between retailers and suppliers must be entirely voluntary and arrived at through fair, transparent negotiations.

For years, suppliers have raised grievances about being pressured into signing disadvantageous agreements under the threat of delisting. Under the refreshed enforcement framework, the authority has explicitly warned that forcing suppliers into one-sided arrangements or shifting marketing and distribution costs downstream will no longer be tolerated.

“The Authority warns that joint business plans must be voluntary and fairly negotiated,” the regulator stated.

Furthermore, the CAK noted that it is closely monitoring compliance with the Retail Trade Code of Practice, which governs retailer-supplier interactions. The code requires absolute transparency, prohibiting unilateral changes to payment schedules or the introduction of unapproved retrospective deductions.

Retailers found culpable of violating the provisions of the Competition Act face unprecedented regulatory action. The CAK cautioned that systemic breaches and unfair trade practices could attract severe financial and legal consequences for both corporate entities and individual directors.

According to the regulatory framework, corporate offenders face administrative fines of up to 10% of their annual gross turnover. Additionally, individuals found responsible for orchestrating abusive terms can face criminal prosecution, resulting in criminal fines of up to KES 10 million or imprisonment terms of up to five years.

“Violations could attract fines of up to 10% of annual turnover, criminal fines of KES 10M or imprisonment of up to five years,” the CAK warned, underlining the gravity of the offenses.

The watchdog has indicated that the advisory notice serves as a final prelude to targeted investigations. Rather than relying solely on generalized market monitoring, the authority plans to review specific supply chains and launch enforcement actions against retail entities where concrete evidence of breaches is established.

“CAK says investigations and enforcement action against specific retailers will follow where breaches are established,” the authority confirmed.

Industry stakeholders and supplier associations have largely welcomed the intervention, noting that chronic payment delays by major supermarkets have historically crippled local manufacturers, pushing several firms into insolvency.

By forcing compliance, the regulator hopes to foster a predictable and equitable retail ecosystem that protects vulnerable suppliers while maintaining healthy market competition.

Retailers have subsequently been urged to review their existing supply agreements, clear outstanding vendor arrears, and ensure all commercial practices strictly align with national competition laws to avoid facing the full force of the law.