MODULE :Intellectual Property and Consumer protection

GROUP 6 MEMBERS
NAMES REG NUMBER
1. David Agaba D/LLB/21/05/14663
2.Umuhire Grace D/LLB/21/09/14708
3.Ingabire Muhirwa Sonia D/LLB/21/09/15154
4.Agaba David D/LLB/21/05/14663
5.MENGUE ME NGUEMA D/LLB/20/09/13129
MARIE GRACE
6. Katabarwa Ben D/LLB/21/05/14240
7. Munezero Oneal D/LLB/21/01/14008
CASE NO.CT/006/2020 REPUBLIC OF KENYA AT THE
COMPETITITION TRIBUNAL AT NAIROBI.
PARTIES TO THE CASE
Appellant:MAJID AL FUTAIM HYPERMARKETS LIMITED a limited liability company
incorporated and registered under the Kenyan law also the owner and operator of the supermarket brand
“carrefour”
Respondent:
1. Competition Authority of Kenya, a state corporation established under the Competition
Act No 12 of Kenya.
2.Orchards Limited,a Limited liability company primarily involved in the dairy processing
business. It processes and sells pro biotic yoghurts under the brand name “cool fresh”.
Subject matter : Abuse of buyer power.
Summary of the case
The Appellant and the 2nd Respondent were in a Buyer / Supplier relationship, whereby, the 2nd
Respondent supplied the Appellant with pro biotic yoghurt to be sold at the Appellant’s Carrefour stores.
On the 26th April 2019, Orchards limited lodged a complaint with the first respondent against the
appellant alleging the abuse of buyer power.
The 2nd Respondent and the Appellant executed successive buyer/supplier contracts between the years
2015 to 2018, for the supply of probiotic yoghurts to Carrefour Supermarket chains. At the end of
January 2019, whilst they were negotiating the terms of a prospective contract for 2019, the Appellant
unilaterally delisted the 2nd Respondent by blocking the 2nd Respondent’s suppliers’ code without
notice.
As a result,the 2nd Respondent was left with a big stock of packaging materials. These materials had
procured for the exclusive use of the appellant’s use and could not be utilized otherwise.
The authority agreed with Orchard that Carrefour possessed buyer power and was guilty of abusing it
which led to making an appeal before the Tribunal to revoke the decision.

Carrefour sought to have the following orders of the authority, among others, overturned by the
Tribunal.

1. All current supply agreements between carrefour and its suppliers including those that are not party to
the case, be amending to the offending clauses that facilitate abuse of power such as the application of
listing fees, application of rebates, unilateral delisting of suppliers.
2. Carrefour to cease entering into supply agreements containing the terms described in (1) above.
3. Carrefour to take action to remedy the effect of its abuse of buyer power which includes;
i .a refund of rebates deducted from invoices of Orchards amounting to KES 289,482
ii.in respect of the loss arising from the unilateral termination of the supply agreement, pay
Orchards KES 130,856.
iii.seek prior approval from the Authority before rejecting delivery of goods.
iv.seek prior approval from the Authority before requiring suppliers to deploy
merchandise to Carrefour’s stores.

4. A financial penalty of 10% of Carrefour’s gross annual turnover in Kenya from the sale of Orchard’s
probiotic yoghurt amountung to KES 124,768.

It also mentions that the 1st respondent conducted an analysis and investigation and issued a Notice of a
Proposed Decision to the Appellant in August 2019. The notice states that the Appellant had buyer
power and abused it in relation to the 2nd respondent, potentially violating Section 24(2A) of the Act.
Proposed remedies are outlined under the Act. the 1st Respondent acknowledges the Appellant's right to
a fair hearing according to the Fair Administrative Action Act of 2015. The 1st Respondent invites the
Appellant to submit a written representation and indicate if they require an opportunity to make oral
representations within 14 days. The Appellant, represented by Messrs Anjarwalla & Khanna, responds to
the 1st Respondent's notice by raising several issues. They argue that there is no proof that the Appellant
possesses buyer power or that they have abused it. They also claim that the 1st Respondent did not
follow due process, relied on non-legally binding guidelines and practices from other jurisdictions, and
that the complaint against them is a form of blackmail. The Appellant requests an investigation into the
matter and asks for all the evidence and material relied upon by the 1st Respondent. They also state that
the 1st Respondent made unfounded and incorrect assumptions in reaching its decision
In a letter dated September 11, 2019, the 1st Respondent responded to the Appellant's concerns. The 1st
Respondent stated that they had found that the Appellant had buyer power and had abused that power.
They also mentioned that foreign direct investment should not be an excuse to break the law. The 1st
Respondent invited the Appellant to provide written or oral presentations to further explain their case.
They also clarified that the evidence used in their preliminary report was already in the Appellant's
possession. An economic analysis was conducted based on buyer power guidelines available on the 1st
Respondent's website. The guidelines were not a draft and were in line with international best practice.
The assumption of an implied contract was made based on goods ordered and received by the Appellant.
The 1st Respondent invited the Appellant to make a formal complaint about alleged blackmail and
suggested resolving the issues through a hearing conference. The Appellant was given until September
20th,2019.

On September 16th, 2019, the Appellant requested a 14-day extension to respond to the 1st Respondent's
letter. This extension was granted on September 18th, 2019. On September 27th, 2019, a meeting was
held between the Appellant, their advocates, and the 1st Respondent. The purpose of the meeting was to
discuss the way forward in the matter. The 1st Respondent clarified that the laid down process must be
adhered to once a Notice of Proposed Decision was issued. After the meeting, the 1st Respondent sent a
letter to the Appellant's advocate clarifying that the Notice of Proposed Decision communicated the
preliminary findings of the investigation and the Appellant still had the opportunity to defend
themselves through oral and written submissions.

On October 1st, 2019, the 1st Respondent forwarded the minutes of the meeting and the documentary
evidence used to arrive at the Notice of proposed decision..
In a letter dated 4th October 2019, the Appellant raised several concerns in response to the 1st
Respondent's letter dated 1st October 2019. These concerns included:

a. The documents shared by the 1st Respondent were miscellaneous and unindexed, with no connection
to the preliminary findings.
b. There was no indication that the statements relied upon by the 1st Respondent complied with the
Evidence Act.
c. The Authority reached a preliminary finding without meeting or engaging the Appellant.
d. The Appellant was given only three days to review the evidence and respond to the 1st Respondent.
e. There was still no evidence provided to prove the allegations against the Appellant.
f. The Appellant requested evidence of best practices from other jurisdictions that the 1st Respondent
relied on.
g. The Appellant requested the economic analysis conducted by the 1st Respondent.
h. The investigations did not comply with the provisions
The appellant claims that they did not receive a fair hearing as they were not involved in the
investigations conducted by the first respondent. They also argue that there were no rules for procedure
regarding the hearing conference. They state that they will not participate further until these concerns are
addressed. In response, the first respondent stated that the documents they relied upon were already in
the appellant's possession and that the appellant should be able to explain them. The first respondent
indexed the documents, including communication between the appellant and the first respondent,
records of payments to the second respondent, invoices from the second respondent, and payment
advices from the appellant to the second respondent.
The Appellant and the 2nd Respondent have been involved in a dispute over supply agreements, with the
1st Respondent determining that there is a commercial relationship and the Appellant has buyer power.
The 1st Respondent has relied on original documents and has followed due process, ensuring the
Appellant is involved as required by the Act. The economic analysis is based on various factors,
including Section 24A (2B) of the Act, buyer power guidelines, Competition Authority of Kenya revised
guidelines, and supply contracts. The 1st Respondent has granted the Appellant until 30th October 2019
to confirm whether the written communication received is final submissions or if they intend to
participate in a hearing conference. The Appellant's Advocates requested 21 days to respond to the issues
raised by the 1st Respondent.

APPELLANT’S CASE
The Appellant denies having buyer power and claims that the 1st Respondent relied on non-factual,
erroneous evidence to support its findings. The Appellant also denies the practices identified as abuse of
buyer power, arguing that deployment of supplier staff to supermarkets is an ordinary industry practice
and the refusal to accept unacceptable merchandise is within the rights of law.

The 1st Respondent lacked the legal mandate to institute and carry out investigations on alleged abuse of
buyer power under the Act, which was introduced in to the Act by the Competition (Amendment) Act of
2019. The investigations were commenced in May 2019. The Appellant argues that it did not get a fair
hearing before the 1st Respondent, failing to adhere to the rules of natural justice and failing to follow
the laid-out procedure under sections 31 to 36 of the Act.

The Appellant also states that the 1st Respondent required the Appellant to respond within strict and
unreasonable timelines throughout the investigation, while the 1st Respondent did promptly respond to
the Appellant's queries. The Appellant is aggrieved that the 1st Respondent relied on undisclosed and
unspecified international best practices, which do not have the force of law in Kenya pursuant to Section
3 of the Judicature Act.
The Appellant contests the validity and legality of the Draft Buyer Power Guidelines, arguing that they
were not legally binding as they did not comply with the provisions of the Statutory Instruments Act.
They also argue that the 1st Respondent erred in law and in fact in making a finding that the Appellant
had unilaterally terminated the Supply agreement for the year 2019, taking away the rights of the parties
to freely contract.

RESPONDENT’S ARGUMENTS
The 1st Respondent counters the Appellant's claims as follows:

1. Legal Authority: The 1st Respondent asserts its power under the Competition Amendment Act of
2016, citing specific sections enabling investigations into buyer power abuse.

2. Buyer Power Finding: Defends its conclusion that the Appellant had buyer power over the 2nd
Respondent, citing a dependency relationship, niche products, and evidence of contractual abuse.

3. Procedural Compliance: States adherence to legal procedures, including negotiation invitations,

informing the Appellant of rights, and providing ample opportunities for defense presentation.

4. Buyer Power Guidelines: Argues that the Buyer Power Guidelines, initially labeled as 'Draft,' are
valid and align with the Act, serving as non-binding tools for transparency.

5. International Best Practices: Counters the Appellant's objection, asserting that aligning with
international best practices is an Act objective, and the Appellant had the chance to suggest alternatives.

6. Document Analysis Period: Denies analyzing pre-buyer power provision documents, focusing the
investigation on the relevant years of 2017, 2018, and 2019.

7. Contract Amendments: Defends its right to order amendments to contracts with other suppliers,
emphasizing that freedom and privity of contract do not permit agreements contrary to the law.
8. Assessment of Damages: Insists on strict adherence to section 36(d) of the Act in issuing orders on
the assessment of damages.

In essence, the 1st Respondent maintains its legal authority, procedural correctness, and the validity of
its findings and orders in response to the Appellant's challenges.

Legal issues to be analyzed

1. Whether the 1st Respondent relied on documents and statements of accounts in relation to a period
prior to the enactment of the buyer power provisions of the Act (Ground no 5 of the Appeal).
2.Whether the 1st Respondent erred in fact and in law by relying on the Buyer Power Guidelines
3. Whether the 1st Respondent erred in fact and in law by relying on International Best Practices from
other jurisdictions
4.Whether the Appellant had buyer power and if yes if they abuse that power
Buyer power is defined as the influence exerted by an undertaking or group of undertakings in the
position of purchaser of a product or service to (i) obtain from a supplier more favourable terms; or (ii)
impose a long term opportunity cost including harm or withheld benefit which, if carried out, would be
significantly disproportionate to any resulting long term cost to the undertaking or group of
undertakings.
5.Whether the 1st Respondent’s Orders were unreasonable and absurd with respect of its decisions.
6.
7.. Who bears the cost of this Appeal
8.whether the 1st Respondent had had power to investigate the conduct of the appellant for abuse for any
period prior to 31st December 2019.

LEGAL ANALYSIS

1.. WHETHER THE 1ST RESPONDENT ERRED INFACT AND IN LAW BY RELYING ON
INTERNATIONAL BEST
PRACTICES FROM OTHER JURISDICTIONS
The 1st Respondent in its decision dated 4th February 2020, states that its analysis and investigation
pursuant Section 34, was guided by:
a. Section 24(2B) and (2D) of the Act
b. The Authority’s Buyer Power Guidelines, and
. The Appellant argues that the 1st Respondent erred by relying on Best International practice in making
its decision.

The 1st Respondent asserts, that one of the objects of the Act, is to bring national competition law,
policy, and practice in line with international best practice.

Further, International Best Practice can only be discerned from comparable jurisdictions. By studying
how jurisdictions with similar provisions of law, have applied the same in execution of their mandate
under their respective regimes.

Although international best practice is not a source of law in Kenya, we find that Kenyan Courts and
administrative bodies
consider decisions and practice from other jurisdictions in their decision making. Decisions from other
jurisdictions do not have the force of law but are persuasive especially where local decisions and
practice is not available.
This Tribunal notes that the Appellant is also relying on foreign decisions and practice. More
specifically, we refer to items No 8 to 10 of the Appellant’s list of authorities. The Appellant also refers
to the Japanese Superior Bargaining Position Guidelines and The Australian Competition and
Consumer Commission Guidelines on Misuse of Market Power, amongst others. The
Appellant is blowing hot and cold. Relying on foreign decisions, and practice from other jurisdictions
when it suits them, and decrying application of the same by the 1st Respondent.
160. The Appellant is approbating and re probating. In Evans -Vs- Bartlam (1937) 2 All Er 649 at page
652 where Lord Russel of Killowen said:
“The doctrine of approbation and re probation requires for its foundation inconsistency of conduct, as
where a man, having accepted
a benefit given him by a judgment cannot allege the invalidity of the judgment which conferred the
benefit.”

Similarly, this Tribunal finds that it cannot entertain this ground of appeal by the Appellant as one
cannot in the same breath argue for something when it suits them, and against it when is does not

2.. WHETHER THE APPELLANT HAD BUYER POWER AND IF SO WHETHER IT ABUSED
THAT POWER.
Buyer power is defined as the influence exerted by an undertaking or group of undertakings in the
position of purchaser of a product or service to (i) obtain from a supplier more favourable terms; or (ii)
impose a long term opportunity cost including harm or withheld benefit which, if carried out, would be
significantly disproportionate to any resulting long term cost to the undertaking or group of
undertakings.

3.RELATION TO A PERIOD PRIOR TO THE ENACTMENT OF THE BUYER POWER

PROVISIONS OF THE ACT
(GROUND NO 5 OF THE APPEAL)
The Appellant alleges that the 1st Respondent in its investigations relied on documents relating to a
period prior to the enactment of the buyer power provisions in the Act.
However, the Appellant did not expound on this argument substantively.

Nevertheless, we have perused the Decision of the 1st Respondent and the documents supplied by the
parties. The Buyer power provisions were introduced in the Act by Competition Amendment Act no 49
of 2016. The commencement date was 13th January 2017.
The 1st Respondent in its final decision dated 4th February 2020, lists the evidentiary documents that
were furnished to it by the Appellant vide letter dated 26th June 2019.

The said evidentiary documents furnished include Supply Agreements between the Appellant and the
2nd Respondent for the years 2016 to 2018 and Statements of Account for the 2nd Respondent for the
period 2015 to March 2019.
In the calculation of rebates to be refunded to the 2nd Respondent the 1st Respondent cited documents
dated between 13th May 2016 and 31st March 2019.
In the determination of the loss arising from cost of procurement materials for exclusive use for
the Appellant, the 1st Respondent cited on documents relating to November 2016 and July 2018.
In determination of the penalty the 1st Respondent relied on the Appellant’s turnover, with respect to
the sale of the 2nd Respondent’s merchandise, for the year 2018.
With respect to the calculation of rebates, we note that the 1st Respondent considered documents
predating 13th January 2017.
We have also looked at exhibit “WK16 a” annexed to the Replying Affidavit of one Wangómbe Kariuki
and note that the same includes documents dated 2016. However, in its orders the 1st Respondent only
ordered a refund of rebates for the years 2017,2018 and 2019.
4..WHETHER THE 1ST RESPONDENT HAD POWER TO INVESTIGATE THE CONDUCT OF
THE APPELLANT FOR ABUSE OF BUYER POWER FOR ANY PERIOD PRIOR TO 31ST
DECEMBER 2019.
The tribubal does not agree with the Appellant that the 1st Respondent had no legal mandate to conduct
investigations relating to the Appellant’s abuse of buyer power in relation to the 2nd Respondent for any
period before 31st December 2019.
It finds that, as of April 2019, Sections 24 (2) (A), (2) (B) (2D) and (3), as read together with Section 3, 9
(1) (a) and (b) of the Act, and Section 31 of the Act and Section 48 of the of the Interpretation and
General Provisions Act, the 1st Respondent had power to investigate complaints into abuse of buyer
power.
So, what was the intention of Parliament in introducing Section 31 (1) (c) of the Act in 2019" The
National Assembly Hansard of Tuesday, 19th November 2019, which is a record of the proceedings of
Parliament on the day the bill was discussed, at paragraph 2 of page 49 thereof states :
“...Currently, Section 31 of the Act does not expressly include buyer power. It is open to interpretation in
a manner that precludes the Authority from enforcing its mandate on abuse of buyer power. Such an
interpretation would negate the very purpose of the provisions of buyer power, hence the need for an
express provision).
Our understanding of the proceedings, in Parliament, on that day, is that section 31 (1) (c) was
introduced, not to confer investigative power on the 1st Respondent for the first time, but to affirm that it
existed and to preclude an interpretation that would assume otherwise.
We, therefore, find that the 1st Respondent’s had power to conduct investigations into abuse of buyer
power in April 2019.
Who bears the costs.

JUDGMENT
In request for a declaration that the 1st Respondent did not have any legal power of authority to conduct
an investigation into abuse of buyer power for any period prior to 31 December 2019.
The court finds that;i. The 1st Respondent’s process of conducting investigations violated the provisions
of Section 31 of the Competition Act, 2010.
ii.The 1st Respondent’s investigation into the complaints raised by the 2nd Respondent was unlawful,
null and void for failing to follow due process and adhere to the constitutional edicts of fair
administrative action and a fair hearing as guaranteed under Articles 47 and 50 (1) of the Constitution of
Kenya, 2010.
iii. The 1st Respondent’s decision contained in its letter of 4 February 2020 be set aside.
iv. The Respondents to bear the costs of this appeal
The court also finds that prayers number I, II and III are hereby dismissed.
2. Prayer number IV partially succeeds, and the 1st Respondent’s decision dated 4th February 2020 is
hereby modified as follows:
i. The Appellant shall amend all current supply agreements relating to its Carrefour Hypermarkets in
Kenya within the next thirty (30) days hereof with a view to expunging all offending provisions,
specifically clauses that provide for, lead to or otherwise facilitate abuse of buyer power, including but
not limited to the:
a. application of listing fees,
b. application of rebates,
c. transfer of commercial risk to the supplier, and
d. unilateral delisting of suppliers.
ii. The requirement for the 1st Respondent’s prior approval before rejecting delivery of goods by the
Appellant from suppliers is hereby set aside.
iii. The requirement for the 1st Respondent’s prior approval before deployment of merchandisers to the
Appellant’s stores is hereby set aside.
iv. The Order to pay to the 2nd Respondent the sum of Kenya Shillings One Hundred and Thirty
Thousand, Eight Hundred and FiftySix (K.Shs. 130,856) for loss arising from unilateral termination of
the supply agreement for the year 2019, being cost of procurement of material for exclusive use for the
Appellant’s orders is hereby set aside.
3. The Order for the refund of rebates deducted from invoices of the 2nd Respondent for the years 2017,
2018 and 2019 amounting to Kenya Shillings Two Hundred and Eighty-Nine Thousand, Four Hundred
and Eighty-Two (K.Shs. 289,482), as set out in the Appellant’s written statements of accounts for those
years is hereby upheld and the same is to be paid within the next 30 days
hereof.
4. The Order for the payment of financial penalty of ten percent (10%) of the Appellant’s gross annual
turnover in Kenya from its Carrefour Franchise from the sale of Cool Fresh Yoghurts for the year 2018
in the sum of Kenya Shillings One Hundred and Twenty-Four Thousand, Seven Hundred and Sixty-
Eight (K.Shs. 124,768) is upheld the same to be paid within the next 30 days hereof.
5. Each Party shall bear its own costs.