The Competition Authority has named the insurance industry as the top abuser of buyer power accounting for 72 percent of all cases investigated by the authority.
This is an increase from the 44 percent rate reported in FY 2020/21 with delayed payment and unilateral change of contract listed as the most common nature of abuse of power.
Retail and manufacturing sectors were also listed as top abusers of buyers’ power accounting for 25 percent and 3 percent each. Other sectors notorious for such cases include telecommunication, construction, distribution, agriculture and architectural services.
Priscillah Njako, CAK manager in charge of the Buyer power department says increased cases in such sectors are mainly caused by failure by large businesses failing to honor agreement terms with their suppliers, mainly SMEs with the belief that the suppliers do not have legal recourse.
“Such actions place thousands of livelihoods at risk since their sources of income come under unbearable and unjustifiable financial strain. Big businesses are therefore reminded of their obligation to abide by the Competition Act and honor their supply agreements,” Njako said during a media briefing held on Tuesday.
Of the buyer power complaints investigated by the Authority in FY2019/20, parties did not have written contracts in 85 percent of the cases, and in the 15 percent of cases where contracts were found to exist, all were standard prepared by buyers for signature by suppliers and were skewed in the buyers’ favor.
The authority further said it has facilitated the release of Sh38 million to 20 motor repairers and 18 motor vehicle assessors who were shortchanged by 18 major insurance companies in FY2020/21 and 2021/22.
Through the enforcement, CAK salvaged over 1,000 jobs and operations of businesses that were owed for services rendered and completed up to five years ago.
“Such actions place thousands of livelihoods at risk since their sources of income come under unbearable and unjustifiable financial strain. Big businesses are therefore reminded of their obligation to abide by the competition Act and honor their supply agreements, “she said.
She, however, urged small businesses in the insurance and retail sectors to always keep written contracts between parties, an issue she said has been a key challenge to effective enforcement with 85 percent of the investigated cases lacking contracts.
“We are encouraging market players and retailers to always have a record, this is a challenge for many businesses who prefer to operate on the basis of the owner, an instance which encourages abuse of power,” she remarked.
The Authority, according to Njako relied on local purchase orders, invoices, and credit notes among other commercial documents to construe the terms of the contract between the parties.
Harrison Ikunda, the Chief Executive Officer of Kenya Motor Repairers Association (KEMRA), noted that payment delays have drained relationships between its members and their landlords, staff, and suppliers, among others.
“We approached the Authority when our members complained about payment delays by different insurance companies. The funds released to us have facilitated the survival and growth of our businesses,” said Mr. Ikunda.
SOURCES: CAPITAL BUSINESS