Supermarkets will no longer be allowed to make suppliers pay in order for their goods to be displayed prominently on the shelves.
New rules governing trade practices between retailers and suppliers now give the latter a right to place their goods in prime locations in supermarkets unless they are carrying out a promotion
The rules — signed Thursday by the Ministry of Industry and Trade and retail business players — were drafted in the aftermath of the near-collapse of Nakumatt and Uchumi supermarkets.
The move comes in the wake of mounting retail sector debts that saw suppliers and other creditors lose millions of shillings to troubled retail chains.
Under the rules, set to be operational next month, suppliers will also not pay supermarket owners to get more shelf space in their premises.
“Retailers must not directly or indirectly require a supplier to make any payment in order to secure better positioning or an increase in the allocation of shelf space for any goods of that supplier within a store unless such payments is made in relation to a promotion,” says the retail code of practice and regulation also signed by the Association of Kenya Suppliers, the Retail Trade Association of Kenya and the Kenya Association of Manufacturers
“Where a retailer directly or indirectly requires any payment from a supplier in support of a promotion of one of that supplier’s products, a retailer must only hold that promotion after reasonable notice has been given to that supplier in writing.”
The new rules further stipulate that payments for promotion must be mutually agreed between parties.
Firms under the Retail Trade Association of Kenya that inked the agreement include Naivas, Tuskys, Nakumatt, Carrefour and Uchumi supermarkets.
The Competition Authority of Kenya (CAK) has also established a Buyer Power Department to address mounting concerns over the negative influence that businesses have had over suppliers in the past.
The regulator stipulates that supermarket owners and other retail outlets that do not pay suppliers on time will face punitive fines of up to Sh10 million, as well as serve a jail term not exceeding five years or both.