The Competition Authority of Kenya (CAK) will assume powers to punish big companies for delay or non-payments for goods and services supplied by small business if MPs approve proposed legal changes.
The Competition (Amendment) Bill, sponsored by Leader of Majority Aden Duale seeks to change the law to facilitate investigations by the antitrust body “with a view to mitigating abuse of bargaining or buyer power.”
The Bill defines abuse of buyer power as “influence exerted by an undertaking or group of undertakings in the position of purchaser of a product or service to obtain from a supplier more favourable terms or to impose a long- term opportunity cost including harm or withheld benefit, which, if carried out would be significantly disproportionate to any long-term cost to the undertaking or group of undertakings”.
“Any conduct that amounts to abuse of buyer power in a market in Kenya or a substantial part of Kenya is prohibited,” the Bill states.
Mr Duale argued that abuse of buyer power had exposed SMEs to huge debts due to late payments with some forced to close business.
“According to recent reports, collapsed retail chains, including some still in business owe suppliers over Sh40 billion. This has not only slowed down the economy but also forced layoffs,” Mr Duale said.
“In addition, delayed or non-payment has led to increased non-performing loan portfolio in our banking sector,” he added.
The proposed law compels CAK to monitor activities and ensure compliance by imposing reporting and prudential requirements where the authority establishes that a sector is experiencing or is likely to experience incidences of abuse of buyer power.
“The Authority may require industries and sectors, in which instances of abuse of buyer power are likely to occur to develop a binding code of practice,” the Bill reads.