GAZETTE NOTICE NO. 5725

IT IS notified for general information that the Competition Authority of Kenya has issued the Retail Code of Practice set out in the Schedule for use by all persons undertaking activities under the Act. PART I—INTERPRETATIONS Interpretation (1) In this Code unless the context otherwise requires— (a) “Act” means the Competition Act No. 12 of 2010 (b) “Authority” means the Competition Authority of Kenya established under section 7 of Competition Act. (c) “category buyer” means in relation to any individual Supplier, an employee (or employees) within a Retailer’s Buying Team, who manages the Primary Category buyer (or Primary Category buyers) for that supplier (or is otherwise at a higher level than the Primary Category buyer within the management structure of the retailer) (d) “damage” means Goods which become unfit for sale subsequent to them being delivered to retailers (e) “de-list” means to cease to purchase goods for resale from a supplier. (f) “Code Compliance Officer” means the person who, from time to time will intervene or oversee the procurement, payment process and supplies returns. (g) “good complete supply chain practice” means any compensation or inducement in any form (monetary or otherwise) and includes mutually agreed contractual terms. (h) “Head of Purchasing” means, in relation to any individual supplier, the employee or employees within a retailer’s Buying Team who are responsible for overseeing from time to time for the day-to-day buying functions of the retailer in respect of that individual supplier (i) “joint business plan” means an agreement defining agreed terms of a certain agreed time for as far as product volumes, rebates, agreed share of shelf positioning and payment movement of goods by both parties for business growth and development and supply chain efficiency. (j) “purchase department” means those employees of a retailer whose role from time to time includes at least one of the following: direct involvement in buying goods for resale the interpretation and application of the provisions of the Code, the management of any or all of those employees described above provided that it does not include the Code Compliance Officer who shall be nominated from the retailer’s marketing department as non-interested party in the procurement process. (k) “promotion” means any offer for sale through a mutually agreed mechanism, whether or not accompanied by some other benefit to consumers and that is intended to subsist only for a specified period. (l) “reasonable notice” means a period of notice, the reasonableness of which will depend on the circumstances of the individual case, including— (i) the duration of the Supply Agreement/joint business plan to which the notice relates, or the frequency with which orders are placed by the retailer for relevant goods; (ii) the characteristics of the relevant goods including durability, seasonality and external factors affecting their production; (iii) the value of any relevant order relative to the turnover of the Supplier in question; (iv) the overall impact of the information given in the notice on the business of the supplier, to the extent that this is reasonably foreseeable by the retailer; (m) “retailer” means any person carrying on a business in Kenya for actual retail of goods for the retail market as a supermarket, hypermarket or self-selection store. (n) “retail trade dispute settlement committee” means the suppliers and retailers Trade Disputes Settlement Committee as established under section 18 of the code. (o) “shrinkage” means losses that occur after goods are delivered to a retailer’s premises and arise due to theft, damage, internal accounting error, internal loss or any other internal aspect of the retailer’s chain. (p) “supplier” means any person carrying on (or actively seeking to carry on) a business in the direct supply to any retailer of goods for resale in the Kenyan market, and includes any such person established anywhere in the world. (2) Compliance with the Code does not exclude any person from, or restrict the application of the Competition Act, No. 12 of 2010, Laws of Kenya which shall be the primary governing law for purposes of this Code. PART II–FAIR AND ETHICAL DEALING 2. Principle of Fair Dealing (1) A retailer shall at all times deal with its suppliers fairly and lawfully. Fair and lawful dealing will be understood as requiring the Retailer to conduct its trading relationships with suppliers in good faith, without distinction between formal or informal arrangements, without duress and in recognition of the suppliers’ need for certainty as regards the risks and costs of trading, particularly in relation to production, delivery and payment issues. (2) A retailer may require particular actions on the part of a supplier if the relevant Supplier does not agree, whether or not in response to a request or suggestion from the retailer, to undertake an action in response to ordinary commercial pressures. Ordinary commercial pressures will include but are not limited to external exigencies which affect profitability of a retailer. Where those ordinary commercial pressures are partly or wholly attributable to the retailer, they will only be deemed to be ordinary commercial pressures where they do not constitute or involve duress (including economic duress), are objectively justifiable and transparent and result in similar cases being treated alike. The burden of proof will fall on the Supplier to demonstrate that, on the balance of probabilities, an action was not required by the retailer. (3) A supplier shall at all times deal with its retailers fairly and lawfully. Fair and lawful dealing will be understood as requiring the supplier to conduct its trading relationships with retailers in good faith, without distinction between formal or informal arrangements, without duress and in recognition of the retailers’ need for certainty as regards the risks and costs of trading, particularly in relation to stocking levels cash flow and product movement. (4) Any signatory to this code shall not engage in unethical practice during listing, that being the process of entering into or renewing agreements for supply of goods for a given period or in the discharge of any of its functions in the code. (5) Trade confidentialities shared between a supplier and a retailer in the normal line of business, and as articulated in the supplier agreement or Joint Business Plan, shall not be disclosed except upon the lapse of a year from the date they were revealed, or when required under law for purposes for dispute settlement. The only confidential information should be information which is commercially sensitive and/or information whose disclosure would adversely affect the competitive position of a firm. 2560 2560 PART III—VARIATION 3. Variation of Supply Agreements/Joint Business Plans and Terms of supply (1) Recorded Supply Agreements/Joint Business Plans shall be mandatory in the Supplier Retailer relationship under this code and shall include terms to provide for the following— (a) the terms of payment; (b) the payment date; (c) the interest rate payable on late payment; (d) the conditions for termination and variation of the contract with reasonable notice; and (e) the mechanism for the resolution of disputes. (2) Subject to paragraph 3(3), a retailer must not vary any Supply Agreement/Joint Business Plan retrospectively, and must not request or require that a supplier consent to retrospective variations of any Supply Agreement. (3) A retailer may make an adjustment to terms of supply which have retroactive effect where the relevant Supply Agreement sets out clearly and unambiguously— (a) any specific change of circumstances (such circumstances being outside the retailer’s control) that will allow for such adjustments to be made; and (b) detailed rules that will be used as the basis for calculating the adjustment to the terms of supply. (4) If a retailer has the right to vary a Supply Agreement unilaterally (as provided in clause 3(3) above, it must give reasonable notice of any such variation to the supplier. (5) Suppliers shall communicate to the retailer on any anticipated shortages and supply constraints on confirmed and/or agreed orders in accordance to the performance terms as stipulated in the supply agreement and or joint business plan. (6) In the event that a supplier has not communicated possible shortfall to the retailer, any unfulfilled supply case fills, without reasonable justifications as agreed in the Supply Agreement or Joint Business Plan, shall attract reasonable loss claim. The value of the loss claim shall be agreed by both parties. 4. Changes to Supply Chain Procedures (1) A Retailer must not directly or indirectly require a sSupplier to change significantly any aspect of its supply chain procedures during the period of a supply Agreement or Joint Business Plan, unless that retailer gives reasonable notice period agreed by both parties, of such change to that supplier in writing. In event that the retailer does not give reasonable notice, such changes shall attract reasonable loss claim agreed by both parties PART IV—PRICES AND PAYMENTS 5. No Delay in Payments (1) A retailer shall pay a supplier for goods delivered to that retailer’s specification in accordance with the relevant supply Agreement or Joint Business Plan. Any anomalies in the documents should be notified to the supplier within 7 days and action for the same should be resolved within the following 7 days by the supplier. (2) In the case of deliveries of fresh and perishable goods, anomalies in documents should be notified within 24 hours or at the earliest possible opportunity and action for the same should be resolved within the following 7 days by the supplier. (3) A retailer shall pay any undisputed amount in the Statement of Account after the clarifications, in accordance to the terms stipulated in the Supply Agreement or Joint Business Plan as issues of any disputed amounts are being sorted out between the supplier and the retailer. (4) Disputed invoices should be settled within 30 calendar days from date of statement once amicably agreed by both parties. (5) Disputes arising as a result of delayed payments or dispute claims shall be handled by the Retail Trade Dispute Settlement Committee established under section 18 of this code. (6) A retailer shall pay interest for delayed payments. The interest rate payable shall be agreed by the retailer and supplier in their Joint Business Plan or Supplier Agreement. 6. No Oobligation to Contribute to Marketing Costs (1) Unless otherwise provided for in the relevant supply Agreement or Joint Business Plan or mutually agreed between the retailer and the supplier, a retailer must not, directly or indirectly, require a supplier to make any payment towards that setailer’s costs of— (a) category buyer visits to new or prospective suppliers; (b) artwork or packaging design; (c) consumer or market research; (d) the opening or refurbishing of a store or; (e) hospitality for that retailer’s staff; and (f) listing a product. 7. Payments for Shrinkage (1) A supply Agreement must not include provisions under which a supplier makes payments to a retailer as compensation for shrinkage unless otherwise proved that the supplier was negligent. (2) Supplier should assist retailer in training in product knowledge and handling to reduce shrinkage. (3) Any wrong and non-conforming barcoding will be resolved as per the Supply Agreement and or Joint Business Plan. (4) Any wrong and non-conforming barcoding will result in a penalty to the supplier as agreed in the supply and or Joint Business Plan (JBP). 8. Payments for Damage (1) Damages are inevitable as part of retail trade (2) A retailer must not directly or indirectly require a supplier to make any payment to cover any damages of that supplier’s goods incurred at that retailer’s stores unless— (a) such damages are due to the negligence or default of that supplier, and the relevant supply Agreement/JBP sets out expressly and unambiguously what will constitute negligence or default on the part of the supplier; or (b) the basis of such Payment is set out in the Supply Agreement/JBP where the agreement is applicable an agreed percentage shall suffice and anything over and above shall be borne by the retailer. 9. Limited Circumstances for Payments as a Condition of Being a supplier (1) A retailer must not directly or indirectly require a supplier to make any payment as a condition of stocking or listing that supplier’s goods. (2) Notwithstanding the provisions of paragraph (1) above, payment may be required if it— (a) is made in relation to a promotion; or (b) is made in respect of goods which have not been stocked, displayed or listed by that retailer during the preceding 365 days in 25 per cent or more of its stores, and reflects a reasonable estimate by that retailer of the risk run by that retailer in stocking, displaying or listing such new products. 10. Compensation for Forecasting Errors (1) A retailer shall fully compensate a supplier for any cost incurred by that supplier as a result of any written forecasting error in relation to products attributable to that retailer unless— (a) The retailer has prepared those forecasts in good faith and with due care, and following consultation with the supplier; or 11th June, 2021 THE KENYA GAZETTE (b) The supply Agreement/JBP includes an express and unambiguous provision that full compensation is not appropriate. (2) A retailer must ensure that the basis on which it prepares any forecast has been communicated to the supplier. 11. Payments for Better Positioning of Goods (1) A retailer 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 payment is made in relation to a promotion. 12. Promotions (1) 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. For the avoidance of doubt, a retailer must not require or request a supplier to participate in a promotion where this would entail a retrospective variation to the Supply Agreement. (2) Where a retailer wishes to do an internal promotion, the retailer shall give reasonable prior notice to the supplier of the promotion, allowing the supplier the chance to either decline or accept to participate in the promotion if it has not been taken care of in the Supply Agreement/JBP. (3) The payments for promotions shall be as mutually agreed between the suppliers and retailers. 13. Due Care to be Taken when Ordering for Promotions (1) A retailer must take all due care to ensure that when ordering goods from a supplier at a promotional wholesale price, not to over- order. (2) A retailer must ensure that the basis on which the quantity of any order for a promotion is calculated is transparent (3) In event that goods ordered for promotion are not sold out, the supplier will agree with the retailer on how to treat the unsold goods. PART V— OTHER DUTIES 14. Unjustified Payment for Consumer Complaints (1) Subject to paragraph 14(3) below, where any consumer complaint can be resolved in the store by a retailer refunding the retail price or replacing the relevant goods, that retailer must not directly or indirectly require a supplier to make any payment for resolving such a complaint unless— (a) the payment exceeds the retail price of the product charged by that retailer; and (b) that retailer is satisfied on reasonable grounds that the consumer complaint is justifiable and attributable to negligence or default or breach by the supplier. (2) Subject to paragraph 14(3) below, where any consumer complaint cannot be resolved in the store by a retailer refunding the retail price or replacing the relevant goods that retailer must not directly or indirectly require a supplier to make any payment for resolving such a complaint unless the— (a) payment is reasonably related to that retailer’s costs arising from that complaint; (b) retailer has verified that the consumer complaint is justifiable and attributable to negligence or default on the part of that supplier; (c) full report about the complaint (including the basis of the attribution) has been made by that retailer to that supplier; and (d) retailer has provided the supplier with adequate evidence of the fact that the consumer complaint is justifiable and attributable to negligence or default or breach of a supply agreement on the part of the supplier. (3) A retailer may agree with a supplier an average figure for payments for resolving customer complaints as an alternative to accounting for complaints in accordance with paragraphs 14 (1) and 14 (2) above. This average figure must not exceed the expected costs to the retailer of resolving such complaints. 15. Duties in Relation to De-listing (1) A retailer may only de-list a supplier for genuine commercial reasons. For the avoidance of doubt, the exercise by the supplier of its rights under any Supply Agreement (including this Code) or the failure by a retailer to fulfil its obligations under the code or this order will not be a genuine commercial reason to de-list a supplier. (2) Prior to de-listing a supplier or a product, a retailer must— (a) provide reasonable notice to the supplier of the retailer’s decision to de-list. In addition to the elements identified in paragraph 1(1) of this Code, for the purposes of this paragraph ‘reasonable notice’ will include providing the supplier with sufficient time to have the decision to de-list reviewed using the measures set out in paragraphs 15 (2) (b) and 15 (2) (c) below; (b) inform the supplier of its right to have the decision reviewed by senior management as described in paragraph 17 of this Code; and (c) where the supplier and retailer agree to the delisted product— (i) the retailer shall allow the supplier reasonable time to implement the agreement; (ii) allow the supplier to sell the delisted product at a discount; (iii) allow the supplier to move the product to a mutually agreeable retailer’s retail branch; and (iv) supplier shall collect the delisted goods within reasonable time. 16. Senior Category Buyer (1) A retailer’s Senior Management Category buyers will, on receipt of a written request from a supplier, review any decisions made by the retailer in relation to the Code or the specified order. (2) A retailer must ensure that a supplier is made aware, as soon as reasonably practicable, of any change to the identity and/or contact details of the Senior Category buyer for that Supplier. (3) A retailer should at any given time provide information of the contact person to the suppliers. (4) A retailer should at any given time provide information to the suppliers of the relevant contact person. 17. Retail Trade Committee (1) There shall be a Prompt Payment Committee consisting of the Chairpersons and Chief Executive Officers of the Retail Trade Association of Kenya (RETRAK), Kenya Association of Manufacturers (KAM) and Association of Kenya Suppliers (AKS). (2) The Committee shall convene its meetings on a quarterly basis by rotation of the secretariat role by the associations. The primary mandate of the Committee shall be to assess the implementation of the Code of Practice. (3) The Committee shall report any issue that will not be resolved on the implementation of the Code to the Retail Trade Dispute Settlement Committee. 18. Retail Trade Dispute Settlement Committee (1) There shall be a Retail Trade Dispute Settlement Committee which shall act as the dispute resolution body for all disputes arising under this code. (2) The Committee shall be constituted of seven persons as follows— (i) two (2) nominees of the Retail Trade Association of Kenya (RETRAK); (ii) two (2) nominees of the Kenya Association of Manufacturers (KAM); (iii) one (1) nominee of the Association of Kenya Suppliers (AKS); 2562 2562 (iv) one (1) nominee of the Council of Governors; and (v) one (1) nominee by the Ministry of Trade. (3) The quorum for the Committee shall be any five (5) members. (4) The Committee’s decision shall be by consensus. (5) The decision of the Committee shall be binding on all the parties to the dispute before it. (6) The Committee shall be the initial forum for redress for all disputes arising out of this code. It shall however not be a bar to further redress in the judiciary. (7) Appeals from the decisions of the Retail Trade Settlement Committee on matters arising under section 24A of the Act shall lie to the Authority. 19. Retail Supply Agreement (1) A Supply Agreement is enclosed to this Code of Practice used for purposes of guiding retailers and suppliers. Dated the 19th May, 2021. WANG’OMBE KARIUKU, Director-General.