REDUCING CONFLICT

Competitions regulator drafts model contracts for retailers and insurers

The Authority expects that the template contracts, if applied, will minimize conflicts between contracting parties

In Summary

• The Authority through this hopes to cultivate a culture of contracting parties adopting written commercial agreements.

• The template contract detail the minimum requirements that should be contained in contracts entered between a supplier and a buyer.

Competition Authority of Kenya Director General Kariuki Wang'ombe.
Competition Authority of Kenya Director General Kariuki Wang'ombe.
Image: FILE

The Competition Authority has developed model contracts for use by buyers & suppliers in the retail and insurance sectors, so as to reduce conflicts between parties during an agreement.

The authority said it hopes to cultivate a culture of contracting parties adopting written commercial agreements while facilitating compliance with the Competition Act.

The template contract details the minimum requirements between a supplier and a buyer and serves as a reference point for both parties.

CAK model contract for the retail sector relates to the supply of goods and services while other model contracts are for the provision of services in the insurance sector.

The authority expects that the template contracts if applied, will minimise conflicts between contracting parties in the retail and insurance industry, which have invited its intervention.

The model contracts come after CAK in April had to rule on a case between Carrefour supermarkets in an 'abuse of buyer power' case, which arose from a disputed contract.

The retailer lost an appeal at the Competition Tribunal, where it was accused of pushing anti-competitive pricing to boost sales and increase its market share.

The retailer was ordered to amend all its contracts with suppliers within 30 days,  to expunging all “offending provisions” specifically clauses providing for abuse of power.

In June 2020, Jubilee Health Insurance Limited and Nairobi Hospital were entangled in a dispute over multimillion-shilling claims, a standoff that saw the hospital lock out clients insured by the country’s largest medical underwriter.

Nairobi Hospital claimed that Jubilee had not settled a Sh357 million bill that has been outstanding for three years.

The insurer, on the other hand, said the disputed amount was Sh80 million.

The authority, in its annual report for the period to June 2020, said it investigated 32 cases of buyer power abuse, of which 12 were small businesses having made complaints about the insurance industry.

The retail industry, according to CAK, accounted for 28 per cent of all the complaints that the authority received last year while 38 per cent were from the insurance sector.

The authority said many of the suppliers affected when large companies abuse buyer power are small and medium enterprises, some of which have had to shut down after failing to sustain operations owing to cash flow problems.

The insurance industry has been under the spotlight after the Competition Authority of Kenya (CAK) flagged the numerous instances of delays in remitting payments to suppliers.