LEGAL UPDATE ON THE RETAIL CODE OF PRACTICE
By Tyson Mwendwa
On 11th June, 2021 the Competition Authority of Kenya gazetted the Retail Code of Practice (hereinafter “the Code”) for use by all persons undertaking activities under the Competition Act, 2010. The Code sets out a framework for the fair and ethical dealing within the retail industry. In particular, the Code seeks to ensure that a retailer and supplier shall transact among themselves fairly and lawfully.
The Code puts in place formal arrangements to legally bind a Supplier-Retailer relationship. To this end, the Code has made it clear that Supply Agreements/Joint Business Plans will be mandatory in the Supplier-Retailer relationship. This essentially means that a Supply Agreement or Joint Business Plan should exist before a Supplier and Retailer can enter into a supplier-retailer relationship. Further, the Code provides that the supply agreement should provide for the terms of payment of the goods or services supplied, the payment date, the interest rate payable on late payments as well as the condition for termination of the agreement and dispute resolution. The Code further spells out the modalities of varying the contents of a Supply Agreement which includes provision for notifying either party of the intended variations in the agreement.
The Retail Code of Practice makes provisions to ensure that a retailer pays its supplier in good time. Timelines for payments to suppliers are to comply with the date of payment as per the Supply Agreement or Joint Business Plan. Essentially, the Code seeks to ensure that retailers make timely payments to suppliers failing which interest on late payments shall accrue. In the event of late payments, the retailer will be mandated to notify the supplier early enough and in any case within not more than 7 days; and the late payment should be resolved within the next 7 days of notifying the supplier. In the event of disputed invoices arising, the Code makes it clear that such disputes are to be resolved within 30 days from the date the statement of accounts is issued.
The Code establishes a Retail Trade Committee that seeks to ensure and oversee prompt payments within the retail industry as well as oversee implementation of the Retail Code of Practice. The Committee shall consist of chairpersons and Chief Executive Officers of the Retail Trade Association of Kenya (RETRAK), Kenya Association of Manufacturers (KAM) and Association of Kenya Suppliers (AKS). Lastly, there is established a dispute resolution mechanism known as the Retail Trade Settlement Committee to hear disputes arising out of the Code.
Indeed, the Retail Code of Practice seeks to ensure synergy and seamless growth of suppliers and retailers within the retail industry. The Code seeks to address and mitigate the issue of late payments of suppliers and strengthens the Supplier-Retailer relationship. Disputes arising out of a Supplier-Retailer relationship will further be resolved expeditiously due to establishment of the Retail Trade Settlement Committee under the Code.
Trade PS, Dr. Chris Kiptoo speaking at the signing of the Code lauded the significance of the Code noting that it encourages self-regulation of the sector and harmonizes the Supplier-Retailer relationship. Dr, Kiptoo further noted that the retail sector is a priority sector under Kenya Vision 2030 in supporting Kenya’s economic transformation. In the same vein, the State Department of Trade in collaboration with stakeholders is developing Regulations for the retail sector which will see a fallback mechanism in place in the unlikely event that self-regulation of the Supplier-Retailer relationship fails. Equally, KAM Chairman, Mr. Sachen Gudka speaking at the signing of the Code appreciated the Code noting that it will increase liquidity in the economy and further that the Code will play a role in ensuring prompt payment of suppliers within the sector which will result in cash flows for businesses’ operations. Mr. Sachen equally lauded the Government for adopting the Code as it embraces international best practices in the sector.