Unilever ordered to review supply agreements, shorten payment periods

The Competition Authority of Kenya (CAK) has ordered consumer goods firm Unilever to review all its supply agreements and shorten the payment periods after the company was found to be exploiting traders who supply it with goods.

The maker of popular household products such as Omo, Lifebuoy, and Vaseline was found by the CAK to have abused its buyer power, which is the ability of a buyer to obtain terms of supply more favorable than a supplier’s ordinary contractual terms.

This is a significant blow to Unilever, as anyone or any firm found culpable for buyer abuse is liable on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding KES 10 million or to both.

Under the terms of the settlement agreement, Unilever must reduce payment terms for all existing small and medium enterprises (SMEs) from 90 to 60 days effective immediately and further to 45 days effective January 1, 2025.

For all new SMEs on-boarded after January 1, Unilever must pay within 30 days.

Unilever will also be expected to increase its procurement from SMEs by incrementally growing procurement localization spend by KES 400 million between January 1, 2023 and December 31, 2025.

Inviting at least two local SME suppliers to all tenders and other procurement procedures will also be required. Additionally, the company is expected to dedicate an annual budget of KES 75 million to undertake supplier development training for its SME suppliers for a period of three years from January 1, 2023, to December 31, 2025.

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