‘Buyer-power abuse’ harms  SMEs – Study

Wednesday, June 22nd, 2022 04:29 | By

Competition Authority of Kenya (CAK) has fingered some players in the insurance sector for abuse of buyer-power.

Buyer-power abuse happens when buyers influence price or quantity of products and entails powerful buyers switching costs, bargaining on volume, or even finding substitute products in moves that frustrate growth of others.

Conclusion of investigations by CAK into abuse of buyer-power targeting motor vehicle repairers and motor vehicle assessors helped salvage livelihoods during the Covid-19 pandemic period.

“Large business undertakings sometimes fail to honour agreement terms with their suppliers, who are often SMEs, under the misguided belief that the suppliers do not have legal recourse,” said Priscilla Njako, Manager, buyer power department.

Addressing a media training yesterday, the regulator said investigations targeted 18 major insurance firms that unjustifiably reneged on honouring payments to small and micro-enterprises (SMEs).

“This intervention has salvaged the livelihoods of approximately 1,000 Kenyans and enabled this sub-sector to remain competitive during the Covid-19 pandemic period,” Njako said.

Overdue invoices forced SMEs to take up expensive loans and increase the cost of services making it impossible to pay salaries. The authority’s intervention occasioned the release of over Sh38 million to these businesses, ensuring their sustainability and job opportunities.

That was in addition to Sh5 million in overdue payments to SMEs in the telecommunications and agro-processing sectors since July last year.

CAK is now advising businesses to enhance their record-keeping practices in order to facilitate easy retrieval of evidence.

Harrison Ikunda, the Chief Executive Officer of Kenya Motor Repairers Association (KMRA) said payment delays have drained relationships between its members and their landlords, staff and suppliers, among others.

“We approached the authority when our members complained about payment delays by different insurance companies. The funds released to us has facilitated the survival and growth of our businesses,” Ikunda said.

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