Safaricom has allegedly implemented a new dealership agreement that allows the telco to terminate its contract with distributors without consulting the traders, sparking off a standoff that has seen one of its dealers move to court seeking to overturn the changes.
Goodweek Inter-services Limited moved to High Court under a certificate of urgency accusing Safaricom of switching it off from its portal without notice, after it declined to sign the new framework arrangement.
The dealer claims that Safaricom’s action is unlawful and threatens to collapse its business.
“The 1st respondent’s (Safaricom) actions are malicious and calculated at coercing the petitioner to renew its Dealer Agreement with 1st respondent on unfavourable commercial terms, which Safaricom has unilaterally introduced,” the firm submitted through lawyer Ken Kiplagat.
Part of the contentious clause states that Safaricom may at its sole discretion, upon detection of a material breach, terminate or suspend the dealership with immediate effect.
Whereas the residual income of dealers has been diminishing, the telco bars the traders from dealing with other products and shall not in any way, including through a related company advertise, promote, sell or distribute any competing products or services without the express written authority of Safaricom.
Goodweek Inter-Services claimed in the court documents that Safaricom arbitrarily suspended its access to online dealer trading portal where the trader’s operations are carried out.
Safaricom has opposed the case arguing that the High Court has no jurisdiction to determine the case.
“The application is devoid of merit and solely intended to circumvent the dispute resolution mechanism laid in the agreement,” Safaricom said through senior counsel Ahmednasir Abdullahi.
Justice Bahati Mwamuye directed the parties to file their submissions, on the objection filed by Safaricom, which will be highlighted on September 18.
According to the trader, the firm invested Sh180 million and has employed more than 200 people across the country. The trader has named Safaricom Plc, Vodafone, Vodafone Kenya Limited and Mobitelea Ventures as respondents in the case.
The court heard that the trader’s business is exclusively conducted on the online Safaricom Dealer Portal, which the telco has full control over.
The court was informed that the trader is a major dealer and a distributor of Safaricom products for the last 20 years.
Dr Kiplagat pleaded with the court to direct Safaricom to stop restricting the access to the dealer portal, pending the determination of the case.
Mr Salmon Ogwel, a director of the firm said he was granted exclusive rights to promote and distribute Safaricom’s products in an agreement on August 15, 2019.
He said the distributorship started in 2022 and all was well until April 16, 2024 when the telco terminated the access in an attempt to ‘strong-arm’ the petitioner into signing an unfavourable and altogether unconstitutional contract.
Mr Ogwel said he has set up M-Pesa shops and leased properties in Nairobi, Migori, Homa Bay and Oyugis and also runs Safaricom buses and vans on behalf of the telco.
He said all dealers were invited to a meeting on March 14, 2024 to discuss the new commercials Safaricom intended to introduce. The dealers allegedly rejected the proposals and formulated their counter proposals which were to be discussed.
Mr Ogwel said before the suspension from the portal, the trader was carrying out his business online as normal on the dealer portal when its directors were contacted by Safaricom and directed to sign the contract on ‘as is’ basis despite pending negotiations and without its concerns being addressed.
The court heard that the parties have been in pending negotiations over the new contract since last year.
He said Safaricom had assured the trader that it was reviewing the comments it had proposed and would be reverting to the trader only for the telco to switch off its access to the portal.
The court was informed that parties have been in pending negotiations over the new contract since last year with the trader continuing to trade online in accordance with past conduct by the parties and the established industry custom and usage.
“The switching off was a crude and desperate negotiation tactic by the 1st respondent which is clearly abusing its dominant position in the market to railroad the petitioner,” he said.
“The petitioner has incurred heavy financial losses resulting from operational expenses all the while unable to operate the business due to the illegal and unlawful switching off of the petitioner’s access to the 1st respondent’s said online dealer portal,” the petitioner said.
