Safaricom is facing a class action suit by its agents after one of its dealers asked the High Court to allow other merchants to join a case in which it wants compensation for millions of shillings invested in a “lopsided contract” with the telecommunications company.
Goodweek Inter-Services Ltd, a dealer that operated three Safaricom shops in Nairobi, Migori and Homa Bay counties, says the telco introduced unrealistic targets to block merchants from earning commissions from newly registered customers.
In its application, Goodweek wants the court to allow other dealers to join the case and make claims against Safaricom or submit arguments as interested parties.
The court papers indicate that there are more than 400 dealers enlisted by Safaricom across the country, even as Goodweek says the telco intends to reduce the number to 38.
Goodweek says it has invested more than Sh180 million in ensuring its three shops meet Safaricom’s standards, and to stock it with the required merchandise.
The dealer filed the suit at the Constitutional and Human Rights division of the High Court. It has sued Safaricom, Vodafone Group Plc, Vodafone Kenya Ltd and Mobitelea – a company that controversially acquired a 10 per cent stake in Safaricom before selling back to Vodafone Group Plc in 2009.
Goodweek says Safaricom boxed the most influential dealers into endorsing the agreements and convincing others to get on board.
In response, Safaricom says Goodweek sued the Vodafone firms and Mobitelea to justify dodging the commercial court, which the telco says would have referred the dispute to arbitration in line with the dealership agreement.
According to Safaricom, the dispute is business in nature and revolves around the law of contract, hence should have been filed at the Commercial and Tax Division of the High Court.
“By presenting this evidently commercial dispute as a constitutional petition, the petitioner has deprived the first respondent (Safaricom Plc) of the executed terms of a contract in respect of settling disputes and has in effect dragged third parties who are not signatories to the dealer agreement into the dispute,” the court papers say.
Goodweek has been Safaricom’s dealer since 2002. The arrangement collapsed in December 2023 when Goodweek failed to sign the new deal on account of its alleged lopsided nature.
The dealer claims it was not offered a renewal because it refused to sign the agreement that gave Safaricom authority to make business decisions without consulting Goodweek.
The firm adds that there was a clause capping financial penalties against Safaricom for breach of contract at Sh100,000, which it argues is a small figure.
Goodweek claims Safaricom attempted to force dealers to invest in marketing and promotion on behalf of the telco.
Safaricom, however, says there was no such clause, and that Goodweek chose not to sign the contract it was offered, and which would have allowed it to continue running shops in the three counties.
“The first respondent has never made any demand to its dealers, including the petitioner, to make any investment on its behalf and for its benefit,” Safaricom’s senior legal counsel Daniel Ndaba says in court papers.
Goodweek in its suit papers claims other dealers have in the past raised concerns about changes to their contracts with Safaricom in meetings dubbed “Panafric One” and “Panafric Two”.
In its court papers, Goodweek claims Safaricom set unrealistic targets for dealers in a scheme aimed at locking them out of commissions that are earned from continued and expanded use of new lines by their registered users.
Goodweek was expected to register 20,700 new Safaricom subscribers in 2023 but managed to 17,322.
“From the data, it is evident that Safaricom was deliberately setting unrealistic targets, way above the petitioner’s reasonable and true ability to reach, with a collusive and exploitative intent designed to justify a pre-designed and premeditated failure algorithm set to deny the petitioner earned goodwill,” the company says in the court papers.
The firm adds that upon recruitment by Safaricom, the telco sold a “shared prosperity” business model, in which each party would enjoy continued revenue from subscribers.
However, Safaricom maintains that its relationship with dealers has always been strictly under the terms and conditions of the dealer agreement.
Goodweek faults Safaricom for pegging some commissions on scratch card sales at a time many people prefer to buy airtime through M-Pesa, and for raising new customer registration targets, when mobile phone penetration is at 130 per cent as per Communication Authority of Kenya statistics.
