Safaricom faces court battle over alleged strong-arming of M-PESA dealer Goodweek Limited

A contract dispute between Safaricom, Kenya’s largest telecom operator, and longtime dealer Goodweek Inter-Services Limited has escalated into a legal battle at the country’s High Court. Goodweek, which sells M-PESA services, SIM cards, and Safaricom merchandise, is challenging its removal from Safaricom’s dealership network, accusing the telecom giant of abusing its market power to impose unfair contract terms.

The case, now before the Constitutional and Human Rights division of the High Court of Kenya, also names Vodafone Plc, Vodafone Kenya Limited, and Mobitelea Ventures Limited as respondents, suggesting that Goodweek sees the dispute as larger than just Safaricom.

Goodweek had been trading on Safaricom’s dealer portal since 2002 but lost access in April 2024 after failing to renew its contract. Safaricom argues the suspension was automatic and procedural, triggered by the expiration of the dealership agreement.

“The 1st respondent’s (Safaricom) Online Dealer Trading Portal’s automated shut-down response is a safeguard mechanism designed to ensure compliance with regulatory and contractual obligations,” the company stated in court documents.

According to Safaricom, all dealers operate under similar terms, and over 400 other dealers renewed their agreements without issue. The telco maintains that Goodweek had ample notice to renew its contract but chose not to, making its claims of unfair treatment baseless.

Goodweek, however, contends that its removal was anything but routine. The company claims Safaricom used its dominant market position to force dealers into signing contracts with no room for negotiation. Goodweek argues that it was effectively locked out by refusing to accept these terms.

The dealer’s legal strategy includes bringing Vodafone Plc, Vodafone Kenya, and Mobitelea into the case, though Safaricom’s lawyer, Daniel Ndaba, has questioned the relevance of their inclusion.

At the heart of the case is a key legal question: Did Safaricom simply enforce standard contract terms, or did it use its market power to strong-arm smaller players?

Safaricom insists it did not terminate Goodweek’s contract; rather, the agreement expired naturally due to Goodweek’s refusal to sign a new deal. The telco also argues that the dispute should have gone to arbitration, as stipulated in the contract, rather than court.

“The 1st respondent (Safaricom) did not terminate the contract between itself and the petitioner (Goodweek),” Safaricom stated in court documents. “The said contract lapsed by effluxion of time as parties were unable to negotiate and enter into another contract and/or extend the terms as they had previously done.”

On the other hand, Goodweek sees this as a test case for the power dynamics between large telecom firms and their smaller partners. If the High Court rules in its favour, the case could set a precedent for how dominant firms engage with dealers in Kenya’s telecom sector.

With arbitration clauses, market dominance concerns, and contract law all in play, the outcome of this case could have far-reaching implications for the industry.