New statute prohibits unfair terms and conditions and practices in conjunction with the purchase of agricultural and food products

The UTP Act[1] implements an EU directive concerning unfair trading practices, which is often designated as the UTP Directive.[2] UTP is an acronym for unfair trading practices. The directive is intended to protect suppliers of agricultural and food products. The Swedish Act has a broader scope of application and, in certain respects, goes beyond the minimum requirements prescribed by the UTP Directive. Buyers who breach the Act risk becoming the subject of an investigation and may be subject to sanctions. Terms and conditions and practices which are contrary to the UTP Act may, under certain circumstances, also constitute abuse of a buyer’s dominant position contrary to the competition law rules.

General recommendations

• Buyers and suppliers of agricultural and food products should review and ensure that agreements and practices in conjunction with the purchase of agricultural and food products are in accordance with the UTP Act and corresponding regulations in other EU countries.
• The UTP regulations should be part of the buyer’s overall compliance policy. Those persons who are responsible for negotiations and agreements with suppliers of agricultural and food products should receive a separate review of the regulations. Buyers should be aware of the powers of the supervisory authorities and how an unannounced inspection should be managed.
• A supplier who is subjected to unfair trading practices should consider different courses of action before expressing its views to the purchaser or taking other measures. The business relationship, the possibilities to secure evidence, possible results, time and costs are some aspects which may be relevant. Sometimes, there may also be reasons and opportunities to instead (or also) approach a supervisory authority in another EU country.

Scope of application

The UTP Act applies in conjunction with the purchase of agricultural and food products when: (i) the buyer or the supplier is established in Sweden; and (ii) the buyer has an annual turnover which exceeds two million Euro or is an authority which is established in the EU.

The Act is thus applicable for buyers who are established in Sweden but also to buyers who are established abroad when the supplier is established in Sweden. In other words, the Act provides protection for suppliers of agricultural and food products who are established in Sweden, irrespective of the supplier’s annual turnover. As a consequence of the Swedish model, suppliers who are also financially larger and stronger than the buyer thus enjoy protection.

In the event several buyers perform a combined purchase, their annual turnover will be aggregated in conjunction with the assessment of whether the buyer has a turnover corresponding to more than two million Euro. If the buyer is part of a group of companies, it is the group’s turnover which is relevant. In a group with consolidated accounts, this means, for example, that the consolidated accounts, subject to certain amendments, will be used in conjunction with the calculation of whether the threshold value is met.

The UTP Act does not apply in cases where the buyer is a consumer.

The definition of buyer and supplier

Buyer means a natural or legal person, a group of natural or legal persons or a public authority which purchases agricultural or food products. Public authority means a decision-making body in a municipality or a region and such publicly governed organs as defined by the Swedish Public Procurement Act (PPA). The term buyer thus includes, among other things, economic associations/co-operatives, but also companies within the food industry, wholesalers, retailers, hotels, restaurants, bars and cafés, contracting public authorities and others who purchase agricultural and food products for resale or own use.

Supplier means a natural or legal person who sells agricultural and food products. It is only buyer’s use of unfair trading practices which falls within the scope of the Act. Certain actors can act as both buyers and suppliers, such as food industry companies and wholesalers. Examples of actors who essentially act exclusively as buyers for the purposes of the Act are public authorities and retailers.

Black list of prohibited terms and conditions as well as practices

The UTP Act contains a so-called black list of terms and conditions and practices which, subject to a few exceptions, are prohibited in connection with the purchase of agricultural and food products. This pertains to the following terms and conditions and practices:

1. to pay later than 30 days after certain prescribed time periods as stated in the Act;
2. to cancel/annul a reservation/order subject to less than 30 days’ notice, unless otherwise follows from specific regulations;
3. to unilaterally change the terms and conditions in an agreement regarding issues concerning intervals, practice, place, time or volume regarding a delivery, quality requirements, payment or price;
4. to unilaterally change certain other terms and conditions in an agreement which, in order for it not to be prohibited, must be clearly and unequivocally agreed in advance (cf. paragraphs 4 – 6 in the grey list below);
5. to demand payment from the supplier for such items which are not connected with the supplier’s sales;
6. to demand that the supplier shall bear the costs for any deterioration which occurs or loss which arises at the buyer’s premises or after the risk in the property passes to the buyer, when such deterioration or loss is not attributable to the supplier’s negligence or fault;
7. to fail to comply the supplier’s request for a written confirmation of the terms and conditions in an agreement;
8. to take or threaten commercial reprisals against a supplier who exercises their contractual or legal rights; and
9. to demand compensation from the supplier for the cost of managing customer complaints in connection with the sale of the supplier’s agricultural and food products, irrespective of the absence of negligence or fault by the supplier.

The UTP Act’s black list also includes a refence to the Swedish Trade Secrets Act (2018:558) which contains provisions governing illegitimate attacks on trade secrets. This may apply, for instance, in relation to a buyer who illegally acquires, uses or discloses the supplier’s trade secrets.

The grey list with terms and conditions and practices which are prohibited unless agreed in advance

The UTP Act also includes a so-called grey list with terms and conditions and practices which are prohibited unless the buyer and supplier have clearly and unequivocally agreed on the application thereof in advance. This applies to the following terms and conditions and practices:

1. to return unsold agricultural and food products to the supplier without paying for them;
2. to return such products without paying for the removal thereof;
3. to demand payment as a condition that the supplier’s agricultural and food products will be stored, affixed with a sign or listed, or in order to provide such products to the market (cf. paragraph 4 of the black list);
4. to demand that the supplier shall pay for the buyer’s advertising or marketing of agricultural or food products (cf. paragraph 4 of the black list);
5. to demand that the supplier shall pay personnel costs to furnish premises which will be used in conjunction with the sale of the supplier’s agricultural and food products (cf. paragraph 4 of the black list); and
6. to demand that the supplier shall bear the whole, or part of, the costs for discounted agricultural and food products which the buyer sells as a part of a marketing campaign unless the buyer, prior to the commencement of the campaign, states the time period during which the measures shall be undertaken and the anticipated quantity of products which will be ordered (cf. paragraph 4 of the black list).

In the event one practice which is referred to in paragraphs 3 – 6 above is permitted and applied in a certain case, the buyer shall, at the supplier’s request, provide a written calculation concerning payment per unit or from the total payment and/or a written cost estimation and the basis for this calculation.

Supervision and sanctions

The Swedish Competition Authority exercises supervision in respect of the UTP Act. The Swedish Competition Authority co-operates and exchanges information with the European Commission and supervisory authorities in other Member States. The Swedish Competition Authority has established a special unit for supervision. The unit is headed by unit manager Martin Bäckström. A guide for buyers and suppliers is available via the Swedish Competition Authority’s website.

Cases may be initiated at the initiative of the Swedish Competition Authority, or as a result of tips or complaints. Confidentiality applies in accordance with the Swedish Public Access to Information and Secrecy Act (PAISA) for information which can identify the complainant, or the supplier to which the notification relates, unless it is clear that the matter can be dealt with without the complainant or supplier suffering damage.

In order to exercise supervision, the Swedish Competition Authority may issue an order subject to a default fine to a buyer, supplier or third party to provide information, documents or other related items, and may also order a person who is expected to be able to provide information to attend a formal interview at a time and place which the Authority decides.

The Swedish Competition Authority can undertake unannounced inspections at buyers and thus has the right to access areas, premises and other spaces in which the buyer conducts operations, however not residential premises. In order to undertake such an inspection, the Swedish Competition Authority may request assistance from the Swedish Enforcement Agency. The Swedish Competition Authority does not have authority to look for documents. However, whilst at the relevant premises, the Authority can issue an order to provide information, documents or other items.

In conjunction with a breach of the prohibitions, the Swedish Competition Authority may issue an order subject to a default fine to a buyer to cease applying such a prohibited trading practice and/or unauthorised attack on the supplier’s trade secrets according to the Swedish Trade Secrets Act.

The Swedish Competition Authority can decide that a buyer who has applied a prohibited trading practice shall pay a sanction fee of up to one per cent of the buyer’s turnover for the previous financial year. A sanction fee may also be decided upon in the event a buyer has unlawfully attacked the supplier’s trade secrets. In conjunction with the determination of the size of the fee, specific consideration shall be given to the nature of the breach as well as the duration and scope thereof. Consideration shall also be given to whether the person against whom the decision is directed has previously breached the prohibition, and which circumstances exist to pay the fee. A sanction fee shall not be decided upon in minor matters. A decision concerning sanction fees shall be notified not later five years from the date on which the breach ceased.

The decision by the Swedish Competition Authority pursuant to the UTP Act can be appealed to the Administrative Court. Permission to appeal is required in the event of an appeal to the Administrative Court of Appeal.

It is evident from the preparatory works to the UTP Act that the UTP Directive does not pertain to civil law regulation and may thus not be invoked by one individual against another individual. Accordingly, the fact that a term and condition or a practice breaches the UTP Act is insufficient per se for the term and condition to be invalid or constitute the basis for a civil action for damages.

Definition of agricultural and food products

According to the UTP Act, agricultural and food products means all products which are listed in Annex I to the Treaty on the Functioning of the European Union, as well as products which are produced to be used as food through the use of products listed in the Annex.

The list of products stated in the annex incudes, inter alia: livestock, meat, pork and other edible animal parts, fish, crustaceans, milk and dairy products; eggs, honey, plants and floricultural products, fruit, peel from citrus fruits or melon, coffee, teas and spices, grain, malt, starch, gluten, straw and forage plants, animal and vegetable fats and oils, margarine, beet and cane sugar, treacle and other sugar solutions; cacao beans, wine from fresh grapes, other fermented beverages such as cider (apple and pear wines) and mead, vinegar, food waste from the food industry, prepared animal feed, raw tobacco and unprepared or prepared but not yet spun flax.

Do you have any questions, or do you need help?

Please contact us. We advise both buyers and suppliers of agricultural and food products in various industries as well as parts in the value chain.

Johan Karlsson

Advokat/partner

Stockholm

johan.karlsson@vinge.se

+ 46 (0)70 714 3167

Anna Palmérus

Advokat/partner

Gothenburg

anna.palmerus@vinge.se

+ 46 (0)72 179 1513

Pär Remnelid

Advokat/partner

Malmö

per.remnelid@vinge.se

+ 46 (0)73 920 5513

Martin Johansson

Advokat/partner

Brussels

martin.johansson@vinge.se

+ 32 476 208 808

[1] Law (2021:579) regarding prohibition of unfair trading practices in the purchase of agricultural and food products. See also Regulation (2021:583) on prohibition of unfair trading practices in the purchase of agricultural and food products. For the preparatory works, see Government Bill 2020/21:134 and Department Memorandum Ds 2019:19.

[2] Directive (EU 2019/633 of the European Parliament and of the Council of 17 April 2019 regarding unfair trading practices between companies in the agricultural and food supply chain. See also, among others, the Commission’s report on unfair trading practices between companies in the food supply chain COM (2016) 32 final, dated 29 January 2016; notice of control against unfair trading practices between companies in the food supply chain COM (2014) 472 final, dated 17 July 2014; and Green Paper on unfair trading practices in the B2B food and non-food supply chain COM (2013) 37 final, dated 31 January 2013.