By decision of 26 October 2023, the Swedish Competition Authority imposed on fruit and vegetable wholesaler Everfresh a fine of SEK 5m for having applied in contracts, for a period of a little under four months, payment periods longer than permitted under the Unfair Trading Practices ("UTP") Directive, which directive has been transposed into national Swedish law. The decision is interesting because it is the first such fine in Scandinavia to be issued since the rules came into force in 2021.
Background
Fruit and vegetable company Everfresh is part of the
international Dole Group. Operating at wholesale level, the group
markets fruit, vegetables and berries from all over the world,
boasting a total annual revenue of approx. SEK 93.4 bn.
In December 2021, Konkurrensverket (the Swedish
Competition Authority (the "SCA")) received information
indicating that Everfresh was prescribing terms of payment that did
not comply with the Swedish Act on unfair trading practices
(UTP-Act), which implemented the UTP Directive and had come into
force in November 2021. The purpose of the UTP rules is to restrict
the use of unfair trading practices in the agricultural and food
sector, including in relation to the balance of power typically
prevailing in the sector. One of the essential provisions in the
Directive prohibits terms of agreement granting a buyer of
perishable agricultural and food products more than 30 days from
delivery to effect payment.
While the Directive prescribes different payment periods for
perishable and non-perishable agricultural and food products,
Sweden has chosen to over-implement, imposing a maximum payment
period of 30 days on all products. In Denmark, on the other hand,
payment terms may be up to 60 days for non-perishable products,
although the rules vary depending on the turnover of the relevant
companies.
Based on the information received, the SCA decided to launch an
investigation into the payment terms in Everfresh's supplier
agreements.
The investigation and decision of the Swedish Competition Authority
The SCA's investigation showed that Everfresh had kept in place, for months after the coming into effect of the UTP Act, contractual terms allowing suppliers more than 30 days to effect payment. Email correspondence between Everfresh and the suppliers revealed that even when suppliers pointed out to Everfresh that the payment periods were longer than allowed under the new Act, Everfresh did not adjust the terms, explaining to its suppliers that the existing contract terms would stay valid until renegotiated. Everfresh told the SCA that the breach was due to a lack of time to amend all agreements in a timely manner before the new rules came into force.
Based on its investigations, the SCA concluded that Everfresh
had violated the UTP Act's prohibition on unreasonably long
payment periods, such violation persisting from the entry into
force of the Act on 1 November 2021 until at least 24 February
2022. The SCA further held that the breach could not be said to be
below the threshold of significance, given that the unlawful terms
concerned the majority of Everfresh's suppliers. As a result,
the unlawful terms of contract translated into hundreds of unlawful
payment periods, affecting payments totalling millions of Swedish
kroner.
The SCA therefore, on 26 October 2023, decided to impose on
Everfresh a fine of SEK 5m, having regard to the nature, duration
and size of the infringement, as well as Everfresh's sizeable
turnover.
The decision can be appealed to the Swedish Administrative Court in
Stockholm. It is as yet unknown if it will be appealed or not.
Our comments
The decision is interesting since it is the first fine for
violation of the UTP Directive issued by the Swedish Competition
Authority – or indeed, to our knowledge, by any Scandinavian
authority. The decision thus marks a milestone in the enforcement
of the rules on unfair trading practices in the agricultural and
food industries and shows that the rules needs to be taken
serious.
The decision emphasises that companies are themselves responsible
for adjusting the terms of their agreements to comply with the
rules, and that any failure to do so comes with a significant risk
of fines and, as always in this type of case, also a certain
reputational risk. Presumably, the authorities have also wanted to
set an example that the rules must be taken seriously and must be
complied with, i.a. because the new rules mean that a significant
number of contracts will need to be changed.
The UTP rules also apply in Denmark (see our newsletter about the introduction of the rules here), but we have yet to see any actual decisions on the rules in Denmark. The supervisory authority in Denmark is the Danish Competition and Consumer Authority, which has an office specialising in the rules.
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