Historic fine imposed on Swedish food company for unfair trading practices

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.

Kromann Reumert assists with all types of UTP assessments, including updating contracts to comply with rules and regulations.

Read the full decision (in Swedish).