Significant fine upheld for unfair trading practices in the agricultural and food sector: A landmark case on the Swedish implementation of the UTP Directive

Since 1 November 2021, the Act on the Prohibition of Unfair Trading Practices in the Purchase of Agricultural and Food Products (the “UTP Act”) has applied in Sweden. Initially, the Swedish Competition Authority (the “SCA”) focused on increasing awareness of the regulatory framework. In recent years, however, the SCA has also issued several decisions and opinions to provide guidance. In addition, Swedish case law has now begun to emerge regarding the interpretation and application of the ban on late payments, with a recent example being a ruling on 17 February 2025, by the Administrative Court of Appeal in the case at hand. This is the first ruling by the Administrative Court of Appeal based on the UTP Act.

The regulations concerning unfair trading practices stem from the UTP Directive[1]. The directive aims to address the imbalance of bargaining power between suppliers and buyers in the agricultural and food supply chain, which can lead to unfair trading practices that often deviate from good commercial conduct, and where weaker parties are forced to bear disproportionate economic risks.

The UTP Act implements the UTP Directive in Sweden and aims to provide a protective framework for suppliers, ensuring fair treatment in their commercial transactions. It applies to purchases of agricultural and food products where either buyer or supplier is established in Sweden, and where the buyer has an annual turnover of more than two million euros or is a public authority in the European Union. Importantly, the legislation does not extend to transactions where the buyer is a consumer, focusing instead on the commercial relationships that have the potential to impact broader market dynamics.

The prohibited practices are categorised into those that are always prohibited (blacklisted) and those that are prohibited unless explicitly agreed (greylisted).

Prohibited trading practices:

The following practices on the part of a buyer of agricultural and food products are prohibited according to Section 5 of the UTP Act:

• payment later than 30 days,
• cancellation of an order with less than 30 days’ notice,
• unilateral changes to certain terms of a supply agreement,
• requiring payments from the supplier that are not related to the sale of the products,
• requiring the supplier to pay for the deterioration or loss, or both, of the products, where such deterioration or loss is not caused through the negligence or fault of the supplier,
• non-compliance with the supplier’s request for written confirmation of the terms of a contract,
• commercial retaliation against a supplier who exercises their contractual or legal rights, and
• requiring compensation from the supplier for the cost of customer complaints relating to the sale of the products.

As regards to the date from which the payment term in (a) (and which is subject to scrutiny by the Administrative Court of Appeal in the present judgment) is to be calculated, the UTP Act distinguishes between contracts where the products are to be delivered on a regular basis and when they are not.

In the case of a contract providing for delivery of products on a regular basis, the 30-day payment term starts from the end of an agreed delivery period, or the date on which the amount payable is set, whichever occurs later. In the case of a contract that does not provide for delivery of products on a regular basis, the 30-day payment term starts on the date of delivery or the date on which the amount payable is set, whichever occurs later. If it is the buyer who determines the payable amount, the payment term shall always commence from the end of the delivery period or the date of delivery, as applicable.

Permissible trading practices with prior agreement

The following practices by buyers of agricultural and food products are prohibited, unless clearly agreed in advance between buyer and supplier, as provided for in Section 12 of the UTP Act:

• returning unsold products to the supplier without paying for them,
• returning unsold products without paying for their disposal,
• requiring payment as a condition for the storage, display or listing of the supplier’s products, or for making such products available on the market,
• requiring the supplier to pay for the marketing of the products by the buyer, and
• requiring the supplier to pay labour costs for furnishing premises used for the sale of the supplier’s products.

Background to the case

Setterwalls has previously reported on the matter here.

Following a tip to the SCA in December 2021, the authority initiated a formal investigation into a fruit and vegetable wholesaler’s (the “Company”) trading practices. Specifically, the tip alleged that the Company applied payment periods longer than 30 days, in breach of the UTP Act.

As part of its investigation, the SCA requested information and documents from eight suppliers. In seven of the agreements examined, the SCA discovered that the Company had applied payment terms of 40 days after the enactment of the UTP Act. The SCA’s investigation revealed that the Company made late payments to six of the eight suppliers on at least 612 occasions between 1 November, 2021 and 24 February, 2022. These delays ranged from 4 to 23 days beyond the 30-day period after the invoice date. The total amount of these late payments was approximately SEK 2,837,000. Additionally, the Company used contractual terms specifying payment periods exceeding 30 days with a total of 290 suppliers.

Furthermore, email correspondence between the Company and a number of its suppliers in connection with the UTP Act entering into force showed that the Company had not adjusted its payment periods, despite being informed by the suppliers that the payment periods exceeded those permitted by the UTP Act. The Company justified its position to its suppliers by asserting that existing contract terms apply until renegotiated.

On initiation of investigation by the SCA, the Company manually updated the agreements with its suppliers and revised the payment terms.

In October 2023, following a comprehensive investigation by the SCA, the authority issued its decision in the matter, concluding that the Company had violated the prohibition on late payments, having on several occasions paid suppliers later than the payment times applicable under the UTP Act. On this basis, the SCA imposed a fine of SEK 5,000,000 on the Company. In its decision, the SCA notably provided guidance on how to calculate the fine and this was the first case under the UTP Act in which the SCA imposed a fine.

The Company appealed the decision to the Administrative Court.

Proceedings before the Administrative Court

Initially, it should be noted that the Company admitted that by failing to adjust its payment terms in time, it had breached Section 5 of the UTP Act.

Against this background, the main issue in the case was not whether the Company had breached the UTP Act, it was instead whether a fine was appropriate and whether the fine had been correctly determined.

The Company argued that the fine was excessive, and that the violation was not intentional. It also emphasised that the Swedish legislator had not implemented a transitional provision for older contracts to bring them into line with the new legal framework. It highlighted the fact that the violation occurred shortly after the law came into effect and was corrected within a month, suggesting that a reasoned dismissal or an injunction would have been more appropriate than the sanction imposed. The Company further pointed out that initial enforcement actions were supposed to focus on guidance and self-regulation. The Company argued that its violation was of a minor nature, involving small amounts and short delays in payments, with minimal economic damage to suppliers. It criticised the lack of a proportionality assessment in the decision, deemed the sanction disproportionate and noted that similar violations in other EU Member States resulted in much lower penalties. It also claimed that the lengthy processing period of 22 months violated the Company’s rights under Article 6.1 of the European Convention on Human Rights.

The Administrative Court rejected the Company’s appeal, ruling that the fine imposed by the SCA was justified and well-balanced, and that there were no grounds for reducing it. The fine was deemed sufficiently effective and dissuasive, and also proportionate. The Administrative Court considered that the Company’s arguments did not give rise to any other assessment. Finally, the Administrative Court added that it found that it was clear from the SCA’s decision that the principle of proportionality had been taken into account in all necessary respects.

The Company appealed against the Administrative Court’s judgment at the Administrative Court of Appeal.

Proceedings at the Administrative Court of Appeal

In the Administrative Court of Appeal, the Company essentially presented the same arguments as in the Administrative Court, adding inter alia that if the Administrative Court of Appeal did not set aside the fine for other reasons, it should examine whether Article 1.4 of the UTP Directive has direct effect, possibly after a preliminary ruling from the Court of Justice of the European Union. In particular, the Company argued that the unconditional and precise time limit in the article aimed to give companies sufficient time to adapt existing agreements.

Against this background, the Company contended that there were strong indications that Sweden had not correctly transposed Article 1.4 of the UTP Directive into Swedish law, which was why the UTP Act, together with the principles of proportionality and equal treatment, should be interpreted in accordance with the UTP Directive in order to justify the setting aside of the fine.

For clarity, Article 1.4 of the UTP Directive states that supply agreements concluded before the date of publication of the measures transposing the directive in accordance with the first subparagraph of Article 13.1 shall be made to comply with the directive within 12 months of that date of publication.

In this regard, the SCA argued that Article 1.4 of the UTP Directive specifies the date by which Member States must ensure that the terms of supply contracts are in line with the substantive provisions of the UTP Directive. It is conditional upon Article 9.1 of the UTP Directive, which states that Member States may maintain or introduce stricter rules aimed at combating unfair trading practices than those laid down by the UTP Directive, and therefore has no direct effect. According to the SCA, the Swedish legislator had elected to apply the substantive provisions of the UTP Directive to all supply contracts at the time the UTP Act entered into force, which represents an application of the right conferred on Sweden under Article 9.1 of the UTP Directive.

The Administrative Court of Appeal agreed with the SCA’s assessment ruling and, in view of the fact that Article 1.4 of the UTP Directive is conditional upon Article 9.1 of the same directive, found that the UTP Directive had been correctly transposed into Swedish law.

The Administrative Court of Appeal further agreed with the Administrative Court’s ruling that there were grounds for imposing a fine and that there were no grounds for reducing the fine. On these grounds, the Administrative Court of Appeal dismissed the appeal.

The Company has appealed the judgment to the Supreme Administrative Court. The Supreme Administrative Court is yet to grant leave to appeal.

Concluding remarks

This is the first case decided by the Administrative Court of Appeal concerning the UTP Act. The case therefore sets a precedent and provides important guidance on when fines are appropriate and how they should be calculated. The case is a reminder of the strict obligations imposed by the UTP Act and the seriousness with which late payments and other unfair trading practices are viewed in Sweden.

The Company has appealed to the Supreme Administrative Court, which has yet to grant leave to appeal, leaving open the possibility of further judicial guidance on these issues.

Buyers and suppliers alike should pay close attention to the obligations set out in the UTP Act. Setterwalls has extensive experience working with the agricultural and food sector and is happy to assist with any questions you may have regarding the UTP Act.

[1] Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.