First administrative fine based on the UTP Directive now imposed in Sweden

On 1 May 2021 the Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain (“UTP”) was implemented in the Member States. The directive is intended to target the imbalances in bargaining power between suppliers and buyers in the agricultural and food supply chain, as they could inter alia potentially lead to unfair trading practices. Setterwalls has reported on this issue here and here. The rules have been in full force in Sweden since 1 November 2021 under the UTP Act (2021:579). On the basis of this legislation, the first administrative fine based on the UTP Directive as implemented in Sweden has now been imposed.

As part of the implementation of the UTP rules, Member States are obliged to appoint a competent authority to oversee supervision and enforcement of the UTP rules. In Sweden, the Swedish Competition Authority (“SCA”) has been appointed as the competent authority. SCA has the power to initiate and conduct investigations on its own initiative, or based on a complaint. SCA may impose prohibitions, including interim measures, and may issue prohibitions under penalty of a fine. SCA may also impose an administrative fine of up to a maximum of one percent of the company’s revenue. The SCA has now issued its first administrative fine based on the UTP Directive as implemented in Sweden. The decision has been appealed to the Administrative Court of Stockholm, and we will monitor the case.

The UTP Act applies to agricultural and food products if the buyer or supplier is established in Sweden and the buyer has an annual turnover equivalent to no less than EUR 2 million. The law does not apply if the buyer is a consumer.

The provisions of the UTP Act include a prohibition on the buyer paying the supplier later than 30 days after either when the supplier provides so, or delivery of the products, if the final payable amount is determined by the buyer.

In the case at issue, the authority had received information indicating that the company concerned used payment time periods that were not consistent with the new rules. SCA found that the company had, over a period of time exceeding three months, applied payment terms exceeding the thirty days that follow from the Swedish implementation of the UTP Directive. The lateness of payments arose both through contractual payment terms exceeding thirty days and late payments per se. The authority’s investigation showed that the company had paid its suppliers later than 30 days after invoice over this three-month period on a hundred occasions. Once suppliers had informed the company that the payment terms exceeded the periods stipulated in the UTP rules, the company had stated that the payment terms remained in force until renegotiated and that it did not have the time to change all agreements in time for implementation of the then new rules.

After the issue had been taken up at SCA, the company manually updated their payment terms. However, in its decision, SCA attached weight to the fact that the company did not update its payment terms upon notice from its suppliers and, of course, not in time for implementation of the then new directive.

In total, the total value of the transactions in breach of the rules was about SEK 2,837,000. With regard to the period of time during which the terms were applied, the amount of the transactions, the number of days of late payments and the fact that the company failed to rectify the breach upon notice from its suppliers, SCA considered the breach to be serious. Taking into account the fact that the company in question had annual revenue of SEK 4,768 million, SCA ordered a rather substantial administrative fine of SEK 5 million. However, it should be noted that this is less than one percent of the company’s revenue.

In the case concerned, the company was a fairly major international company. We cannot conclude from this single case whether larger companies are more likely to be in the spotlight of SCA in this initial phase. However, we do note that the fine was on the high side, and this is also one point of emphasis that the company raised in its appeal. The case also demonstrates the importance of ensuring that the UTP rules are implemented in all aspects of a company’s business, where applicable. Setterwalls is happy to assist in making sure that your company is prepared for the new rules. The case has been appealed, and Setterwalls will monitor the final outcome.