Swedish Dairy vs. Oatly – who is crying over spilled milk?

There has been a row going on in the Swedish Market Court. The Swedish Dairy Association, referred to below as “Swedish Dairy”, is suing Oatly for violations of the Swedish Marketing Practices Act. Oatly manufactures products based on oats, which can be used as substitutes for dairy products – such as milk, cream, yogurt, crème fraiche, etc. Swedish Dairy’s “beef”, pardon the pun, concerns claims about milk, which Swedish Dairy claims are misleading and offensive to the dairy business. The following are examples of the claims in question:

“It is like milk, but made for humans.”

“No soy. No milk. No harm.”

“No cream, soy, rice, almonds or any other ephemeral inventions.”

“… our fraiche provides an upgrade to crème fraiche and, if you wonder what we mean by upgrade, we mean that you get the same great performance, but our fraiche is lighter, cleaner and healthier.”

This article is not about who is right and who is wrong. That would be tantamount to second-guessing the decision of the Market Court. What  we would like to comment on are two lessons learned in this case.

Lesson 1: Preliminary injunctions – not if you mess with the security placed

Swedish Dairy has asked for a preliminary injunction against the first two claims above. Twice. Both times, the Market Court has denied the motion. 

The first time around, the security was in the form of a bank guarantee of SEK 1 million. The way it was worded, it related to the damage Oatly would be able to prove it had suffered as a consequence of the preliminary injunction if Swedish Dairy prevailed. The guarantee designated the writ of summons in the Market Court and the preliminary injunction. So far so good. However, it was also stated that, in order to be valid, the claim for compensation had to be made to the bank in question, Swedbank AB, no later than 90 days after the “judgment or decision of the case” had become final.

The Market Court interpreted the wording of the guarantee to mean that the time limit of 90 days should be counted from the day of the Market Court’s final decision in the matter. The Market Court pointed out that it is unlikely that a decision concerning damages can be obtained within that time frame. Had it been 90 days counting from when a decision awarding damages to Oatly had become final, the time frame would have been acceptable. The Court also found that the amount of SEK 1 million was insufficient to cover the potential damages.

Swedish Dairy is not a quitter, however. So it got back up on its horse … sorry, cow, and filed for a preliminary injunction a second time.

This time, the bank guarantee was in the amount of SEK 5 million – which the Court found to be sufficient as such. The 90 days were to be counted from the day Swedish Dairy’s liability (following the interim injunction) had been finally determined by means of a Court decision or settlement between the parties. So far so good. However, this time there was an added limitation to the guarantee’s validity. It was only valid for three years after the Market Court had rendered its judgment.

The Market Court referred to case law from the Swedish Supreme Court, in which it was held that a corresponding limitation of five years had not been accepted. Also, the Market Court noted that the guarantee was only valid if the case was settled by means of a judgment, not taking into account that the Market Court may settle the case by means of a decision.

Thus, two strikes. It remains to be seen whether Swedish Dairy will try for a third time to get a different result. However, it goes to show that limitations as to a guarantee’s validity in time or amount may cause a court to deny a preliminary injunction. If you are seeking a preliminary injunction, do not serve skimmed milk as compensation, serve whole milk with cream on top or, to put it another way and in the context of a bank guarantee, the validity should be no less than 90 days after liability to pay damages has been determined, and, if you seek to limit the validity generally in time, the rule of thumb should be more than five years (one should probably opt for ten as the general amount of time to be prescribed in Sweden) from the Court’s final judgment or decision in the case. Bear in mind that a bank guarantee can always be recalled/released should the corresponding claim have been settled or the obligation against which it stands be nullified.

Lesson 2: Consider the general public’s and media’s view of your actions

The other rather more amusing thing about this case is how Oatly has chosen to be completely open with information in this case. It has published all writs and decisions to date. (they are available at http://oatly.com/daligstamningikyldisken/ (in Swedish)) and also made the case public by advertising in three major Swedish newspapers. That seems to have worked well for them, too. So far, speculation has been that Oatly may well have the last laugh.

Soon after Swedish Dairy filed its writ of summons, there was a new scientific study published concerning milk. The results probably gave a number of fervent supporters of milk pause for thought, as it indicated that milk is perhaps not as good for you as you might have thought. Most likely, however, this study will be refuted by another study, which in turn will be refuted by another study, and so on. That is just the way things seem to go. Still, Swedish Dairy’s lawsuit comes at a time when milk, which as a product has been held dear by Swedish consumers for years and years, like a lot of other food produce is being questioned on nutritional, health and environmental grounds. Also, you have to admit that even though milk can be enjoyed by humans and may have nutritional benefits for us, it was not really made for us originally, was it? As Orwell put it, “Man is the only creature that consumes without producing. He does not give milk, he does not lay eggs, he is too weak to pull the plough, he cannot run fast enough to catch rabbits. Yet he is lord of all the animals.” (George Orwell – Animal Farm)

So, judging from the media reaction (including social media), it could be that Oatly will be the real winner even if it should lose in court. Thus, a pyrrhic victory, if ever there was one – or will be one – for Swedish Dairy. This case proves that the way a case may play out in the media is worth considering as part of your litigation strategy. Not only do you have to know and use the law, you have to manage or even predict the media angle as well.

What is certain in this case is that the publicity so far has resulted in a rise in sales of Oatly products and that Oatly has received positive attention in the media – attention which, as the saying goes, no realistic advertising budget could buy. At Oatly, no one is crying over spilled milk.