The new law came into force on 1 November which prohibits certain terms and conditions and methods regarding purchase of agricultural and food products. The law is based on an EU Unfair Trading Practices (UTP) directive and is referred to as the UTP Directive. In the following we summarise some tips regarding the new law, and provide an overview of its main features.
Summary of tips
- Review existing agreements and agreement templates concerning purchase of agricultural and food products in order to ensure they do not include terms and conditions in violation of the UTP Directive. Terms and conditions in conflict with the so-called black list (see below) must be removed. Terms and conditions on the so-called grey list (see below) must be examined to ensure that they are justified, clear and unambiguous.
- Suppliers who identify agreement terms and conditions covered by the UTP Directive have a good negotiating position. If buyers require terms and conditions in violation of the law, various measures can be taken. The choice of measures may need to be preceded by both commercial and legal considerations.
- Ensure that everyone within your organisation who concludes, negotiates or otherwise deals with agreements on the purchase of agricultural and food products familiarises themselves with the new rules.
- Update relevant risk analyses and policy documents based on the new UTP Directive and ensure that there are procedures in place in the event of an unannounced site visit from the Swedish Competition Authority.
When does the UTP Directive apply?
It applies to the purchase of agricultural and food products when the buyer is established in Sweden and has a total annual turnover in excess of €2m. It also applies to purchases by authorities, regardless of turnover. The decision-making assembly of a municipality or a publicly controlled body within the meaning of the Swedish Public Procurement Act (LOU) are deemed equivalent to an authority. The directive does not apply when the buyer is a consumer.
Examples of buyers covered by the directive are companies in the food industry, restaurants and bars, and hotels and procuring authorities that buy current products. All suppliers of agricultural and food products are also covered by the directive.
The turnover of buyers belonging to a group of companies is to be calculated on the basis of the group’s turnover. In the case of multiple buyers making a joint purchase, the turnover calculation is to be based on the buyers’ combined turnover. The supplier’s turnover, however, is of no significance. The law is thus also applied when the supplier is the financially stronger party.
What are agricultural and food products?
The UTP Directive refers to Appendix 1 to the Treaty on the Functioning of the European Union (TFEU). The appendix lists a large number of products defined as agricultural and food products. They include live animals, meat, pork and other edible animal parts, fish, milk and dairy products, eggs, honey, vegetables, edible fruits and the peel of citrus fruits or melons, coffee and tea, cereals, fats and oils, sugar and wine. The appendix also covers products processed into foodstuffs through use of one of the products listed. Examples of this are sausages, bread, cheese, beer and ice cream.
What contractual terms and conditions are covered?
Terms and conditions that are always prohibited – black list
Buyers of agricultural and food products must not do the following:
- Pay later than 30 days after specific times as laid down by the law.
- Cancel an order with less than 30 days’ notice, except in special circumstances.
- Unilaterally change the terms and conditions of an agreement as regards frequency, method, location, time or volume of a delivery, quality requirements, payment or price.
- Unilaterally change the terms and conditions of an agreement as regards marketing, staff and discounts (see grey list, Items 2-5).
- Require payment by the supplier for things not related to the supplier’s sales.
- Request that the supplier pay the costs for any deterioration or loss arising on the buyer’s premises or following transfer of ownership to the buyer, where such deterioration or loss is not the result of negligence or errors on the part of the supplier.
- Not comply with the supplier’s request to be given written confirmation of the terms and conditions of an agreement.
- Undertake or threaten to undertake commercial reprisals against a supplier who is exercising their contractual or legal rights.
- Require compensation from the supplier for the cost of processing complaints from customers in conjunction with sale of the supplier’s agricultural and food products when there has been no negligence or error on the part of the supplier.
Conditions to be agreed in advance – grey list
Buyers of agricultural and food products must not apply the following methods unless they have been clearly agreed on in advance:
- Return unsold agricultural and food products to the supplier without paying for them or for disposal of the products.
- Require payment as a condition for storage or listing of the supplier’s agricultural and food products or signage using them, or for the provision of such products on the market.
- Require that the supplier pay for the buyer’s marketing of agricultural and food products.
- Require that the supplier pay staff costs for fitting out premises used for the sale of the supplier’s agricultural and food products.
- Charge the supplier for all or part of the cost of discounts on agricultural and food products sold by the buyer when this is part of a marketing campaign and if the buyer does not specify before commencement of the promotion the period during which the measures are to be carried out and the expected quantity of products to be ordered.
What happens in the event of a violation of the law?
The Swedish Competition Authority supervises the law and can take measures in the event of infringements. A new supervisory unit has been set up at the Swedish Competition Authority, and the authority can initiate cases independently and following tip-offs or complaints. The Swedish Competition Authority has been given far-reaching authorisation to obtain information and documents within the parameters of a supervisory case. This includes carrying out unannounced inspections on buyers’ premises.
The Swedish Competition Authority may issue injunctions to cease UTPs. The injunction can be accompanied by a penalty payment. The Swedish Competition Authority may also decide on a penalty charge for buyers who have applied such methods.
Do you want to know more about the new law, or has the article given rise to other issues? Please feel free to contact one of us or your normal contact at Lindahl.