Last year 2023, the Swedish Competition Authority (”the SCA”) conducted a major investigation into unfair trading practices, which resulted in several cases. Here is a summary of the most interesting case handled by the SCA so far.
Overview on unfair trading practices (in sweden)
The Swedish Act (2021:579) on the Prohibition of Unfair Trading Practices in the Purchase of Agricultural and Food Products (“LOH”) entered into force on 1 November 2021. The Act is based on UTP Directive.[1] The Directive sets a minimum level of protection against certain trading practices and contractual arrangements.
The Directive is based on the premise that imbalances in bargaining power between suppliers and buyers of agricultural and food products are common – which is the reason for legislative protection against the stronger trading partner.
Two provisions are central. The first concerns the so-called “black list”, which sets forth trading practices that are prohibited in all circumstances. The second concerns the so-called grey list, which contains trading practices that are prohibited unless clearly agreed in advance by the parties.
As supervisory authority for LOH, the SCA initiated a major investigation into unfair trading practices. The inquiry resulted in several cases, including the one below – which is of particular interest.
Prohibition of unilateral amendments
Following a complaint, the SCA investigated whether a buyer of egg had unilaterally amended the terms of price and payment with its suppliers, who in this case were farmers. More specifically, the buyer had introduced what was known as a “market-adjusted price”, which mean that prices were adjusted weekly. This implied that the buyer, based on its own sales, unilaterally adjusted the price paid to the supplier. The buyer bought directly from farmers, repacked the eggs and sold to both the retail and food industries, where the eggs were used in food processing.
The SCA investigated in detail how the supplier’s pricing model with the so-called market-adjusted price related to the prohibition of unilateral changes in LOH.
Assessment by the sca – no violation
In particular, the SCA analysed if the buyer had unilaterally enforced a change to the contractual terms. Under section 5(1)(3) of LOH, a buyer is prohibited from unilaterally modifying the terms of the contract regarding the interval, method, place, time or volume of delivery, quality requirements, payment or price. It is clear from the wording that the provision is aimed at modifying the terms of an existing contract.
The SCA concluded that it was the buyer who contracted the supplier for a certain period. The buyer also amended standard contracts, but that there was no particular term as to how often the price would be communicated to the farmer. Instead, according to the SCA, it was the buyer who set the price and could independently raise or lower it in relation to the egg producers, depending on market developments. The price was communicated to the farmer prior to delivery. The farmer was free to opt out and not supply the eggs to “market-adjusted price”. Against this background, the SCA closed the case without investigating the matter further.
[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.
Danowsky & Partners