Swedish Administrative Court of Appeal upholds the first decision on sanctions for breach of the Swedish Unfair Trading Practices (UTP) rules due to a large number of late payments

Background

On 26 October 2023, the Swedish Competition Authority (the “SCA”) issued its first fining decision under the Swedish Unfair Trading Practices Act (the “UTP Act”), which implements the 2019 EU directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain (the “UTP Directive”). As explained in detail in our earlier blog post, the SCA imposed a SEK 5 million (approx. EUR 425 000)  administrative fine against the fruit and vegetable wholesaler Everfresh, part of the Dole Group, for not paying its suppliers on time. The UTP Act prohibits buyers from paying its suppliers later than 30 days from delivery (which applies to all kinds of food, both perishable and non-perishable).

Following an appeal by Everfresh, the Administrative Court in Stockholm upheld the SCA’s fining decision on 23 May 2024. Everfresh appealed the judgment to the Administrative Court of Appeal in Stockholm. On 17 February 2025, the Administrative Court of Appeal in Stockholm issued its ruling, rejecting Everfresh’s appeal and upholding the SCA decision.

Recap on the SCA’s decision

The SCA took into account that the company had paid its suppliers late on a large number of occasions and that some of the late payments amounted to relatively high amounts. The investigation showed that on hundreds of occasions, Everfresh had paid at least six of its suppliers 4-23 days later than 30 days after the invoice date. Furthermore, the investigation showed that Everfresh had contractual terms with a total of 290 suppliers that stipulated payment periods of more than 30 days. The SCA did not find it necessary to determine how many additional late payments that had been made because of the contractual terms. Despite Everfresh’s efforts to change its business system to address the late payments, its efforts to amend the contractual terms regarding payment times were incomplete at the time of the decision.

Judgment from the Administrative Court in Stockholm

In its appeal of the SCA’s decision, Everfresh argued that the fining decision should be annulled or, alternatively, the fine reduced.

Everfresh notably argued that a 12-month grace period should apply for supply agreements already in force before the entry into force of the Swedish UTP Act on 1 November 2021. Everfresh argued that such a grace period is stipulated in Article 1.4 of the UTP Directive and that Everfresh’s contested conduct related to agreements which would have been covered by the 12-month grace period. Before the SCA, Everfresh had argued the UTP-infringement was due to a lack of time to amend all agreements in a timely manner before the new rules came into force.

The Administrative Court in Stockholm rejected the appeal in its entirety, finding that Everfresh’s conduct constituted a serious infringement of the UTP Act that warranted a fine. The Court held that Member States are not obligated to implement a grace period according to Article 9 of the UTP Directive which provides that Member States may introduce stricter rules than those laid down by the Directive.

The recent judgment from the Administrative Court of Appeal in Stockholm

In its appeal, Everfresh argued that the fining decision should be annulled or, alternatively, the fine reduced.

Everfresh also argued that the Court of Appeal should stay the proceedings and request a preliminary ruling from the European Court of Justice with regards to the interpretation of the grace period in Article 1.4 of the UTP Directive. Everfresh argued that Article 1.4 of the UTP Directive has direct effect and that the Swedish legislator had failed to implement it in a correct way.

The Court of Appeal rejected the appeal in its entirety, with a very short reasoning. In relation to the grace period, the Court found that Article 1.4 of the UTP Directive was not capable of having direct effect given that this provision is conditional on Article 9.1 of the same Directive. According to established EU case-law, EU-directives may only have direct effect if its provisions are unconditional and sufficiently clear and precise. The Court of Appeal also noted that the Swedish legislator deliberately had chosen not to introduce a grace period in the Swedish UTP Act and that this was justified under Article 9.1 of the UTP-Directive. As regards the infringements and the fine the Court merely referred to the lower court.

The judgment can be appealed to the Supreme Administrative Court within three weeks.

Comments

If upheld, the judgment from the Administrative Court of Appeal is likely to strengthen the SCA’s enforcement against unfair trading practices, and we anticipate an increase in fining decisions in the future. However, suppliers still face challenges in filing complaints about unfair trading practices, particularly when violations are committed by large grocery chains in a highly concentrated market. Due to commercial considerations and fear of retaliation, few suppliers are willing to confront their largest customers, even when there is a clear violation. Nonetheless, there are certain avenues for filing complaints anonymously.

The judgment also underscores that Member States are permitted to impose stricter regulations when implementing EU directives, a practice sometimes referred to as ”gold-plating.” Sweden’s implementation of the UTP Directive includes several elements of “gold-plating”. Notably, the Swedish UTP Act lacks a 12-month grace period and has a broader scope than the UTP Directive. For instance, the Swedish UTP Act applies uniformly to all agricultural and food products, regardless of whether they are perishable or non-perishable. More significantly, with the exception of buyers with a turnover below EUR 2 million, the Swedish UTP Act applies to all buyers and sellers, irrespective of size. This contrasts with the UTP Directive, which employs a ”step approach,” granting suppliers rights only in relation to buyers with a greater annual turnover than the supplier.

The UTP Directive is currently under review, and we will provide further comments on this matter in due course.