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Dispute resolution

27 January 2023 · Article

Could internet sales of alcoholic beverages with delivery from Denmark be in violation of the Swedish alcohol monopoly?

The Supreme Court (HD) has granted leave to appeal on the issue of whether internet sales of alcoholic beverages with delivery from Denmark to consumers in Sweden is in violation of the Swedish alcohol monopoly. Since the Patent and Market Court and the Patent and Market Court of Appeal in their decisions reached different conclusions, and in light of the fact that a number of companies conduct such sales in Sweden, it must be considered important that HD clarifies the legal situation.

Since 2007, through the so-called Rosengren case,  it has been allowed for private individuals to bring alcoholic beverages from other EU countries into Sweden through private imports, provided that the alcohol is intended for personal use.

HD decided in December 2022 to grant leave to appeal on the issue of whether the sale of alcoholic beverages on the internet, delivered from Denmark to consumers in Sweden, constitutes retail sales in violation of the Swedish alcohol monopoly. The parties to the case are Systembolaget on the one hand, and two companies that are part of the same group, a Danish subsidiary and a Swedish parent company, on the other.

The examination of the issue is urgent because it has become increasingly popular with private imports of alcoholic beverages via the internet to consumers in Sweden and there are a number of different companies that provide the service. Systembolaget has initiated another similar action against such a company, where the case has been stopprf by the Patent and Market Court of Appeal pending the hearing of this case in HD until further notice.

Legal starting points in the Alcohol Act and the E-Commerce Act

A given legal starting point is that according to the Alcohol Act (2010: 1622) there must only be one company for the retail trade of alcoholic beverages, namely Systembolaget. No other company may trade in alcoholic beverages in Sweden.

In this case, however, the e-Commerce Law[1], which implements the  e-Commerce Directive[2], also becomes relevant . The aim of the Directive was to remove certain legal barriers that were considered to hamper the development of e-commerce and to ensure the free movement of, inter alia, such services within the EEA. However, e-commerce law also applies when services are provided to states outside the EEA, giving it a broader scope than the directive.

The law and the directive enshrine the so-called country of origin principle. According to HD’s practice, this principle must be interpreted as meaning that it is the law of the country where the provider of the service is established that applies to the services. This also applies in cases where the services are wholly or partly targeted at recipients in another state within the EEA. Where a service provider is established according to the e-commerce act is assessed based on where the business activity is carried out.

However, the Directive allows a Member State in certain cases to take action against a service provider established in another Member State that wholly or mainly directs his activities towards the territory of the first Member State. The aforesaid is  applicable provided that the place of establishment has been chosen with a view to circumventing the legislation which would otherwise have applied to the service provider if it had been established in the first Member State.

The Patent and Market Court announces a prohibition under penalty of a fine

The Patent and Market Court found, in light of how the e-commerce business is organized, that the Danish subsidiary is established in Sweden. This is due to the fact that the marketing and provision of the business has in principle been aimed exclusively at consumers in Sweden and that a prerequisite for being able to order alcohol has been that the consumer has an address in Sweden. Furthermore, the Danish subsidiary’s main workforce has consisted of people who are also active in the Swedish parent company. In addition, it is the subsidiary that, through Swedish customer service, handled the right of withdrawal, complaints and contact with customers.

The Court held that it was not sufficient for the subsidiary to be registered in Denmark and for its warehousing to take place in Denmark for the place of establishment to be considered to be there. Against this background, there was no precondition for applying the country of origin principle regarding the subsidiary’s provision of services and Swedish law would apply to the company’s marketing without prejudice to what Danish law prescribes.

Regarding the subsidiary’s marketing, the Patent and Market Court found that the sales on the company’s website constituted marketing and that the marketing was unfair because it gives the impression, among other things, that the company’s sales are legal under the Alcohol Act.

Against this backdrop, the Court also needed to examine the compatibility of the Alcohol Act with EU law. When considering Article 37 TFEU, the Patent and Market Court found that the Alcohol Act does not violate EU law and referred to previous practice by the Court of Justice of the European Union.

Finally, the Court imposed fines on both the Danish subsidiary and the Swedish parent company because the Court held that there is no clear dividing line between the respective companies. This meant that the marketing of the business was banned, which in practice entails a ban on the companies from conducting sales of alcoholic beverages in Sweden. The penalty was set at one million crowns.

The Patent and Market Court of Appeal dismisses Systembolaget’s action

The Patent and Market Court of Appeal came to the opposite conclusion and found that the companies did not use improper marketing by marketing alcoholic beverages for sale to consumers in Sweden.

Initially, the court noted that it is clear from the terms of purchase and order confirmations that it is the Danish subsidiary that is responsible for the website and that it is with the subsidiary that customers enter into the purchase agreement. The court found that it was shown only that it was  the subsidiary that had been the party that entered into agreements with the customers.

Furthermore, the Patent and Market Court of Appeal found that it was undisputed that the subsidiary has been registered and has had its registered office in Denmark since the company’s inception. In addition, the company has had its inventories for alcoholic beverages and at least one employee in Denmark. Based already on these circumstances, the Patent and Market Court of Appeal held that the subsidiary is established in Denmark. According to the court, there were no circumstances that showed that the subsidiary is also established in Sweden. Nor did the court consider that there was an investigation that showed that the subsidiary was a dummy corporation and that the company’s operations were actually managed by the Swedish parent company.

The Patent and Market Court of Appeal found that it had not been shown that the subsidiary’s establishment in Denmark constituted an improper circumvention of Swedish legislation that is to be judged as an abuse. This is in the light of, inter alia, the fact that the Court of Justice of the European Union has ruled that it does not constitute an abuse of EU law to form a company in a particular Member State in order to be subject to more favourable legislation.

Through the provisions of the E-Commerce Act, the Patent and Market Court of Appeal found that the company has the right, without prejudice to Swedish rules, to provide the service to recipients in Sweden. Thus, the provisions of the Alcohol Act must not restrict the free movement of the subsidiary and the sale must therefore be allowed.

Finally, the Court pointed out that the provisions on retail trade in the Alcohol Act do not cover sales abroad to consumers in Sweden. The Court held that there were no circumstances showing that the subsidiary engaged in illegal retail trade in Sweden, such as through, for example, the fact that the delivery of the alcoholic beverages had been included in the sale.

In summary, the Patent and Market Court of Appeal found that the companies had not used improper marketing by marketing alcoholic beverages for sale to consumers in Sweden and therefore dismissed Systembolaget’s action in that regard.

The Supreme Court plans to take up the case in April

As described above, the first instance and the second instance have come to different conclusions in the examination of the case. Although the decision of the Patent and Market Court of Appeal applies until further notice, it can be stated that the legal situation will be unclear until HD has issued a judgment. The fact that the Patent and Market Court of Appeal opened up for an appeal to be heard by HD shows the importance of the issues, not least for the parties in the case, but also for other commercial actors and private individuals. According to the timetable drawn up by HD, the presentation or main hearing is planned to be held at the end of April 2023.

[1]  Act (2002:562) on electronic commerce and other information society services.

[2] Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market.