Business law in real life
Swedish e-commerce is growing rapidly and is therefore of great interest to many foreign companies. Those wanting to establish in Sweden, selling their products to Swedish consumers, can relatively easily set up e-commerce in Sweden. On the basis of a market entry that we recently helped with, we here highlight a few legal aspects where foreign companies may have to adapt to Swedish law.
A North American company wanted to start up e-commerce in Sweden, selling to Swedish customers. Ultimately, perhaps also to our neighbouring Nordic countries of Denmark, Finland, and Norway, all of which have many similarities with Sweden.
The first question of interest is the language. Can you – as the company in question, an established company from across the Atlantic – broaden your market only by targeting sales to Sweden, through for instance a sub-domain .se, but market yourself and enter into agreements in English?
There is no explicit requirement in Sweden that agreements entered into or information in connection with entering into agreements on the Internet must be in Swedish. There is, however, a requirement that information to a consumer who enters into an agreement remotely must be clear and understandable. In other words, the consumer must be able to take part of and understand the information without difficulties. What this means is unfortunately not very clear. So in order to make sure that customers understand the information, but perhaps also for market reasons, it’s advisable for the company to provide information and enter into agreements in Swedish.
As for user manuals for products sold (as well as laundry instructions for garments), the preparatory works for the Swedish Consumer Sales Act include statements that a user manual normally is required to be in Swedish or to consist of “commonly known or understandable symbols”. In practice, however, it has been established that these requirements can be excluded, provided that the consumer has been informed, prior to entering into the agreement, that the user manual is available only in certain languages.
Conflict of laws for these purchases?
As a basis, parties are free to choose which country’s laws should apply to an agreement. But consumers always have the right to invoke protective legislation in their own jurisdiction.
The Swedish domain name .se
For those who want to register a top-level domain .se, we can mention that Sweden, unlike some other countries, does not require that the domain be owned by a Swedish company. It is thus relatively straightforward for foreign companies to gain access to a Swedish top-level domain .se, should they want to.
Sweden has no special legal provisions for the registration of domains. Responsible for the operation and administration of .se and .nu domains is The Internet Foundation in Sweden (IIS).
A domain name may also be a trademark and be protected under the Trademark Act. It is, however, important to distinguish between domain names and trademarks, as the requirements for exclusivity are different and registration is handled by different agencies. In practice, this means that domain name protection in no way qualifies as trademark protection and vice versa.
The contracting and ordering procedure
There are no specific requirements in Sweden for how agreements over the Internet are entered into between two parties. There are, however, specific market law requirements for which information must be provided to an individual entering into the agreement. This involves primarily information about which technical steps must be taken before entering into the agreement. The minimum requirements are specified in The Electronic Commerce Act. Omitting such information can constitute misleading advertising under the Marketing Act.
There are guidelines on how to order over the Internet. First, the buyer must mark his/her interest in the purchase. Then, he/she must be given the opportunity to review the order information and terms of agreement. Finally, the order must be confirmed and the terms of agreement accepted.
In this context, we’d like to mention that there is legal guidance on pre-checked boxes. According to the Nordic Consumer Ombudsmen, which provides guidelines for what constitutes generally accepted marketing practices, the customer must actively check the box. It should, in other words, not be pre-checked.
Unfair contract clauses
In the existing North American terms, we noticed some clauses that, from a Swedish perspective, could be considered unfair. Among the terms were, for example, a provision stating that only the original buyer of company products could invoke product warranties. This is not consistent with Swedish law, as the company sells its own manufactured products under its own brand.
Swedish law distinguishes between manufacturer warranty and seller warranty. Manufacturer warranty, which was the case here, follows the product regardless of later owners. Seller warranty is established by shops and retailers but is not mandatory and the seller decides what applies, which means that it usually applies only to the original buyer.
The Swedish Act on Consumer Contract Terms includes several examples of terms of agreement that may be considered unfair. Companies with unbalanced terms with many disclaimers, limitations of liability, and unilateral rights for the company may want to check these against the examples specified in the law.
To buy or not to buy?
The consumer’s right of withdrawal was another issue discussed in this case. The company offered their customers a 30-day right of withdrawal from the day of ordering on their website.
Under the Swedish Distance Selling and Door-to-Door Selling Act, the consumer has the right to cancel an agreement or a purchase within 14 days of receiving the goods.
It is certainly not prohibited to offer your customers better terms than those required by law. But if the time limit starts before the goods are delivered, you may run into problems if the delivery is delayed and the right of withdrawal expires before the timeframe of the statutory right of withdrawal (which is based on reception of the goods).
It is customary to provide the customer a duty to examine the goods and that the customer must contact the seller immediately, or at least without delay, after receiving the goods if a defective product is received. This can, of course, also involve having received a product other than what was actually ordered or that a product ordered is missing from the delivery. But to set a time limit to such a duty – for example within 72 hours – is not consistent with Swedish law, which states that you have to give the consumer a reasonable period of time to examine the product.
A reasonable period of time means that the consumer is given a certain time to consider the situation. The time for this can vary from case to case. Complaints that occur within two months of the consumer noticing the defect are always considered to have taken place within a reasonable time. It is worth noting that this two-month rule always starts from the time the consumer notices the defect and not from the time when he/she should have noticed the defect.
Warranty – six months or lifetime?
Unless otherwise agreed, Swedish law states that companies are responsible for any defects which appear within six months of purchase. This is ultimately a question of proof. If defects appear during this time, the seller is responsible for the defect and has burden of proof. Thereafter, the consumer has to show that the product’s defects existed at the time of purchase.
The company in this case sold its products with a “lifetime warranty” regarding defects in materials and manufacturing for a period corresponding to the life of the product. This referred to the normal time a user generally uses a product of its type.
Given the six-month period, we considered it important to point out to our client that a so called “lifetime warranty” would be a precarious commitment under Swedish law. If no time limit is set for a warranty, the warranty means that any defects that appear in the product after delivery is presumed to have existed at the time of delivery, and that it’s up to the company to rebut the claim.
In a case from the Swedish National Board for Consumer Disputes regarding a sailing jacket, a “lifetime promise” according to which the product was guaranteed to be free from defects in workmanship and material and that a non-satisfactory garment would be replaced or repaired, meant that the seller was liable for a defect that occurred as late as eight years after purchase. Given this, our client had good reasons to consider its warranty.
One must not forget the handling of personal data and other information about customers that the business collects, handles, and possibly stores. At the time of writing, these issues are controlled by the Swedish Privacy Act. In May 2018, this act will be replaced by new rules governing personal data processing. The EU General Data Protection Regulation (GDPR) will then be implemented as new legislation.
GDPR will involve more stringent requirements for the handling and protection of personal data and will strengthen the rights of individuals in relation to the companies handling their data.
More on e-commerce
The above is a selection of the many issues involved in establishing e-commerce. There are, of course, additional issues to consider and deal with, including taxes. At Lindmark Welinder, we have a collective experience of advising companies on this matter and can provide further advice to companies wishing to establish e-commerce in Sweden.