Selling U.S. Products and Services in Sweden

A Hot Tip about Agents, Sales Rep in Sweden

Posted on: 30 Mar 2010

Using an Agent or Distributor

Swedish commercial agents and/or sole distributors are organized under the Swedish Association of Agents (Agenturforetagen) The Association has about 600 member companies, most of them being small owner-managed businesses. Industries represented include clothing industry (accounting for more than 50 percent of membership), footwear, electrical and electronic and food.

 

Normally, an exclusive agent or distributor is appointed to cover the Swedish market. Swedish agents/distributors often represent several foreign firms. A visit to the market is the best way to appraise the relative merits of prospective agents/distributors. Close contact between the American principal and the Swedish agent/distributor is very important and should be developed early.

 

Companies wishing to use distribution, franchising and agency arrangements need to ensure that the agreements they put into place are in accordance with European Union (EU) and Member State national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. In essence, the Directive establishes the rights and obligations of the principal and its agents; the agent’s remuneration; and the conclusion and termination of an agency contract, including the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that the Directive states that parties may not derogate certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.

 

The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of "vertical agreements." U.S. small- and medium-sized companies (SMEs) are exempt from these Regulations because their agreements likely would qualify as "agreements of minor importance," meaning they are considered incapable of affecting competition at the EU level but useful for cooperation between SMEs. Generally speaking, companies with fewer than 250 employees and an annual turnover of less than €50 million are considered small- and medium-sized undertakings. The EU has additionally indicated that agreements that affect less than 10 percent of a particular market are generally exempted as well (Commission Notice 2001/C 368/07).

 

The EU also looks to combat payment delays with Directive 2000/35/EC. This covers all commercial transactions within the EU, whether in the public or private sector, primarily dealing with the consequences of late payment. Transactions with consumers, however, do not fall within the scope of this Directive. In sum, the Directive entitles a seller who does not receive payment for goods/services within 30-60 days of the payment deadline to collect interest (at a rate of 7 percent above the European Central Bank rate) as compensation. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs. The current legislation is undergoing review.

 

Companies’ agents and distributors can take advantage of the European Ombudsman when victim of inefficient management by an EU institution or body. Complaints can be made to the European Ombudsman only by businesses and other bodies with registered offices in the EU. The Ombudsman can act upon these complaints by investigating cases in which EU institutions fail to act in accordance with the law, fail to respect the principles of good administration, or violate fundamental rights.

 

Establishing an Office

The most popular and simplest company structure is the limited liability company. This works well for many foreign firms – especially SMEs starting up in the market.

 

There are no restrictions on foreign-owned firms establishing companies in Sweden.

 

Foreign investors in Sweden historically have favored the limited liability corporate form, which is the only corporate form with no personal liability in Sweden. There are two different forms of limited liability companies: public and private. The difference between the two is that only the public limited liability company can turn to the public for capital.

 

A subsidiary of a foreign company established in Sweden in accordance with Swedish law is considered a Swedish company in all respects and generally no legislative distinction is made between companies whose shares are wholly or principally owned by foreigners and those owned by Swedes.

 

The Swedish Companies Act (Aktiebolagslagen) governs the founding of a company. However, a foreign investor need not bother with these proceedings, as it is much easier to acquire an already registered shelf-company and adapt its articles of association to the needs and intents of the investor. The share capital must be at least SEK 100,000 in a private limited liability company and SEK 500,000 in a public limited liability company.

 

A foreign company interested in establishing a business in Sweden may also conduct its operations through a Swedish branch (filial). A branch may be established without the permission of the Swedish authorities – the branch need only be entered in the Register of Branches, which is kept by the Swedish Companies Registration Office (Bolagsverket)

 

Franchising

The interest in franchising in Sweden continues. According to the Swedish Franchise Association there are some 400 franchise systems, the majority of which are of Swedish origin, employing some 100,000 people in Sweden. The turnover of the franchise market is estimated at USD 17 billion. Franchising is especially popular in the area of fast food, retail trade and consulting/business services.

 

It is strongly recommended that U.S. companies considering franchising in Sweden conduct a qualified legal study to ensure full validity and enforcement of franchising agreements. The use of an American franchising agreement without adjustments for Swedish laws and practices could be detrimental to the franchiser’s business.

 

Franchise networks, which have been successful in the United States, will not automatically succeed in Sweden, but a name that is well known in the U.S. market does have a great advantage. However, to meet the needs of the Swedish market, U.S. franchisers should be prepared to modify their product mix or implement other changes in their marketing policy in order to boost competitiveness.

 

Direct Marketing

American exporters of consumer goods may find it advantageous to sell directly to department stores, consumer cooperatives, chains, and other retail outlets. Some of the larger Swedish retailers have purchasing agents in the United States.

 

Direct marketing is expanding in Sweden. Although well-established mail-order firms strong in the areas of clothing, sporting goods and hardware already exist, there are good opportunities for specialties. Use of telemarketing and cable TV sales channels are growing.

 

There is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are stiffest for marketing and sales to private consumers. Companies need to focus, in particular, on the clarity and completeness of the information they provide to consumers prior to purchase, and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from EU-wide rules on distance selling and on-line commerce. It is worth noting that the EU is currently overhauling its consumer protection legislation. Companies are advised to consult the information available via the hyper-links, to check the relevant sections of national Country Commercial Guides, and to contact the Commercial Service at the U.S. Mission to the European Union for more specific guidance.

 

Processing Customer Data

 

The EU has strict laws governing the protection of personal data, including the use of such data in the context of direct marketing activities. For more information on these rules, please see the privacy section above.

 

Distance Selling Rules

 

• Distance and Door-to-Door sales The EU’s Directive on distance selling to consumers (97/7/EC and amendments) sets out a number of obligations for companies doing business at a distance with consumers. It can read like a set of onerous "do’s" and "don’ts," but in many ways it represents nothing more than a customer relations good practice guide with legal effect. Direct marketers must provide clear information on the identity of themselves as well as their supplier, full details on prices including delivery costs, and the period for which an offer remains valid – all of this, of course, before a contract is concluded. Customers generally have the right to return goods without any required explanation within seven days, and retain the right to compensation for faulty goods thereafter. Similar in nature is the Doorstep Directive (85/577/EEC) which is designed to protect consumers from sales occurring outside of a normal business premises (e.g., door-to-door sales) and essentially assure the fairness of resulting contracts.

 

• Distance Selling of Financial Services Financial services are the subject of a separate Directive that came into force in June 2002 (2002/65/EC). This piece of legislation amends three prior existing Directives and is designed to ensure that consumers are appropriately protected in respect to financial transactions taking place where the consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contract information. Given the special nature of financial markets, specifics are also laid out for contractual withdrawal.

 

Direct Marketing over the Internet

The e-commerce Directive (2000/31/EC) imposes certain specific requirements connected to the direct marketing business. Promotional offers must not mislead customers and the terms that must be met to qualify for them have to be easily accessible and clear. The Directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers on-line must regularly consult national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the Directive does not attribute any legal effect to the placing of an order or its acknowledgment. This is a matter for national law. Vendors of electronically supplied services (such as software, which the EU considers a service and not a good) must also collect value added tax (see Electronic Commerce section below).

 

Joint Ventures/Licensing

Joint ventures and licensing agreements are common in Sweden There is no requirement to register licensing agreements and there are no government restrictions on remittance of royalties or fees. A joint venture or a licensing agreement itself is not a legal entity why a legal form of business must be formed to pursue the project.

 

Selling to the Government

The new Public Procurement Acts came into force on 1 January 2008. The Acts regulates almost all public procurement which means that contracting entities, such as local government agencies, county councils, government agencies as well as certain publicly owned companies etc, must comply with the act when they purchase, lease, rent or hire-purchase supplies, services and public works. The rules are different for public procurement above and below a number of so-called threshold values.

 

The fundamental principles of European Community law with regard to public procurement are the principles of non-discrimination, equal treatment, transparency (openness and predictability), proportionality and mutual recognition.

 

The Swedish Competition Authority is responsible for information on and supervision of Public Procurement .

 

The EU public procurement market, including EU institutions and Member States, totals around EUR 1,600 billion. This market is regulated by three Directives:

• Directive 2004/18 on Coordination of procedures for the award of public works, services and supplies contracts, and

• Directive 2004/17 on Coordination of procedures of entities operating in the Utilities sector, which covers the following sectors: water, energy, transport and postal services.

• Directive 2009/81 on Coordination of procedures for the award of certain works, supply and service contracts by contracting authorities in the fields of defense and security (to be implemented in national laws of EU member states by mid-2011).

 

Remedies directives cover legal means for companies who face discriminatory public procurement practices. These directives are implemented in the national procurement legislation of the 27 EU Member States.

 

The US and the EU are signatories of the World Trade Organization’s (WTO) Government Procurement Agreement (GPA), which grants access to most public supplies and services and some works contracts published by national procuring authorities of the countries that are parties to the Agreement. In practice, this means that U.S.-based companies are eligible to bid on supplies and services contracts from European public contracting authorities above the agreed thresholds. However, there are restrictions for U.S. suppliers in the EU utilities sector both in the EU Utilities Directive and in the EU coverage of the Government Procurement Agreement (GPA). The Utilities Directive allows EU contracting authorities in these sectors to either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50% of the total value of the goods constituting the tender, or is entitled to apply a 3% price difference to non-EU bids in order to give preference to the EU bid. These restrictions are applied when no reciprocal access for EU companies in the U.S. market is offered. Those restrictions however were waived for the electricity sector.

 

Distribution and Sales Channels

Consumers and businesses, alike, are very import-oriented in Sweden. To compliment this import-oriented market, Sweden offers American exporters a wide range of methods for the distribution and sale of products. A very high level of efficiency characterizes the distribution system. The Swedish Trade Federation (Svensk Handel) is the principal organization for private sector importers and traders in Sweden. Within this federation, the Import Council works to encourage Swedish importing by supplying American exporters with knowledge concerning items such as customs regulations and antidumping laws, while also providing Swedish companies with information on potential American contacts/suppliers. The federation’s membership includes 13,000 member firms active in retail and wholesale trade (including import/export, mail order business and e-commerce

 

The major distribution centers in Sweden are Stockholm, Gothenburg and Malmo. Stockholm is the capital and business center of the country with a metropolitan area population of 1.9 million. The head offices of most Swedish industrial, and commercial associations, and most large corporations are located in Stockholm. Many multinationals also use Stockholm as the headquarters for their Nordic and Baltic operations.

 

Gothenburg, Sweden's second largest city, is the nation's foremost port for international shipping. Located on the southwestern coast, Gothenburg is also the center of a fast growing industrial complex representing a wide spectrum of manufactured products ranging from motor vehicles to petrochemicals.

 

Malmo and Helsingborg are located at the southern tip of the country, a short distance from neighboring Denmark. Both cities are important ports for Swedish shipping to continental Europe. A bridge between Malmo and Copenhagen is physically linking Northern Europe with the Continent. The northern two-thirds of Sweden are sparsely populated, but contain many large industrial sites for forest products, mining, and hydroelectric power. Major population centers there include Sundsvall, Skelleftea, Lulea and Umea.

 

Selling Factors/Techniques

Selling techniques are comparable to the practices in the U.S. General competitive factors such as price, quality, promptness of delivery and availability of service are those that determine the success of a supplier. Swedish firms do not change suppliers readily and many commercial relationships have been built up and maintained over decades.

 

Electronic Commerce

In Sweden the market for e-business has great potential. As much as 80% of the Swedish population has access to internet. The main factors fueling the development of e-business is major investment from the government not least in broadband. Over 50% of those that have internet connection use it daily. Over 35% of these users have purchased something on the internet within the past three months. The most common products purchased through the Internet are still CD records, books and computer software/games. Once further standards and security routines for the payment processes are in place, a sharp increase in e-commerce trading can be expected. E-commerce is subject to customs duty.

 

An American company interested in setting up an E-commerce business in Sweden should contact NIC-SE Network Information Centre Sweden AB for information on the registration process.

 

In July 2003, the EU started applying Value Added Tax (VAT) to sales by non-EU based companies of Electronically Supplied Services (ESS) to EU based non-business customers. U.S. companies that are covered by the rule must collect and submit VAT to EU tax authorities. European Council Directive 2002/38/EC further developed the EU rules for charging Value Added Tax. These rules were indefinitely extended following adoption of directive 2008/8/EC U.S. businesses mainly affected by the 2003 rule change are those that are U.S. based and selling ESS to EU based, non-business customers or those businesses that are EU based and selling ESS to customers outside the EU who no longer need to charge VAT on these transactions. There are a number of compliance options for businesses. The Directive created a special scheme that simplifies registering with each Member State. The Directive allows companies to register with a single VAT authority of their choice. Companies have to charge different rates of VAT according to where their customers are based but VAT reports and returns are submitted to just one authority. The VAT authority responsible for providing the single point of registration service is then responsible for reallocating the collected revenue among the other EU VAT authorities.

 

Trade Promotion and Advertising

Advertising plays a major role in Sweden's commercial life. All types of media are available. Daily newspapers and other publications are by far the most important media accounting for over half of all advertising expenditures. Direct mail is the second most important advertising medium, followed by radio and television commercials. Other forms, useful for certain types of products, are point-of-sale advertising, motion picture advertising, outdoor posters, and billboards. Commercial broadcasting exists and is growing in importance.

 

Authorization requires that the agency have experience in advertising and that its books be open for audit by the association.

 

The major metropolitan papers in Stockholm, Gothenburg and Malmo have wide geographical circulation. The three large Stockholm dailies - Dagens Nyheter, Svenska Dagbladet, and Dagens Industri - enjoy nationwide circulation. The large dailies in Gothenburg and Malmo (Goteborgs Posten and Sydsvenskan respectively) provide important media for advertising exposure in western and southern Sweden.

 

There are three major trade fair venues in Sweden. Together they host approximately 2.5 million visitors each year. The largest is Stockholmsmassan (Stockholm International Fairs) with 1.5 million visitors, followed by the Svenska Massan (Swedish Exhibition and Congress Center) and Malmo Massan (Malmo Fairs).

 

Commercial Service Stockholm can help your company plan promotional events and market your products and services in Sweden. Please visit our website www.buyusa.gov/sweden for details on our programs and services set up for this: FUSE – Featured U.S. Exporters, Business Service Providers, and the Single Company Promotion.

 

General Legislation

Laws against misleading advertisements differ widely from Member State to Member State within the EU. To respond to this imperfection in the Internal Market, the Commission adopted a Directive, in force since October 1986, to establish minimum and objective criteria regarding truth in advertising. The Directive was amended in October 1997 to include comparative advertising. Under the Directive, misleading advertising is defined as any "advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behavior or which for those reasons, injures or is likely to injure a competitor." Member States can authorize even more extensive protection under their national laws.

 

Comparative advertising, subject to certain conditions, is defined as "advertising which explicitly or by implication identifies a competitor or goods or services by a competitor." Member States can, and in some cases have, restricted misleading or comparative advertising. The EU’s Audiovisual Media Services Directive lays down legislation on broadcasting activities allowed within the EU. From 2009 the rules allow for US-style product placement on television and the three-hour/day maximum of advertising will be lifted. However, a 12-minute/hour maximum will remain. Child programming will be subject to a code of conduct that will include a limit of junk food advertising to children.

 

Following the adoption of the 1999 Council Directive on the Sale of Consumer Goods and Associated Guarantees, product specifications, as laid down in advertising, are now considered as legally binding on the seller. (For additional information on Council Directive 1999/44/EC on the Sale of Consumer Goods and Associated Guarantees, see the legal warranties and after-sales service section below.)

 

The EU adopted Directive 2005/29/EC concerning fair business practices in a further attempt to tighten up consumer protection rules. These rules outlaw several aggressive or deceptive marketing practices such as pyramid schemes, "liquidation sales" when a shop is not closing down, and artificially high prices as the basis for discounts in addition to other potentially misleading advertising practices. Certain rules on advertising to children are also set out.

 

Medicine

The advertising of medicinal products for human use is regulated by Council Directive 2001/83/EC. Generally speaking, the advertising of medicinal products is forbidden if market authorization has not yet been granted or if the product in question is a prescription drug. Mentioning therapeutic indications where self-medication is not suitable is not permitted, nor is the distribution of free samples to the general public. The text of the advertisement should be compatible with the characteristics listed on the product label, and should encourage rational use of the product. The advertising of medicinal products destined for professionals should contain essential characteristics of the product as well as its classification. Inducements to prescribe or supply a particular medicinal product are prohibited and the supply of free samples is restricted.

 

The Commission presented a new framework for information to patients on medicines in 2008. The framework would allow industry to produce non-promotional information about their medicines while complying with strictly defined rules and would be subject to an effective system of control and quality assurance.

 

Nutrition & Health Claims

On July 1, 2007, a new regulation on nutrition and health claims entered into force. Regulation 1924/2006 sets EU-wide conditions for the use of nutrition claims such as “low fat” or “high in vitamin C” and health claims such as “helps lower cholesterol”. The regulation applies to any food or drink product produced for human consumption that is marketed on the EU market. Only foods that fit a certain nutrient profile (below certain salt, sugar and/or fat levels) will be allowed to carry claims. Nutrition and health claims will only be allowed on food labels if they are included in one of the EU positive lists. Food products carrying claims must comply with the provisions of nutritional labeling directive 90/496/EC. From 2010, only nutrition clams in the Annex will be allowed.

 

The development of nutrient profiles, originally scheduled for January 2009, is being delayed due to the 2009 Parliamentary elections and the appointment of a new Commission. Once they have been set, there will be another two-year period before the nutrient profiles begin to apply to allow food operators time to comply with the new rules. Nutrition claims can fail one criterion, i.e. if only one nutrient (salt, sugar or fat) exceeds the limit of the profile, a claim can still be made provided the high level of that particular nutrient is clearly marked on the label. For example, a yogurt can make a low-fat claim even if it has high sugar content but only if the label clearly states “high sugar content”. Health claims cannot fail any criteria. The deadline of January 31, 2010, for compiling a list of well-established health function claims such as ‘calcium is good for your bones’ will not be met due to the vast amount of applications that have to be screened by EFSA. Disease risk reduction claims and claims referring to the health and development of children will require an authorization on a case-by-case basis, following the submission of a scientific dossier to EFSA. A simplified authorization procedure has been established for health claims based on new scientific data. GAIN Report E48055 describes how application dossiers for authorization of health claims should be prepared and presented.

 

Food Supplements

Regulation 1925/2006, applicable as of July 1, 2007, harmonizes rules on the addition of vitamins and minerals to foods. The regulation lists the vitamins and minerals that may be added to foods. This list was most recently revised in November 2009. A positive list of substances other than vitamins and minerals has not been established yet, although it is being developed. Until then, Member State laws will govern the use these substances.

 

Tobacco

The EU Tobacco Advertising Directive bans tobacco advertising in printed media, radio, and internet as well as the sponsorship of cross-border events or activities. Advertising in cinemas and on billboards or merchandising is allowed though these are banned in many Member States. Tobacco advertising on television has been banned in the EU since the early 1990s and is governed by the TV without Frontiers Directive.

 

Pricing

Companies set prices individually. According to the Swedish Competition Act (which is in line with EU rules), companies are not allowed to practice price fixing. All goods and services are subject to VAT (value-added tax), which ranges from 6 percent to 25 percent. 25 being the normal percentage, 12 percent which is for food or hotel charges, and 6 percent for products such as newspapers, books and magazines, and admission fees for commercial sporting events and also for transportation within Sweden. Products in Sweden are priced using the following formula: CIF price + import duty + excise tax + profit + VAT.

 

Sales Service/Customer Support

Companies set prices individually. According to the Swedish Competition Act (which is in line with EU rules), companies are not allowed to practice price fixing. All goods and services are subject to VAT (value-added tax), which ranges from 6 percent to 25 percent. 25 being the normal percentage, 12 percent which is for food or hotel charges, and 6 percent for products such as newspapers, books and magazines, and admission fees for commercial sporting events and also for transportation within Sweden. Products in Sweden are priced using the following formula: CIF price + import duty + excise tax + profit + VAT.

 

Protecting Your Intellectual Property

Several general principles are important for effective management of intellectual property rights in the European Union (EU). First, it is important to have an overall strategy to protect IPR. Second, IPR is protected differently in the EU than in the U.S. Third, rights must be registered and enforced in the EU under local laws. Companies may wish to seek advice from local attorneys or IP consultants. The U.S. Commercial Service can often provide a list of local lawyers upon request.

 

It is vital that companies understand that intellectual property is primarily a private right and that the US government generally cannot enforce rights for private individuals in the EU. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. While the U.S. Government is willing to assist, there is little it can do if the rights holders have not taken these fundamental steps necessary to securing and enforcing their IPR in a timely fashion. Moreover, in many countries, rights holders who delay enforcing their rights on a mistaken belief that the USG can provide a political resolution to a legal problem may find that their rights have been eroded or abrogated due to doctrines such as statutes of limitations, laches, estoppel, or unreasonable delay in prosecuting a law suit. In no instance should USG advice be seen as a substitute for the obligation of a rights holder to promptly pursue its case.

 

It is always advisable to conduct due diligence on partners. Negotiate from the position of your partner and give your partner clear incentives to honor the contract. A good partner is an important ally in protecting IP rights. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in the EU require constant attention. Work with legal counsel familiar with local laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.

 

It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IPR and stop counterfeiting. There are a number of these organizations, both Swedish and U.S.-based. These include:

- The U.S. Chamber and local American Chambers of Commerce

- National Association of Manufacturers (NAM)

- International Intellectual Property Alliance (IIPA)

- International Trademark Association (INTA)

- The Coalition Against Counterfeiting and Piracy

- International Anti-Counterfeiting Coalition (IACC)

- Pharmaceutical Research and Manufacturers of America (PhRMA)

- Biotechnology Industry Organization (BIO)

- Business Software Alliance (BSA)

 

 

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Posted: 30 March 2010

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