Landmark judgement from the Patent and Market Court of Appeal for Swedish consumer protection in cross-border online marketing
Summary
Companies that are established in another EU Member State but market themselves online to Swedish consumers do not always have to comply with the Swedish Marketing Act. This is confirmed by a recent judgement from the Patent and Market Court of Appeal (PMT 12383-21). According to the judgement, Sweden has implemented the country-of-origin principle in the e-commerce directive as a conflict of laws rule. Therefore, the law of the country-of-origin, i.e. where the e-retailer is established, applies, regardless of whether Swedish law is stricter than the law of the country of origin or not.
One consequence could be that Sweden's normally high level of consumer protection is undermined. Another consequence could be that it becomes more difficult to prevent unfair online marketing by foreign competitors.
The Patent and Market Court of Appeal has granted the right to appeal the judgement to the Supreme Court.
The Patent and Market Court of Appeal has issued a judgement in a case between Parfümerie akzente and KTF (case no. PMT 12383-21). The case raises important questions about the intersection between the country-of-origin principle of the E-commerce Act and the country of effect principle of the Marketing Act.
Background
Parfümerie akzente is an online retailer established in Germany which markets cosmetic products online on its website www.parfumdreams.se to consumers in Sweden. The marketing consisted, among other things, of marketing claims on the website, such as that the company was an "authorized e-retailer", had "1,500,000 satisfied customers", offered "CO2-neutral shipping", and that the company's prices were "far below the recommended retail price".
KTF, an organization representing e.g. Swedish cosmetics companies, brought an action against Parfümerie akzente seeking, inter alia, an injunction prohibiting the company from using the abovementioned marketing claims on the website. According to KTF, the marketing was in breach of the Swedish Marketing Act.
One issue in the case was whether the Swedish Marketing Act could be applied to the online marketing examined in the case, as Parfümerie akzente is established in Germany. KTF's position was that since the marketing undisputedly had effect in Sweden, Swedish law should apply according to the so-called country of effect principle.
The Patent and Market Court of Appeal’s assessment of the marketing claims on the website
The Patent and Market Court of Appeal initially concluded, that the marketing in question was an information society service, why section 3 of the Swedish E-Commerce Act was applicable.
Section 3(1) of the E-Commerce Act, which implements Article 3(2) of the E-Commerce Directive (2000/31/EC), reads
"A service provider with a State of establishment other than Sweden within the EEA is entitled, notwithstanding Swedish rules within the coordinated regulatory field, to provide information society services to recipients of services in Sweden."
One of the main questions in the case was how this provision is to be understood. One possible interpretation is that it is a corrective rule, i.e. the Swedish Marketing Act applies as long as Parfümerie akzente is not subject to requirements that are stricter than those prescribed in Germany. In other words, Swedish rules apply but if they are stricter than German rules and thus impede free movement, the Swedish stricter rules should be set aside. Another possible interpretation is that Section 3(1) of the E-Commerce Act is a conflict of laws rule, meaning that the law of the country-of-origin applies, and the application of Swedish law is excluded, i.e. in this case only German marketing law applies.
EU law allows Member States to choose whether to implement Article 3(2) of the E-Commerce Directive as a direct conflict of laws rule (C-509/09 and C-161/10 eDate Advertising). In other words, it would have been possible for Sweden to implement Art. 3(2) as a corrective rule with the consequence that Swedish law would apply as a starting point.
However, the Patent and Market Court of Appeal concluded that Sweden has implemented Article 3(2) of the E-Commerce Directive as a conflict of laws rule. In other words, the Swedish Marketing Act was not considered applicable to the marketing claims on the website. According to the Patent and Market Court of Appeal , such an interpretation followed from the wording of section 3(1) of the Swedish E-Commerce Act, from the Swedish preparatory works, which state, inter alia, that Swedish authorities are not to intervene at all, except in certain specified exceptional cases (see, inter alia, government bill 2001/02:150 p. 66) and from the underlying purpose of the country-of-origin principle itself.
KTF thus lost its action for an injunction under the Swedish Marketing Act against the marketing claims on the website.
Consequences
One consequence of applying Section 3(1) of the Swedish E-Commerce Act as a conflict of laws rule could be that Sweden's normally high level of consumer protection is undermined if service providers established in another Member State can rely solely on the market law of the country of origin, even though the marketing is directed at Sweden. To a certain extent, this should be counteracted by fact that the Unfair Commercial Practices Directive (2005/29/EEC) is a full harmonization directive, which is why the level of protection for consumers should be equivalent in the European Union.
Another consequence may be that it becomes more difficult to prevent online marketing by a foreign competitor. It should be noted that EU law does not require the country-of-origin principle of the Directive to be implemented as a conflict of laws rule. On the contrary, Sweden could have implemented the country-of-origin principle as a corrective rule, meaning that Swedish law should be applied as a starting point.
The Patent and Market Court of Appeal has authorized the possibility to appeal the judgement to the Supreme Court.
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Karin Cederlund och Emma Sandler