Defamation of corporate entities in Sweden

15 March 2007

Sara Ulfsdotter

There are no specific provisions under Swedish law regarding defamation of corporate entities. The defamation regulation in the Penal Code only applies to private individuals. However, in certain situations the Marketing Act may be used to stop defamation of a corporate entity. In particular, case law has applied the “General Requirements”, which provide that “marketing must be compatible with good marketing practice and also in other respects be fair towards consumers and businessmen”, to situations where someone has unnecessarily ridiculed a competitor or, without any basis, tainted a rival’s good reputation. The provision on “Misleading Advertising” may be used if the defaming advertisement contains a portrayal that is inaccurate or misleading. Both of these provisions frequently apply to the same advertisement.

We now turn to consider the hypothetical situation where Company A has posted an article on its website stating that Company B has been defrauding customers.

On the assumption that the article was made without any proper basis and was, in fact, defamatory, we consider:

  1. what remedies (if any) Company B would have against Company A in Sweden; and

  2. whether the position would be any different in this jurisdiction if (i) one of Company A's directors (Mr A) had also defamed Company B; or (ii) the article posted by Company A also defamed a director of Company B (Mr B).

Thus if, Company A states, on its website, and without any basis, that Company B is defrauding customers, Company B may file a lawsuit at the Swedish Market Court (Marknadsdomstolen) on the grounds either (a) of breach of the general requirements; or (b) that the advertisement is misleading. Company B may request that the Court issue a prohibition and fine Company A. Should Company A later violate this prohibition, Company B may file another lawsuit against Company A and claim compensation for damages caused by the violation to Company B.

The fact that one of Company A’s directors (Mr A), also defamed Company B does not change Company A’s right to sue Company A. However, providing the requirements of the Marketing Act are met, it is also possible to request that the Court issue a prohibition and fine against Mr A personally. This is because, according to the Marketing Act, an employee or another person acting on behalf of the company (or in fact any other person who otherwise has materially contributed to the marketing, such as an advertising agent) may be held responsible in this regard.

It is important to note that the Marketing Act only applies to commercial advertising. Messages with no business purpose at all fall outside the scope of the Marketing Act. To libel a company, for example, by posting a message on a website asserting that the company sells harmful, low-quality products, does not fall under the Marketing Act.

The only restrictions for non-commercial statements are those set out in the Freedom of the Press Act and the Fundamental Law on Freedom of Expression, which in relation to defamation of corporate bodies are rather limited. In fact, there is commentary which states that the possibility of taking legal action against someone who makes non-commercial, yet defamatory statements about a company, is practically non-existent.

On the other hand, if Mr A has also defamed Mr B, a different set of rules will apply. As Mr B is a natural person, the “ordinary defamation provision” in the Penal Code applies. This provision was not primarily intended for use in “commercially-driven” defamation, but in practice the provision has been applied to such cases. As a general rule, Mr B is the only party who could prosecute Mr A for having defamed his good name and reputation. If the Court finds Mr A guilty of this, it may award Mr B compensation for his damages and Mr A could face either a fine or imprisonment. It is a fundamental principle of Swedish law that only natural persons can commit crimes and therefore the Penal Code does not apply to legal entities, such as Company A. Therefore, if Company A defames Mr B it cannot be prosecuted according to the Penal Code.

Therefore, while Mr B may seek redress from Mr A for defamation by Mr A, Company B may find it difficult, under Swedish law, to obtain redress for the defamatory statement on Company A’s website against either Company A or
Mr A.