New proposal on the supervision of online retail of alcohol in Sweden

17 January 2014

David Nilsson

In May 2012, the Swedish Government appointed an investigation to oversee Swedish rules concerning the advertisement and supervision of the online retail of alcohol in respect of the Swedish Alcohol Act, which governs the state retail monopoly on alcohol. One of the objectives of the investigation was to suggest new rules concerning supervision of the growing online retail of alcohol on the Swedish market. The investigation's proposal was published on 7 June this year. The proposal has been met with severe criticism from Systembolaget, the retail monopolist, as it involves the supervision of an area that is considered to be a loophole under Swedish law in that it enables profit-seeking companies to circumvent the retail monopoly on alcohol.

Background

In 2007, the European Court of Justice ruled against Swedish regulations that barred private citizens from importing alcohol from other EU countries, declaring that it inhibited the free movement of goods in a manner that was “less a method of limiting alcohol consumption generally than a means of favoring Systembolaget.” This case has become known as the Rosengren ruling. The ruling resulted in a change of the Alcohol Act and opened up for direct imports by private consumers and also allowed for third party intermediaries to help to facilitate the process. It has also formed the legal basis for a growing number of online alcohol retailers and wine clubs that have a Swedish website and organization, but which are registered in another EU country. These online retailers are generally considered to operate within the limits of the Rosengren ruling provided that the company ships the alcohol directly from outside Sweden to the consumer and registers to pay Swedish alcohol taxes. In 2009, a previous government funded investigation proposed a ban on these types of businesses but the proposal never made it through the legislative process. However, it was noted that the situation had to be surveyed, in case of future developments.

Since then there has been a steady growth in the online retail of alcohol facilitated by an independent intermediary and Systembolaget has repeatedly expressed concern over the recent developments.  In June 2013, Systembolaget filed a complaint against Swedish food store "CityGross" hoping to get a pilot case on the legality of the online retail of alcohol facilitated by intermediaries. The reason for the complaint is the current cooperation the Swedish food store CityGross has with the Danish company, WineFinder, which makes it possible for CityGross' customers to buy alcohol from WineFinder and have it delivered to their local CityGross store. Citygross claims that the cooperation is legal in light of the Rosengren ruling and the established right to privately import according to the Alcohol Act whereas Systembolaget considers it in violation of the retail monopoly. However, should other food stores in Sweden follow in these footsteps and engage in similar cooperative efforts with online retailers, it could effectively render the state retail monopoly on alcohol less effective.

General contents of the proposal

There are currently no supervisory rules in place concerning the online retail of alcohol and as such the government is unable to control if the alcohol being bought online is delivered to recipients who are of age and legally able to buy alcohol according to the provisions of the Alcohol Act. The investigation states that it would be difficult to enforce supervision on the online retail itself as it is based outside of Sweden and it would be virtually impossible to make sure that a person buying alcohol online is of age.  The new supervisory rules are therefore focused on the end-supplier in the retail chain that delivers the alcohol to consumers. The proposed supervision of the suppliers has been tailored to fit with the current system for supervision concerning the sale of medium-light beer, which is exempted from the retail monopoly. The Swedish National Institute for Public Health is in charge of the general supervision by issuing provisions, recommendations and collecting statistics, whereas the operational supervision is carried out by local municipalities which ensure the observance of the law and have the right to impose administrative sanctions.

The new rules impose a duty of notification (Sw: anmälningsplikt) on suppliers involved in the commercial delivery of alcoholic beverages to private persons. The notification shall be made to the municipality where the company has its registered office or if the company has its office outside of Sweden, the municipality of Stockholm. The Swedish National Institute for Public Health will keep a national registry over all suppliers that deliver alcoholic beverages to Swedish consumers in order to get a clear view of the magnitude of the online retail that is occurring on the Swedish market.

For a supplier, fulfilling the duty of notification will be a prerequisite for being allowed to deliver alcohol to Swedish consumers and a failure to do so will be prohibited according to the Alcohol Act. Furthermore, the rules stipulate that the supplier has to ensure that the recipient meets the legal age requirement when delivering the alcohol. The municipalities will have a right to "stage" sales, in order to ensure that suppliers comply with this demand.

The proposed rules are enforced with both administrative and penal sanctions. The municipalities that are in charge of the supervision on an operational level have also been given the right to administrative sanctions and can impose prohibitions or issue warnings to suppliers. A supplier that neglects a prohibition imposed by a municipality, or refuses to comply with the duty of notification, will risk having to pay a fine of up to 6 months in jail. 

Criticism of the proposal

Systembolaget has released an official comment on the investigation's proposal expressing harsh criticism towards the supervision of online retail.  According to Systembolaget, some of the online retail facilitated by an intermediary shows striking similarities with ordinary retail sale which is prohibited according to the Alcohol Act. According to Systembolaget, this type of online retail does not fall within the scope of the Rosengren ruling, and the new rules on supervision will result in an indirect legitimization.  Furthermore, Systembolaget states that in order to ensure an effective supervision of the online retail, the legality of the retail itself has to be clear. The investigation discusses these concerns in the report and admits that there is currently legal uncertainty regarding the online retail occurring on the Swedish market. Unfortunately, the investigation found that it was not within its ambit to legally assess the current legislation on the right to private import as well.  The investigation still decided to propose new rules concerning the supervision as it reasoned that some type of online retail would still be legal in the future, albeit perhaps not in the same scope as it is today.

Conclusion

According to the investigation, the proposed rules on supervision are planned to be in force by July 2014 but there is still a long road ahead. Valid points of criticism have been made as to the appropriateness of implementing a system of supervision when the legality of the object of supervision itself can be questioned. The discussion following the proposal as it goes through the legislative process will surely draw attention to the need for judicial clarification, either by a court of law or through legislation. Legislators will have to walk a fine line between respecting the judgment of the European Court of Justice and at the same time uphold the effectiveness of the retail monopoly.

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