Overview
Consumers and businesses alike are 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. The federation’s membership includes 9,000 member firms active in retail and wholesale trade. The major distribution centers in Sweden are Stockholm, Gothenburg, and Malmo. Stockholm is the capital and the business center of the country with a metropolitan area population of about 2 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 base for their headquarters for their Nordic and Baltic operations.
Gothenburg, Sweden’s second-largest city, is the nation’s foremost port for international shipping as well as the largest port in Scandinavia. Located on the southwestern coast, Gothenburg is also the center of a fast-growing industrial complex representing a wide spectrum of manufactured products. 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 physically links Northern Europe with the Continent.
The northern two-thirds of Sweden are sparsely populated, but growing in importance, as the area contains many large industrial sites for forest products, mining, and hydroelectric power. There are currently several projects testing new technologies to decrease the CO2 emissions of energy intensive industries like mining and steel production. Major population centers there include Sundsvall, Skelleftea, Lulea, and Umea.
>For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.
Using an Agent or Distributor
Although there are several U.S. subsidiaries in Sweden, most U.S. firms still rely on agents or distributors to represent their business in Sweden.
A visit to the market is the best way to appraise the relative merits of prospective agents/distributors. Close contact between the U.S. company and the Swedish agent/distributor is very important and should be developed early.
Direct sales are also a possibility, but using an agent or distributor is usually the most effective way to enter the Swedish market.
Many agents and distributors will prefer exclusivity given the size of the market and since they will typically invest effort and financial resources into building brand awareness and developing a market position for the U.S. product or service. It is advisable to carefully think through the issue of exclusivity versus non-exclusivity before entering into negotiations with potential partners. Clearly stated terms, including performance measures and termination clauses, should be built into any agreement granting exclusivity.
Companies wishing to use distribution, franchise, and agency arrangements need to ensure that the agreements they put into place are in accordance with 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. 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. It also establishes the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that according to the Directive, parties may not derogate from 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.
Establishing an Office
Sweden has no rules that discriminate against foreign investors, and shareholders may reside in any country. 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 Swedish market. 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 this procedure, as it is much easier to acquire a pre-registered off-the-shelf company and adapt its articles of association to the needs and intents of the investor. The share capital must be at least SEK 25,000 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). Both a branch and a limited company must be registered with the Swedish Companies Registration Office and the Swedish Tax Agency.
The Verksamt.se website contains information and services from different Swedish government agencies regarding the starting, running, developing and closing a business in Sweden. Business Sweden also provides information on requirements and options regarding the establishment of a local company presence.
For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of State’s Investment Climate Statements Website.
Franchising
In Sweden, franchising is a popular business model common in many industries. However, the majority of franchises operating in Sweden are of Swedish origin. There are several laws that govern the operation of franchises within the EU, but these laws are relatively broad and generally do not constrain the competitive position of U.S. businesses. More information on specific legislation can be found on the website of the European Franchise Federation.
There is no specific comprehensive franchise legislation in Sweden. The only direct franchise-related legislation is a disclosure obligation for the franchisor. Under the Swedish Franchise Disclosure Act (Law no 2006:484), a franchisor must provide a prospective franchisee with certain information before a franchise contract is entered. The legislation covers all franchise contracts in Sweden: domestic and foreign contracts; master franchise contracts and unit contracts; new contracts; and renewals of old contracts.
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.
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 to boost competitiveness. Launching large-scale franchise operations may not be realistic in a market the size of Sweden’s. It can also be challenging for potential Swedish franchisors to secure financing for foreign franchises.
Among the most well-known American branded franchises operating in Sweden are fast food or casual restaurants such as McDonald’s, Burger King, Pizza Hut, Hard Rock Café, TGI Friday’s, Subway, Starbucks, KFC as well as Avis, Hertz, Mail Boxes Etc., Remax Real Estate, and 7-Eleven.
The Swedish Franchise Association is a member organization for both franchisors and franchisees, arranging several annual activities.
Direct Marketing
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.
The EU has strict laws governing the protection of personal data, including the use of such data for direct marketing activities. As of 25 May 2018, the General Data Protection Regulation (GDPR) applies in the EU. The GDPR is a horizontal privacy legislation that applies across sector and to companies of all sizes. It replaces the previous data protection Directive 1995/46. The overall objectives and underlying principles of the legislation remain the same. Businesses must inform consumers that they are collecting personal data and have a legal basis to process and retain the data.
The GDPR is broad in scope and uses broad definitions. “Personal data” is any information that relates to an identified or identifiable living individual (data subject) such as a name, email address, tax ID number, online identifier, etc. “Processing” data includes actions such as collecting, recording, storing, and transferring data.
A company that is not established in the Union may have to comply with the Regulation when processing personal data of EU and EEA residents (EEA countries include Norway, Lichtenstein, and Iceland) and Switzerland:
a) If the company offers goods or services to data subjects in the EU, or,
b) If the company is monitoring data subjects’ behavior taking place within the EU.
The mere accessibility of a company’s website in the EU is insufficient to subject a company to GDPR, but other evidence of the intent to offer goods or services to data subjects in the EU would be relevant. For instance, conducting advertising campaigns directed at EU markets or mentioning an EU member state in relation to the good or service could be relevant. The European data protection authorities published guidelines to help companies determine whether they fall within the GDPR’s territorial scope.
As a general rule, companies that are not established in the EU but that are subject to the GDPR must designate in writing an EU representative for purposes of GDPR compliance. There is an exception to this requirement for small scale, occasional processing of non-sensitive data.
Fines in case of non-compliance can reach up to 4% of the annual worldwide revenue or 20 million euros – whichever is higher. Companies of all sizes and sectors should consider GDPR as part of their overall compliance effort with assistance of legal counsel.
The European Commission and Data Protection Authorities released official guidelines to help companies with their compliance process. These documents relate, for instance, to the role of the data protection officer, personal data breach notification, data protection impact assessment.
Note: the EU is currently updating its e-privacy legislation governing confidentiality of communications. If enacted, this legislative instrument could add several requirements in addition to the GDPR. We encourage U.S. exporters to monitor this situation as it evolves through the EU legislative process.
For more information:
Transferring Customer Data to Countries outside the EU
The General Data Protection Regulation (GDPR) provides for the free flow of personal data within the EU but also for its protection when it leaves the region’s borders. The GDPR sets out obligations on data controllers (those in charge of deciding what personal data is collected and how/why it is processed), on data processors (those who act on behalf of the controller) and gives rights to data subjects (the individuals to whom the data relates). These rules were designed to provide a high level of privacy protection for personal data and were complemented by measures to ensure the protection is maintained when data leaves the region, whether it is transferred to controllers, processors or to third parties (e.g. subcontractors). EU legislators put restrictions on transfers of personal data outside of the EU, specifying that such data could only be exported if “adequate protection” is provided. The European Commission is responsible for assessing whether a country outside the EU has a legal framework that provides enough protection for it to issue an “adequacy finding” to that country. The U.S. does not have an adequacy decision (see section on the EU-U.S. Privacy Shield below). This means that U.S. companies can only receive personal data from the EU if they:
- Provide appropriate safeguards (e.g., standard contractual clauses, binding corporate rules), or,
- Refer to one of the GDPR’s derogations.
For more information:
EU data protection authorities’ FAQs on data transfers to the U.S.
Important note:
The legal environment for data transfers to the United States continues to evolve. Companies that transfer EU citizen data to the United States as part of a commercial transaction should consult with an attorney, who specializes in EU data privacy law, to determine what options may be available for a transaction.
The EU-U.S. Privacy Shield
The EU-U.S. Privacy Shield Framework was established by the U.S. Department of Commerce and the European Commission to provide companies on both sides of the Atlantic with a mechanism to comply with EU data protection requirements when transferring personal data from the European Union to the United States in support of transatlantic commerce. On July 16, 2020, the Court of Justice of the European Union issued a judgment declaring as invalid the European Commission’s Decision (EU) 2016/1250 of July 12, 2016, on the adequacy of the protection provided by the EU-U.S. Privacy Shield. As a result of that decision, the EU-U.S. Privacy Shield Framework is no longer a valid mechanism to comply with EU data protection requirements when transferring personal data from the European Union to the United States. This decision does not relieve participants in the EU-U.S. Privacy Shield of their obligations under the Privacy Shield Framework. For more information, consult the website of the U.S. Department of Commerce, Privacy Shield Framework.
In March 2022, the United States and the European Commission reached a deal in principle on the Trans-Atlantic Data Privacy Framework, which will enhance the existing Privacy Shield Framework. The U.S. government and the European Commission are continuing their cooperation with a view to translate this arrangement into legal documents that will need to be adopted on both sides to put in place this new framework. For that purpose, these U.S. commitments will be included in an Executive Order that will form the basis of the Commission’s assessment in its future adequacy decision.
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. A legal form of business must be formed to pursue the project.
Express Delivery
There is a wide selection of international and local express delivery companies that offer reliable courier/last mile services in Sweden. When goods are imported to Sweden from outside the EU, they must be reported to Swedish Customs. The courier companies perform the required customs procedures, delivering the package when all costs have been paid. All non-EU imports are subject to VAT and charges such as customs duties and administrative fees can also be applied. Information about which charges apply as well as import restrictions, can be found on the Swedish Customs website.
Due Diligence
Product safety testing and certification is mandatory for the EU market. U.S. manufacturers and sellers of goods have to perform due diligence in accordance with mandatory EU legislation prior to exporting.
The Commercial Service in Stockholm offers the International Company Profile service which provides background reports on potential agents and distributors, as well as other Swedish firms.