Sweden’s international reputation as a paragon of business ethics was tarnished when Sweden’s leading daily newspaper, Svenska Dagbladet exposed the country’s largest retail cooperative’s wanton breach of contract against a small wine club operator.

This story reveals not only how unethically Kooperativa Förbundet (The Swedish Cooperative Union – KF) has acted but also how the powerful forces for the status quo can hinder innovation, entrepreneurship and competition in Sweden.

When KF approached my company, Antipodes Premium Wines, to cooperate in the marketing of our quality wine products with their new expensive online grocery business we could see the synergies. Food and wine was our passion and delivering both at the same time would be a great benefit for consumers.

A two year contract was signed in January 2008 that we would jointly market each other’s services and they would also deliver wine to the customers of www.australianwineclub.se in Stockholm. From March to August 2008 Mataffären branded vans delivered wine orders to our customers and the cooperation was friendly and successful. KF’s senior executives Pär Jansson and Lars Idermark took responsibility for approving the contract which is at the centre of the controversy.

KF is owned by its 3 million members, has close political ties and is therefore not as profit motivated as the other grocery chains. When the marketing partnership became known and certain factions criticized them for competing with the government alcohol monopoly they tore up the contract without legal cause.

My company made a large investment to develop a website for Mataffären Vinklubb and properly fulfill our obligations in the marketing contract. The Managing Director of Mataffären and APW were very positive about the prospects for selling quality bottled wine priced over 90kr and food together and enabling customers to have them delivered at the same time.

Despite the legality of the service and the contract it had signed with Antipodes Premium Wines, KF’s Jansson and Idermark caved in to external pressures and brazenly terminated the contract. “Our three million members do not want us to sell wine,” I was told by Jansson.

Maybe a few of them don’t but a contract was signed and fair compensation must be paid if they made a bad decision they want to get out of. It is a wonder how two senior business leaders in Sweden can firstly not anticipate their shareholders/members wishes before entering into a contract and then secondly tear up a contract with complete disregard for the legal and ethical implications.

KF disregarded the contract entirely and offered no form of compensation despite our company’s legal right to be reimbursed for lost profits and investment made. They bullied and threatened us in the hope that our small company would quietly disappear. We did not.

Australian Wine Club has over 27,000 very satisfied members who enjoy our unique home delivery service of quality wine from around the world (none of which are available at Systembolaget) and passion for food and wine. Food and wine is a growing interest in Sweden shared most likely by many of KF’s 3 million members. But if they want to indulge their hobby they will have to look elsewhere to do it because KF does not believe in letting consumers exercise their legal right to choose where to buy wine.

More information can be found at my blog, Wine Freedom and on Australian Wine Club.

Footnote: The Swedish Cooperative Union declined an offer to reply to the above article.