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Switzerland: Competition Commission
Chairman of the Swiss Competition Commission
The Swiss Competition Commission (ComCo) and its Secretariat protect and promote competition in Switzerland. In the last few years, we have focused on two key themes: market foreclosures and hard-core cartels.
Preventing market foreclosures
ComCo has been busy on three fronts in its activities to prevent market foreclosure. First, in the internal market it recommended the opening up of cantonal markets for notarial services, which are currently subject to restrictions. Second, the investigation into restraints on parallel imports of French-language books led to sanctions imposed on the convicted companies. And the third front is a somewhat special case relating to the watch market – special because it is potentially unique in international terms.
For historical reasons, Swatch Group has held a dominant position in the market for mechanical watch movements and assortments (the regulating components of a mechanical watch movement). It supplies these core components to a large number of Swiss watch manufacturers for mechanical ‘Swiss-made’ watches that are highly successful globally. Swatch Group has expressed its intention of phasing out the supply of these products to Swiss watch manufacturers. A reduction in supply that is too rapid could constitute an abuse of the dominant position – the watch manufacturers would be obstructed in the market for mechanical watches, if not actually excluded from it. Swatch Group therefore sought to find a solution for phasing out supplies in accordance with the Cartel Act by means of an amicable settlement with the Secretariat. In this amicable settlement, the Secretariat had the task of finding a balance between reducing supplies from Swatch Group and the availability of products from alternative manufacturers, so as to maintain ‘effective’ competition in the market for mechanical watches.
The Secretariat and Swatch Group reached an amicable settlement in the spring of 2013 and, following a market trial, submitted it to ComCo for approval. The hearings held by ComCo for the watch manufacturers concerned showed that a discontinuation of supplies may be regarded as acceptable in relation to mechanical watch movements, but must be regarded as premature in relation to assortments due to the lack of sufficient alternatives. This eventually led to a second, revised amicable settlement, which allows Swatch Group to gradually reduce the supply of mechanical watch movements by the end of 2019 and ultimately stop supplies altogether without abusing its dominant position. The duty to supply assortments continues for the time being. A reduction or termination of these supplies is possible in the future, but depends on future market developments (creation of alternative sources of production).
The special feature of this case was that there was no abuse by a dominant undertaking to be assessed or sanctioned. Instead, the task was to regulate a planned practice so that no such abuse could occur. With regard to the aim of the Cartel Act, ‘to prevent the harmful economic or social effects of cartels and other restraints of competition and, by doing so, to promote competition in the interests of a liberal market economy’, such intervention by the competition authorities is not only consistent with this aim, but almost essential.
Fighting hard-core cartels
In its focus on hard-core cartels, ComCo looked particularly at bid rigging. In 2013, we concluded an investigation into bid rigging in the road construction industry in the Canton of Zurich. However, there is still evidence for collusive behaviour in procurements in other regions and sectors. The Secretariat of ComCo has conducted dawn raids in undertakings from the construction sector in two cantons and in undertakings in the business of tunnel cleaning.
Last year we concluded an investigation into price-fixing agreements in the field of aviation with sanctions being imposed on the companies at fault. Between 2000 and 2005, several airlines agreed on elements of the price for air freight transport. The case has been characterised by a high complexity of proceedings because of the large number of air transport agreements with third-party states. This complexity and the lack of agreements to formally cooperate with foreign authorities in applying and enforcing competition law led to the long duration of the proceedings.
The Swiss competition authorities are also investigating other behaviours with an international dimension. In the financial services sector, we investigated agreements to influence the reference interest rates Libor, Tibor and Euribor, as well as derivatives based on them. After a preliminary investigation starting last year, ComCo opened another investigation into the financial services sector at the end of March 2014. The probe into the alleged manipulation of foreign-exchange rates is against eight investment banks from Switzerland, the UK and the US. The international dimension has been complex and time-consuming, particularly in obtaining data from abroad. In its investigations, the Secretariat had to issue orders to provide information from companies that were contested by the involved parties. The Federal Administrative court affirmed these orders.
To date, ComCo and its Secretariat have largely been left to their own devices when applying the Cartel Act. As the investigations into the field of aviation and the financial markets had shown, this could lead to a prolonged duration of proceedings given the current lack of agreements with other competition authorities that would permit a formal cooperation in the application and enforcement of the competition law. Although the competition authorities may exchange information and experiences with other competition authorities on an informal basis as part of its involvement in the Competition Committee of the OECD or in the International Competition Network (ICN), no information that is protected by official secrecy can be exchanged in the absence of a statutory basis for doing so. However, we expect a change in the near future with the ‘Agreement between the Swiss Confederation and the European Union concerning Cooperation on the Application of their Competition Laws’ (the Agreement).
In essence, the Agreement regulates cooperation between the Swiss and the European competition authorities. It is a purely procedural agreement and does not provide for any substantive harmonisation of competition laws. In the absence of joint substantive provisions and in the absence of any market access aspect to the Agreement, the issue of joint institutions did not arise. Apart from new provisions on exchanging information, which lends the Agreement the character of a ‘second-generation agreement’, the Agreement is largely based on the agreements the EU has concluded with South Korea and Japan.
The Agreement allows the competition authorities to discuss informally non-confidential information that they have obtained by an investigative process or otherwise. In case of an investigation of the same or a related conduct, and in response to a formal request, the authorities can exchange relevant documents in their possession. However, the Agreement contains limits for documents with a special protection, such as reports from the leniency systems or legal professional privilege. Further, the exchanged information can be used only within strict limits.
In May 2013, the Agreement was signed by a member of the Swiss Federal Council and representatives of the European Commission. Both chambers of the Swiss parliament approved the Agreement by June 2014. Therefore, we expect that the Agreement will enter into force soon.
For the future work of ComCo and its Secretariat, the Agreement would facilitate the access to information and evidence in proceedings concerning the prosecution of international cartels or to a cross-border abuse of a dominant position. By mitigating the difficulties in information gathering in cases with an international dimension, the Agreement would lead to more efficient and faster investigations. At the same time, the Agreement ensures compliance with the procedural guarantees of the Cartel Act.
Chairman of the Swiss Competition Commission
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