The European Antitrust Review 2015 • Section 4: Country chapters
In Switzerland, competition law is governed by the Federal Law of 6 October 1995 on Cartels and Other Restraints of Competition (the Cartel Act). The regulatory framework is complemented by numerous federal ordinances and general notices as well as communications of the Competition Commission (ComCo or the Commission). On 22 February 2012, the Federal Council submitted to Parliament its bill for a number of amendments of the Cartel Act for approval. Parliamentary deliberations started in summer of 2012. On 6 March 2014, the National Council dismissed all amendments already approved by the Council of States. In the meantime, the Council of States confirmed its decision to amend the Cartel Act. The revision will go back to the National Council. If this chamber of Parliament rejects the amendment again, the revision process will end.
The draft provides for amendments of the Cartel Act in the areas of per se prohibition of hard-core restrictions, institutional reform and reform of merger control. The strengthening of private enforcement, mandatory reduction of sanctions in the case of compliance programmes and procedural improvements to increase legal certainty are also the focus. Furthermore, Parliament is, by its own initiative, examining the introduction of criminal sanctions against individuals and the prohibition of illegal price differentiations. The most controversial sanctions will be discussed below.
Per se prohibition of hard-core estraints
One of the most controversial issues under the cartel reform concerns hard-core restraints. The draft provides that hard-core restraints shall be treated in the future in a much more restrictive manner. Horizontal agreements and vertical agreements on prices, territories and quantities shall be governed by a (partial) per se prohibition. The partial per se prohibition of hard-core restrictions would lead to a paradigm shift from an effects-based approach to a form based approach. So far, the so-called hard-core restrictions are only unlawful if the relevant practice has an appreciable effect on effective competition.
If an agreement on prices, territories or quantities is established by ComCo on formal (not effects-based) criteria, the agreement would be prohibited unless the undertakings in question can provide sufficient evidence to justify the actions on grounds of economic efficiency. The shift of the burden of proof to the undertakings under scrutiny applies to all kinds of potential restraints of competition. In the future, companies will be obliged to justify every potential restriction of competition based upon evidence provided by them.
This reform is heavily criticised by trade associations as the formation of ad hoc consortiums for public tender procedures would be more difficult. So far, such ad hoc consortiums are very important in large infrastructure projects.
Prohibition of price differentiations
Parliament is also discussing the prohibition of illegal price differentiations. It means that the international companies selling branded products abroad for lower prices than on the Swiss market should be forced to sell these products abroad also to Swiss customers at such lower price. As a result, international companies would be forced to sell their products or services to Swiss customers at the conditions and prices charged in other OECD countries. However, the current wording of the provision (as approved by the Council of States) would not imply that Swiss customers could ask for delivery in Switzerland at lower prices. The Swiss customers would have to accept the services and goods aboard. Nevertheless, this provision would entail a unique intervention into multinational companies’ freedom to implement international price differentiation strategies.
The Swiss competition authority is made up of the Commission and its Secretariat; the Commission takes the decisions (decisive body) and the Secretariat investigates (investigative body). The accumulation of investigation and decision-making into one authority has been strongly criticised. The critique applies also to the fact that the separation of the responsibilities between the Commission and the Secretariat is not very clear. In addition, the Commission currently includes representatives of industry, trade associations and unions, which raises some independency questions. Moreover, under the present law, the Federal Administrative Court (FAC) acts as a lower appellate court which reviews the decision of the Commission as to the law and to the facts. In practice, the FAC does not use its full jurisdiction and deliberately reduces the depth of its reviews with the justification that ComCo is a special authority with specific expert knowledge.
Thus, the proposed amendments suggested the introduction of a two-tier structure. The Federal Council proposed the introduction of a Competitiion Authority (CA), which would conduct investigations without having any decisive power. The CA would not include any representatives of industry, trade associations and unions. Furthermore, the FAC, which will be composed of judges with entrepreneurial experience and specific competition law knowledge, will be de facto able to take decisions upon motion of the CA with full jurisdiction. A parliamentary deliberation in the Council of State rejected this proposition as a result of a recent decision of the Federal Supreme Court of 29 June 2012 in the well-known Publigroupe case, which confirmed the lawfulness of the current system.
Reform of merger control
In regard to the merger control reform, the draft suggests replacing the current substantive test with the significant impediment to effective competition (SIEC) test presently used under the European merger regime. The other proposed amendments in this regard include an extension of the review period of the preliminary investigation in Phase I by 21 days and in Phase II by two months. Nevertheless, these possibilities to extend the review period would be subject to an agreement between the authorities and the undertakings concerned. Secondly, a waiver of the notification obligation in the case of a concentration where all relevant geographic markets would comprise at least the EEA plus Switzerland and the concentration is assessed by the European Commission. In such cases, the filing of a copy of the Form CO with the Swiss authorities for information purposes but without review would be sufficient.
Other new developments
On 17 May 2013, the EU and Switzerland signed an agreement concerning cooperation on the application of their competition laws, the so-called ‘second-generation’ agreement, which includes explicit provisions on the exchange of confidential information obtained by the competition authorities when they investigate the same case. The agreement distinguishes between oral discussions and the transmission of documents to other competition authorities. The competition authorities may discuss any information, including information obtained by investigative process, as necessary to carry out the cooperation and coordination provided for under this agreement. When such information contains personal data, it may only be given if the European Commission and the Swiss competition authority investigate the same or related conduct or transaction. Additionally, both authorities may transmit information already in their possession and obtained by investigative process to the other authority where both competition authorities are investigating the same or related conduct or transaction. Up to now, it was only possible with an express consent of undertaking (on the informal basis of waivers issued). However, with regard to information made available to any of the authorities in the context of a leniency or settlement procedure, the exchange of information or documents is still not permitted unless the leniency applicant has given its express consent in writing. The cooperation agreement is currently subject to approval in the parliament. The approval by the National Council is outstanding.
Last but not least, as of 1 May 2013, the Swiss procedural laws have also been harmonised with respect to legal privilege, including cartel proceedings. Under the new regime, legal privilege extends to any file produced in the course of the (core) professional activity of an independent attorney, no matter where a document is found. Nevertheless, this procedural amendment does not apply to in-house counsels.
Road construction and civil engineering companies investigations
As far as case law is concerned, there have been a number of decisions of the Commission. One of the most controversial ones regarded bid-rigging cartels in the construction sector in the different Cantons of Switzerland. The last decision on this matter was rendered in June 2013 and concerned a bid-rigging cartel in the field of street construction works in the Canton of Zurich. The Commission came to conclusion that several companies in the Canton of Zurich made arrangements in order to coordinate the award of contracts and to allocate construction projects and customers. In its decision, the Commission confirmed its previous practice, according to which immunity can be granted even if an application for leniency is filed only after a dawn raid has taken place as long as it is the first leniency application and provides sufficient evidence of an infringement.
The first decision regarding bid rigging in the construction sector in the Canton of Argovia is still pending before the FAC. The Commission issued its decision on this matter in December 2011 in which it argued that the parties agreed unlawfully on prices and the allocation of customers in more than 100 cases of public and private tenders. The imposed individual fines range from between approximately 5,000 and 1.4 million francs and total approximately 4 million francs. Six companies benefited from a reduction of their sanction, whereas one undertaking obtained a full waiver of its sanction under the leniency programme. Some of the parties have submitted an appeal with the FAC against the decision of the Commission, basically on the grounds that the Commission has not properly proven the existence of a bid-rigging agreement in the several investigated cases. The decision of the FAC is expected to be announced soon.
Air freight cartel
On 2 December 2013, the Commission imposed sanctions of total 11 million francs on 11 airlines for freight transport price fixing. The involved airlines – including British Airways, Air France-KLM and SAS – were fined for allegedly agreeing on freight rates, fuel surcharges, war risk surcharges, customs clearance surcharges for the United States and on the commissioning of surcharges. Lufthansa Airlines, the parent company of Swiss International airline, was also involved, but gained immunity from sanctions by acting as a whistle-blower and avoided being fined. According to the Commission’s Annual Report 2013, based on the practices relating to the various price elements, there was apparently no doubt that a horizontal price-fixing agreement took place. The investigation into the airline price fixing was very complex, in particular because so many of the companies involved concluded air transport agreements in place with third-party states. Switzerland, for instance, is part of an air transport agreement with the European Union, which allows for partial integration in transporting goods by air. As a result, the Commission had to consider Swiss competition law as well as EU competition rules. Appeals are pending before the FAC.
On 27 May 2013, the Commission imposed fines of 16.5 million francs on 10 wholesalers of French-language books due to unlawful territorial agreements. The Commission came to the conclusion that between 2005 and 2011 wholesalers prevented Swiss bookshops from purchasing books from abroad at lower prices. The Commission claims in its Annual Report 2013 that the wholesalers have developed distribution systems designed to restrict competition in the procurement market for French-language books. The Commission argued that due to exclusive agreements between the wholesalers and the publishers, it was impossible for the bookshops to purchase books from abroad during the given period. The book market in the French part of Switzerland is special in the sense that the book shops need fast deliveries and the ability to return books that have not been sold to customers. Therefore, the reason why many book stores have not tried to import books from abroad could also be explained by the special service that Swiss wholesalers provide. Many of the wholesalers involved in the investigation have not accepted the decision. They argue that foreign resellers have not been restricted to sell books to Swiss customers and that therefore article 5 alinea 4 Cartel Act was not infringed. Appeals are pending before the FAC.
On 21 October 2013, the Commission terminated the investigation concerning Swatch Group’s planned implementation of its new supply policy. As a result, an amicable settlement between the Secretariat and the Swatch Group was concluded. According to the settlement, the obligation to supply certain components of a mechanical watch shall continue until the end of 2019. Based on the average for the years 2009 to 2011, Swatch Group and ETA agreed to supply 75 per cent of the previous volume in 2014/2015, 65 per cent in 2016/2017 and 55 per cent in 2018/2019. Furthermore, Swatch Group and ETA made a commitment to ensure equal treatment to all their customers. Should market conditions develop in a manner which is substantially different from what has been agreed, the Commission reserved the right to reconsider the obligation to supply.
On 3 December 2013, the FAC decided in favour of appellants (Pfizer AG, Eli Lilly SA and Bayer AG) and overturned the three fines of around 5.7 million francs imposed by the Commission. In its decision of 2 November 2009, the Commission held that Pfizer AG, Eli Lilly SA and Bayer AG had fixed the retail prices for their off-list medicines for treating erectile dysfunction (Viagra (Pfizer), Levitra (Bayer) and Cialis (Eli Lilly)) in the form of recommended retail prices and had therefore implemented an unlawful agreement affecting competition. In its analysis of the relevant competitive relations, the FAC took the view that the general conditions under the law on therapeutic products (the ‘prescription only’ requirement and the ban on public advertising), in view of the psychologically effective ‘embarrassment factor’ among patients concerned, prevented price competition within the market at the level of retail outlets to the extent that a statutory reservation in terms of Cartel Act must be assumed. For that reason, it came to the conclusion that the Cartel Act did not apply to the matter in dispute, which meant that the contested sanction rulings had no legal basis. The Commission (formally the Federal Department of Economic Affairs) has filed an appeal to the Federal Supreme Court.
On 19 December 2013, the FAC dismissed the appeals filed by the Elmex manufacturer GABA International AG (Gaba) and its Austrian licensee Gebro Pharma GmbH (Gebro). The appeals concerned the decision of 30 November 2009 of the Commission imposing sanctions of 4.8 million francs against Gaba and 10,000 francs against Gebro. The FAC regarded a clause in the licence agreement between those two companies as an unlawful vertical territorial agreement under the Cartel Act. The FAC decided in favour of the Commission and took a view that a clause agreed to in writing which prohibited passive sales from Austria and therefore parallel imports into Switzerland (an export ban) constitutes an agreement under Cartel Act, which significantly restricts competition (article 5 alinea 4 Cartel Act). Moreover, the FAC held that such hard-core restrictions impede effective competition based on their form and that an effect-based approach (as the Commission took) is not necessary, as such hard-core agreements will inherently have a significant impairment on competition. The decision of the FAC very much surprised the ‘Swiss antitrust community’ as this is exactly the approach proposed by the Federal Council with the introduction of the so-called partial per se prohibition of hard-core restrictions. If the Swiss Federal Court confirms the view of the FAC, the revision will no longer be required.
The parties have filed appeals to the Federal Supreme Court.
In an order dated 21 October 2013, the Commission discontinued an investigation relating to cosmetic products. Even though the investigation has revealed that the concerned parties have concluded certain agreements (territorial protection agreements, restrictions on online trading and price recommendations), the Commission came to the conclusion that these agreements did not harm competition substantially, taking into account the negligible market shares, the low market concentration and the rather modest international price differences. In addition, the undertakings under investigation voluntarily amended the problematic clauses and concerted practices during the investigation.
The preliminary investigation against Harley-Davidson was terminated on 25 September 2013 without consequences. Similarly to the investigation relating to cosmetic products, the Secretariat regarded the ban on exports of Harley-Davidson products from the United States to Switzerland as an insignificant restraint on competition.
On 29 June 2012, the Federal Supreme Court confirmed a sanction of 2.5 million francs imposed against Publigroupe SA, as well as, for the first time, the lawfulness of the current institutional set-up taking into consideration the European Convention on Human Rights. As a result, an initial amendment of the Swiss Federal Council to introduce an institutional separation between an investigatory body and a competition court was rejected by the National Council.
Other ongoing investigations
In February 2012, the Commission opened an investigation against several large banks having received a leniency application which indicated that derivative traders of various banks may have influenced the reference rates Libor and Tibor fixed with respect to certain currencies. In addition, according to the Commission, the derivative traders may have colluded to manipulate the difference between the ask price and the bid price (spread) of derivatives based on these reference rates to the detriment of their clients. The investigation is very complex and due to its international dimension raised legal questions concerning data protection and bank secrecy issues. The investigation is still ongoing.
Finally, on 22 February 2012 the Commission opened a formal investigation against the Swiss press agency Schweizerische Depeschenagentur (SDA) for suspected abuse of a dominant position. The investigation aims to clarify whether SDA abused its alleged dominant position on the market by impeding competitors or discriminating against customers and concerns mainly SDA’s rebates policy, including exclusivity rebates and allegations of bundling. The preliminary investigation indicated that the SDA’s pricing system may have been focused on squeezing out existing competition and preventing market entries. The investigation is still ongoing.
With the opening of an investigation on 22 May 2013 into various Swiss concessionaries of manufacturers in the Volkswagen Group (VW, Audi, Škoda, Seat), the Secretariat examines information that it had obtained on possible pricing arrangements between these concessionaries.
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