The European, Middle Eastern and African Antitrust Review 2017

Switzerland: Overview

Kellerhals Carrard

Legal developments

In Switzerland, competition law is governed by the Federal Act on Cartels and other Restraints of Competition (the Cartel Act) of 6 October 1995. The regulatory framework is complemented by numerous federal ordinances and general notices, as well as communications of the Federal Competition Commission (COMCO, formerly the Federal Department of Economic Affairs).

Revision of the Notice on the competition law treatment of vertical agreements in the automobile trade and its explanatory guidelines (the MV Notice)

On 29 June 2015, COMCO completed the revision of the MV Notice on the competition law treatment of vertical agreements in the automobile trade and its explanatory guidelines. COMCO took account of the new legal framework in the EU by revising its contents where appropriate. The aim of the revision was to encourage competition between and within brands in the markets for the sale of new motor vehicles, the sale of spare parts and the provision of repairs and servicing. Vertical agreements that are harmful to competition and give rise to a foreclosure in the Swiss automobile market shall be prevented. Furthermore, the revision aims to ensure greater legal certainty for all market participants. The new notice came into force on 1 January 2016 with a transitional period of one year.

Prohibition of price differentiations (the Altherr parliamentary initiative)

Since the strong Swiss franc challenges export-oriented companies and the tourist industry, a committee for ‘fair import prices’ proposed the introduction of a concept of relative market power into the Cartel Act. According to the committee, this measure would prevent international companies from selling brand-name and preliminary products on the Swiss market at higher prices than abroad. Hans Altherr, a representative of the committee, who is also a member of the Swiss parliament, formally filed a parliamentary initiative, which was unanimously accepted by the preparatory commission of the Council of States. Several other initiatives regarding a partial revision of the Cartel Act are still pending and have not yet been discussed by the Council of States and National Council. It is doubtful whether the proposed amendments of the Cartel Act could effectively address the issues caused by the strong currency. It is especially not clear whether potential decisions of COMCO could be enforced abroad.

Cooperation agreement

According to COMCO, the implementation of the Agreement between Switzerland and the EU on a cooperation concerning the application of their respective competition laws, which came into force on 1 December 2014, has generally started well. The agreement has enabled an exchange of information in various proceedings that previously would not have been possible due to official secrecy regulations. It has been applied in the assessment of mergers as well as in proceedings to investigate restraints of competition. If a company discloses information in the context of a voluntary report or an amicable settlement, an exchange of information only takes place in cases where the company gives its explicit written consent. The cooperation agreement has led to proceedings that could be conducted more efficiently. COMCO claims that this was demonstrated, for example, in the merger of General Electric Company and Alstom Energy.

Recent cases

Tunnel cleaning companies

On 5 February 2013, the Secretariat of COMCO opened investigation proceedings regarding tunnel cleaning against three companies operating in several regions, and began by conducting searches. In its annual report COMCO pointed out that the searches were an important part of the investigations and could lead to vital evidence being secured and could have induced the companies concerned to make voluntary reports of unlawful conduct. In a ruling dated 23 February 2015, COMCO decided that agreements concluded between 2008 and 2013 by three Swiss tunnel cleaning companies operating in several regions constituted price and territorial agreements, which are contrary to competition law. The companies were alleged to have colluded over the terms of their bids in public tendering procedures and agreed who should be awarded the contract in a certain region.

The three involved companies admitted their participation in this restraint of competition during the investigation, which led to a reduced sanction. The amount of the sanction depended on when their voluntary leniency applications were filed and the quality of their cooperation with the competition authorities. The first company that filed the notification during the dawn raid could benefit from a complete exemption from sanctions. In addition, each of the companies reached an amicable settlement with the competition authorities. The fines amounted to a total of approximately 161,000 Swiss francs.

RG/Swisscom/Ringier

In a decision released on 14 December 2015, COMCO assessed a proposed merger of SRG SSR (SRG), Swisscom AG (Swisscom) and Ringier AG (Ringier) in the media sector and raised no objections. In summary, the matter was dealt with as follows:

In the Phase II (in-depth) investigation, COMCO approved the formation of a fully functional joint venture by SRG, Swisscom and Ringier, which shall collectively market the advertising inventories (online, TV, radio and print advertising) of these three major groups of companies. At the same time, by taking advantage of existing synergies, the joint venture shall aim to better use and implement new forms of advertising. Particular focus shall be placed on targeted advertising (including targeted TV advertising).

The key elements in assessing the proposed merger were the delimitation of the relevant markets and their characterisation by COMCO. Although COMCO adhered to its practice in terms of which online, TV, radio and print advertising each form a separate relevant product market, it nonetheless recognised in its considerations that the various markets and forms of advertising are converging. Although the authority defined an extremely narrow market for targeted TV advertising on Swisscom’s TV platform, where the new joint venture will have a market share of 100 per cent, it recognised that other advertising forms, such as targeted online advertising, will exercise a strong competitive constraint on the new joint venture company.

Furthermore, it suggested that the market shares of international giants such as Google or Facebook may have to be taken into account when assessing the Swiss advertising markets. COMCO also emphasised the dynamics in the advertising markets, the convergence of the technologies used in the different advertising markets (eg, OTT-TV) and the uncertainties in the development of targeted TV advertising in the future.

Investigation into Swiss banks regarding trade in precious metals

On 28 September 2015, COMCO opened an investigation into Swiss banks UBS and Julius Baer in addition to five foreign banks regarding their trade in precious metals. COMCO sought to investigate whether banks have been coordinating prices in the trade of metals such as gold, silver, platinum and palladium. Specifically, COMCO suspects price fixing in ‘spreads’. A ‘spread’ is the difference between the bidding price and actual price of a commodity or other asset.

There are two other ongoing investigations relating to financial services:

  • First, an investigation into UBS and Credit Suisse as well as more than 10 foreign financial institutes and other companies concerning alleged agreements in the sector of derivatives transactions, based on LIBOR, TIBOR and possibly other reference interest rates. According to COMCO, collusion between derivative traders has influenced the reference rates LIBOR and TIBOR. In addition, market conditions regarding derivative products based on these reference rates have also allegedly been manipulated.
  • Secondly, an investigation into four domestic banks (UBS, Credit Suisse, Zürcher Kantonalbank und Julius Bär) and four foreign banks concerning the alleged manipulation of foreign-exchange rates (Forex). COMCO believes to have indications that several banks went into anticompetitive agreements to manipulate price rates in foreign exchange trading. Decisions on both cases are to be expected this year or the next.

Wholesalers of sanitary facilities

In its ruling dated 29 June 2015, COMCO imposed fines on wholesale sanitary facilities companies amounting in total to around 80 million Swiss francs, although the main questions were addressed in a preliminary investigation that was closed in 2006. The-over-700- pages long decision was submitted to the involved parties on 23 March 2016. COMCO stated that alleged price and quantity agreements between the companies dated as far back as the 1990s. It further assessed that the majority of the wholesale sanitary facilities companies involved in the cartel made arrangements between 1997 and 2011 on price components and price-determining factors such as gross prices. In addition, COMCO concluded that the wholesale sanitary facilities reached a joint decision not to include manufacturers that did not sell their products exclusively through their sales channels in their catalogues. This prevented the affected companies from entering the market. COMCO reasoned the described practice as prohibited price and quantity agreements. The majority of the wholesale sanitary facilities companies are members of the Swiss Federation of Wholesalers in the Sanitary Facilities Industry (SGVSB). The SGVSB was therefore alleged to serve as the forum for negotiating the agreements. The decision is pending before the Federal Administrative Court (FAC). The FAC will have to decide the important question of whether gross price agreements can be qualified as unlawful price agreements even though the companies involved compete over rebates granted on the gross prices.

ADSL pricing policy

In the ADSL pricing policy case, the FAC rejected the appeal against the COMCO’s ruling of 14 September 2015. The FAC imposed a fine of 186 million Swiss francs on Swisscom. Swisscom was considered to be a dominant undertaking on the wholesale market for broadband internet products which pursued a margin squeeze strategy against its competitors from 2004 to 2007. The FAC stated that Swisscom had abused its dominant position by selling necessary intermediate products at excessive prices while cheaply selling the final product to consumers. This prevented the competitors from competing efficiently against Swisscom. The court predominantly supported COMCO’s decision. It reduced the sanction because it judged the behaviour of Swisscom only as grossly negligent. Therefore, it was not appropriate to take the highest possible penalty payment amount. Furthermore, the FAC changed the operative part of the ruling by eliminating the statement about the dominant position of Swisscom in the market for broadband internet products. The change is important, because undertakings that have been held to be dominant in a market in Switzerland or in an adjacent market or a market upstream or downstream in proceedings under the Cartel Act in a final decision have to mandatorily notify COMCO of any planned concentration. Swisscom has appealed against the judgment to the Federal Supreme Court (FSC).

BMW

In a judgment dated 13 November 2015, the FAC rejected the appeal filed by BMW against the COMCO’s decision of 7 May 2012. COMCO had fined BMW around 156 million Swiss francs for unlawfully preventing parallel and direct imports. The FAC stated in its judgment that in order to guarantee that Swiss law is effective, COMCO has to be able to act if circumstances arise abroad that have an effect within Switzerland. Furthermore, the FAC upheld the COMCO’s (questionable) reasoning that territorial agreements that prevent active and passive sales in a particular region are among the most harmful agreements in competition law terms. These absolute territorial agreements shall, by their nature, be regarded as agreements that cause considerable damage to the quality of competition. Although the Swiss Cartel Act follows an effects-based approach, the FAC ruled that quantitative elements (ie, market shares and interbrand competition) do not have to be taken into account in the assessment. This very important legal question will have to be decided by the FSC. Vertical hard-core restrictions may only be justified on the grounds of economic efficiency, but that did not apply in this case. The court also upheld the view of COMCO that these agreements fall under the sanction provisions of article 49a of the Cartel Act, according to which a company may be fined up to 10 per cent of the turnover that it achieved in Switzerland in the previous three financial years. Thus, it rejected BMW AG’s appeal. BMW has further appealed this decision to the FSC.

Alpine sports products

In a judgment dated 17 December 2015, the FAC upheld the appeal against the COMCO’s ruling of 20 August 2012 regarding alpine sports products and Altimum SA. In 2012, COMCO imposed a fine of 470,000 Swiss francs for retail price maintenance agreements in relation to alpine sports products. According to COMCO, the supplier Altimum imposed minimum resale prices on its products’ retailers, eliminating competition for its goods among sports equipment stores. Now in its judgment, the FAC concluded that the evidence presented by COMCO would support an agreement on a resale price maintenance only in relation to 12 per cent of Altimum’s dealers (ie, 39 out of 333). The FAC stated that this resale price maintenance would fall under article 5 paragraph 4 of the Cartel Act, which presumes that a resale price maintenance agreement eliminates effective competition. However, this presumption of elimination of effective competition could be rebutted. That being said, the Court concluded that the resale price maintenance (while being qualitatively significant) would be quantitatively insignificant because only 12 per cent of the dealers had participated in it. Therefore, the resale price maintenance would not constitute a significant restriction of competition. With this decision, the FAC took into account quantitative elements. It therefore came to the 100 per cent opposite result as in the above-summarised BMW decision. This judgment has been appealed against at the FSC. It is expected that the FSC will soon decide in the Gaba/Gebro case whether or not hard-core restrictions must have an appreciable effect on competition in order to be rendered unlawful.

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