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).
Restriction of Swiss cartel law: per se significance of hardcore restraints
On 21 April 2017, the Federal Supreme Court (FSC) published its written reasoning for its landmark decision on Gaba of 28 June 2016. In its ruling, the FSC rejected Gaba’s appeal and confirmed fines against Colgate-Palmolive Europe Sàrl and Gebro Pharma LLC. In light of the effects doctrine set out in article 2, paragraph 2 of the Cartel Act, the FSC considered the Cartel Act to be applicable to all situations which may have effects in Switzerland. The FSC came to conclusion that, generally, hardcore restrictions of competition (ie, agreements between competitors concerning prices, volumes), it is neither necessary nor permissible to examine the significance of the effects of anticompetitive behaviour in Switzerland. In this respect, the FSC held that an agreement regarding the ban on passive sales for the territory outside Austria between Gaba and Gebro is covered by the Cartel Act. Moreover, the FSC decided that a contractual clause prohibiting a licensee to export into other territories constitutes an illegal agreement that significantly restricts competition, and that vertical and horizontal agreements on price, territory and quantity according to article 5, paragraphs 3 and 4 of the Cartel Act, in principle, significantly restrict competition. The significance of the competition restraints is assumed for hardcore agreements because of their quality without the need to examine quantitative effects, such as market shares. Significance is only absent in the case of minor effects on competition, such as ‘bagatelle offences’, which were not further clarified in the written reasoning. Therefore, horizontal and vertical hardcore agreements are only allowed if they can be justified on the grounds of economic efficiency. In its judgment, the FSC also held that direct sanctions may be imposed for hardcore agreements according to article 5, paragraphs 3 and 4 of the Cartel Act that significantly restrict, but do not eliminate, competition. Following this judgment, it is likely that the definition of the agreements affecting competition as well as grounds of economic efficiency will become more important.
Revised vertical notice following the Gaba decision
In light of the Gaba decision, officials of the authority have announced that COMCO will amend the Vertical Notice to reflect the new decision. The Vertical Notice was partially revised on 22 May 2017. On 12 June 2017, COMCO published for the first time explanatory guidelines on the Vertical Notice, which aim at summarising the existing practice of COMCO and the case law of the courts regarding vertical agreements. Section 12(1) of the Vertical Notice states that, under article 5, paragraph 4 of the Cartel Act, agreements that do not eliminate competition are, in principle, significant according to article 5, paragraph 1 of the Cartel Act. The term ‘in principle’ implies that the minor cases are exempted. Neither the Vertical Notice nor the explanatory notes define a minor case. The Vertical Notice does, however, clarify that a vertical agreement on absolute territorial protection cumulatively requires a distribution agreement, the allocation of a territory and an inter-territorial sales ban. Moreover, according to the established practice of the competition authorities, which is now set out in the Vertical Notice, the following five circumstances do not fall within the scope of article 5, paragraph 4 of the Cartel Act:
- bans on passive sales imposed on the supplier;
- group-internal vertical agreements as long as they do not include market foreclosing practices of dealers not belonging to the group;
- international price differences without corresponding agreements;
- limitations on passive sales to specific customer groups; and
- the prohibition of active sales into territories allocated to other dealers (relative territorial protection).
Unfortunately, the Federal Supreme Court has held in Gaba that the rules contained in the EU Technology Transfer Block Exemption Regulation are not relevant for the treatment of such agreements under Swiss competition law. So, as far as Swiss law is concerned, doubt still persists as to the extent companies should be guided by EU practice. Nevertheless, the statement in the new explanatory notes that the EU’s Guidelines on Vertical Restraints apply analogously is to be welcomed.
Update of the explanatory guidelines on the Vertical Notice
As mentioned before, the explanatory guidelines supplement the Vertical Notice and assist with interpretation. COMCO has updated these explanatory guidelines regarding the selective distribution system. In line with the decision of the European Court of Justice in the Coty case, COMCO states that in case of a selective distribution system regarding luxury products, it is allowed to prohibit the distributor to use visible third-party platforms. (No. 24 of the explanatory notes of the Vertical Notice). According to the authority this does not constitute a restriction of customer groups nor a restriction of passive sales to end consumers and is therefore principally not considered to be a qualitatively serious restraint of competition.
Cantonal initiative for fair procurement prices
The half-canton of Basel City has submitted a cantonal initiative on 14 March 2018. The aim of the initiative is to ensure – either through a revision of the Cartel Act or other means – that Swiss people can procure products abroad to the same prices and conditions as the residents there. Currently, the initiative has not been debated by the Council of States or the National Council. Last year, initiatives with similar goals of cracking the ‘Swiss island of high prices’ such as the Altherr parliamentary initiative or the ‘fair price’ people initiative have been set up. The topic of high prices in Switzerland is often discussed in the media. Following such discussions, suggestions arise that this problem should be solved by revising the Cartel Act. It is very doubtful whether a suggested revision of the Cartel Act would really protect Swiss consumers or help Swiss companies to compete on an international level.
Husqvarna Switzerland AG
On 22 May 2017, COMCO concluded the investigation into Husqvarna Switzerland AG with an amicable settlement and a fine in amount of 656,667 Swiss francs. COMCO came to the conclusion that there were, at least between 2009 and 2015, anticompetitive agreements on minimum prices or retail price maintenance) in terms of article 5, paragraphs 4 and 1 of the Cartel Act between Husqvarna Schweiz AG and its dealers in connection with the sale of robot lawnmowers. COMCO found further indications towards potential restrictions of parallel and direct imports into Switzerland, but decided not to pursue the investigation in this respect since Husqvarna agreed to conclude an amicable settlement and benefited from a partial (80 per cent) reduction of the fine by making use of leniency plus. Full immunity was not given since Husqvarna was considered to be a main leader. The company undertook not to stipulate minimum or fixed retail prices to its specialist dealers in Switzerland, whether directly or indirectly. Recommended prices are expressly to be declared as non-binding. The investigation into other suspicions of unlawful conduct was thus terminated.
On 30 October 2017, COMCO imposed a fine of around 22.6 million francs on SwissPost. SwissPost had abused its dominant position in the business customer market for addressed bulk deliveries weighing over 50 grams. COMCO came to conclusion that SwissPost did not fairly apply both the 2009 pricing system, which applied from 1 July 2009 until 31 March 2011, and the CAPRI pricing system, which has applied since 1 April 2011. SwissPost granted special contractual conditions to business customers whose annual volume of postal deliveries did exceed 100,000 francs. However, other customers with comparable characteristics, were treated differently and unlawfully discriminated against. COMCO held that in many contracts, discounts were agreed that were lower than those specified in the pricing system. For that reason some customers had to pay higher prices than others. This meant that they were unlawfully hindered in their competition with other customers and secondly that they paid SwissPost excessive prices. With the CAPRI pricing system, which has applied since 1 April 2011, SwissPost introduced a supplementary discount. This was intended to reward customers that achieved or exceeded a monthly turnover target agreed with SwissPost, but the customers that failed to achieve the monthly target were penalised. That being said, the pricing system was not sufficiently transparent for customers, which deterred them from outsourcing part of their postal deliveries to the competitor Quickmail. SwissPost has appealed against COMCO’s decision to the Federal Administrative Court (FAC).
Construction services in the canton of Graubünden
On 10 July 2017, COMCO came to conclusion that between 2004 and 2012, construction and civil engineering companies in the canton of Graubünden had agreed prices in relation to bids for more than a hundred public and private construction and civil engineering projects in the Münstertal. According to COMCO, the parties discussed their respective interests in the many construction and civil engineering projects and they decided which company should be awarded the contract. Thereafter, the other companies offered their services at higher prices. COMCO held, that until 2008, this collusion took place in the form of preliminary meetings’ organised by the Graubünden Builders’ Federation (GBV). In subsequent years, the companies involved continued their collusion without the assistance of the GBV. COMCO did not impose fines on the undertaking which reported the behaviour first. Another undertaking was not fined because it was already in the liquidation process. The decision has taken full legal effect. Furthermore, COMCO stated on 26 April 2018 that it has fined several construction and civil engineering companies in the same Canton (in the Engadine) for bid-rigging cartels and imposed sanctions of 7.5 million francs. This decision has not been published.
On 30 October 2017, COMCO terminated its investigation into price-fixing agreements in the galvanising industry and imposed sanctions in amount of 8 million francs. COMCO held that between 2004 and 2016, nine hot-dip galvanising companies from the German-speaking part of Switzerland and the French-speaking part of the Valais regularly entered into price-fixing agreements. The companies agreed to charge their customers certain premiums and to adhere to certain minimum prices. Moreover, they repeatedly agreed on increases in prices. These agreements were reached at various meetings of the Swiss Galvanisers Association (VSV) or of their specialist body, the Schweizerische Fachstelle Feuerverzinken (SFF). The agreed premiums involved a raw materials and zinc price surcharge and a transport costs surcharge. One company avoided sanctions because it was first to report the cartel to COMCO and thus made it possible to open the investigation. The sanctions on the other companies were reduced because these companies made voluntary admissions immediately after the proceedings began. The investigation was opened in early 2016 with a dawn raid. The galvanising companies were very cooperative and agreed to amicable settlement.
LIBOR manipulation proceedings
On 2 February 2012, COMCO opened an investigation into 21 parties, 16 banks and five brokers. COMCO has later split the investigation into five different procedures. The first seven rulings in relation to these investigations were reported on 21 December 2016.
- Swiss franc LIBOR: an amicable settlement and sanctions were approved; the case against the brokers was abandoned.
- Bid-ask spreads based on Swiss franc-interest rate derivatives: an amicable settlement and sanctions were approved.
- EURIBOR: an amicable settlement with the parties that have settled with the European Commission was approved. Proceedings are continuing against several other parties.
- Yen LIBOR/Euroyen TIBOR: an amicable settlement with the parties that have also settled with the European Commission was approved. The case against the Japanese banks was abandoned. The proceedings are continuing against several parties.
- The Yen TIBOR case was abandoned against all involved parties.
In total, COMCO’s sanctions amounted to 99.1 million francs. Two of the five cases – the EURIBOR case and the Yen LIBOR Euroyen TIBOR case – are continuing. With this first round of decisions, it has been possible to conclude a significant portion of the proceedings. The investigations were very complex, both on the merits and with regard to the procedure itself. For instance, COMCO had to negotiate amicable settlements with several parties in parallel and different undertakings qualified for full immunity or a partial reduction of a fine in the various jurisdictions.
Approval of the merger between the University Hospital Basel and the Cantonal Hospital of Basel-Land
On 18 September 2017, COMCO approved the planned merger between the University Hospital Basel and the Cantonal Hospital of Basel-Land to a form a joint hospital group. In its review, COMCO came to conclusion that in relation to acute in-patient hospital services covered by basic and supplementary health insurance, the hospital group will attain a strong market position in the Basel area. Nevertheless, it was not likely that the merger would eliminate effective competition in the region. For that reason, the statutory requirements for COMCO to intervene were not fulfilled. From competition law perspective, there was nothing to prevent the planned merger from going ahead.
Ticketcorner and Starticket
On 23 May 2017, COMCO released a public statement about its prohibition of the merger between Ticketcorner and Starticket. Starticket and Ticketcorner are the country’s two biggest ticketing companies. Ticketcorner is jointly owned by CTS Eventim and the Ringier media group. Starticket belongs to the Tamedia group, which, like Ringier, is one of Switzerland’s largest media companies. If the merger were cleared, Starticket would have become wholly owned by Ticketcorner. Ticketcorner and Starticket distribute tickets for concerts and shows, through physical and online channels (primary ticketing) and advertise on media channels and social media platforms. They also provide software solutions for the direct sale of tickets (ticketing software).
In the primary ticketing market Ticketcorner had a market share of about 60–70 per cent and Starticket of about 20–30 per cent. COMCO concluded that Ticketcorner has a predominant position in this market and Starticket is the only serious competitor. COMCO considered that the predominant position of Ticketcorner is strengthened by numerous contractual exclusives. With regard to potential competitors, COMCO stated that there are significant strategic and structural market entry barriers. COMCO examined the potential competition from Spotify, Facebook and Google and concluded that it is insufficient. In light of the above, COMCO concluded that the planned merger would lead to an elimination of effective competition in this market and that there were no suitable conditions or obligations that could be imposed to safeguard effective competition. As a result, COMCO blocked the planned merger. This is only the second merger that has been prohibited since the merger control regulation was introduced into Swiss law in 1996.
In Switzerland the substantive test of the merger control regulation sets very high hurdles for an intervention. The authority has to demonstrate that a concentration could create or strengthen a dominant position, which could lead to the elimination of effective competition. The outcome of COMCO’s assessment came slightly unexpected because the FSC stated in its decisions 20 Minuten and Swissgrid that COMCO is obliged to prove the potential elimination of effective competition. It is interesting that these decisions were not mentioned by COMCO, although they are the only precedents decided by the FSC on the interpretation of the dominance plus test. It is hard to understand why only Starticket and Ticketcorner should be in the position to do promotion for events. In Switzerland, the advertising markets are not controlled by the media houses that own Starticket and Ticketcorner. There is much debate about changing the merger control regulation and replacing the rather lenient ‘dominance plus-test’ by the SIEC-test. However, this merger actually shows that even under the current law an intervention is possible.
In December 2009, COMCO sanctioned three producers of drugs for erectile dysfunction for issuing resale price recommendations. COMCO argued, inter alia, that the price recommendations amounted to unlawful concerted practices on resale prices because a large number of the pharmacies and doctors involved sold the products at the recommended prices.
COMCO also argued that the price recommendations of the three pharmaceutical companies (Bayer, Pfizer and Eli Lilly) resulted in the continuation of the price and margin levels of a former industry cartel that was prohibited by COMCO in June 2000.
A further element was that wholesalers and a company that offered databases on pharmaceuticals products transmitted the recommended prices to the pharmacies and doctors. These companies were qualified as facilitators of the unlawful practices.
Many scholars criticised COMCO’s approach because it was in contrast to EU law where price recommendations are only unlawful if they amount to a minimum or fixed sale price as a result of pressure from, or incentives offered by, any of the parties involved. It also led to legal uncertainty as companies in Switzerland feared that the mere fact that a large part of the resellers adhered to the recommended prices could make the recommendations unlawful and subject to severe sanctions. The three producers, a pharmacy, two wholesalers and the company offering pharmaceutical data bases appealed against the decision. Already in 2013 the FAC annulled COMCO’s decision with the reasoning that the Cartel Act is not applicable to the relevant market due to the restrictions contained in the regulatory framework and due to the fact that consumers that suffer from erectile dysfunction have feelings of shame which prevent them from comparing the prices offered by the pharmacies. However, the Supreme Court annulled this decisions and referred the case back to the FAC.
In its second decision on the same matter, the FAC has annulled COMCO’s decision once again. The FAC held:
- the evidence brought forward by COMCO for the high rate of adherence was not robust enough;
- the mere fact that a large number of pharmacies and doctors adhered to the price recommendations (without coercion or incentives) did not amount to a concerted practice in terms of article 4(1) of the Cartel Act; and
- the price recommendations had the function of recommended maximum prices rather than minimum prices and that therefore no restriction of competition was established.
The judgment is to be welcomed as it brings Swiss law into line with international standards. Price recommendations are possible in Switzerland if the principles established under EU law are met.
The decisions are not final and binding yet, as the Federal Department of Economic Affairs, Education and Research might appeal against the decisions before the Supreme Court.
German car maker BMW lost its appeal against a 157 million francs fine. The FSC rejected the appeal against the decision of the FAC in its judgment dated 24 October 2017. The sanction was fully confirmed by the FSC. It confirmed its jurisdiction in the Gaba case by stating that the Cartel Act also applies to practices which occur outside of Switzerland but have an effect in Switzerland. BMW retailers in the European Economic Area (EEA) had a clause in their contracts which prohibited the sale of cars outside of the EEA and therefore to Switzerland. The FSC thus concluded that BMW’s contracts have led to a foreclosure of territory even though BMW could prove that there had been 1,774 parallel imports. In its reasoning the FSC issued some interesting thoughts on the interpretation of the effects doctrine under Swiss law. It stated that it is sufficient that an infringement committed outside of Switzerland has potential effects on the Swiss markets. However, it said that, for instance, vertical agreements of American undertakings which prohibit exports to Canada are not caught by the Swiss Cartel Act. Furthermore, the FSC principally confirmed its jurisdiction in the Gaba case that agreements who fall under article 5, paragraphs 3 and 4 of the Cartel Act are significant within the meaning of article 5, paragraph 1 of the Cartel Act by their very nature. No actual effect of such agreements needs to be shown. It further stated that BMW was not able to justify the foreclosure by grounds of economic efficiency. It confirmed the lower courts view that this case was a moderately serious violation and therefore the calculation of the sanction had been appropriate.
The FAC upheld the appeal of a company against the decision of COMCO in its judgment dated 14 November 2017. The company was only once participant in the annual cartel meeting. However, according to COMCO this participation was enough to consider the company as complicit in the unlawful agreement. The FAC stated that if a company participates in a meeting of companies which leads to anticompetitive agreements this behaviour can be considered as participation in the unlawful agreement. However, the concerned undertaking may prove that it only pursued lawful objectives by attending the meeting and stated this clearly towards the other companies. In the present case the FAC made clear that the assessment depends on the specific circumstances of the case and COMCO needs to prove an existing agreement – either by actual consensus or a concerted practice. It concluded that in the case at hand there was no proof of the participation of the appellant in any agreement.
In this judgment concerning builders’ supplies, the FSC upheld the appeal of the Federal Department of Economic Affairs, Education and Research against the judgment of the FAC dated 23 September 2014. COMCO has imposed sanctions on different companies for horizontal price-fixing agreements in October 2010. The filed appeals against the decision of COMCO were upheld by the FAC. The FAC reasoned COMCO could not sufficiently prove that there was a price-fixing cartel. The FSC stated that the FAC itself was responsible for establishing the needed facts which were allegedly missing since the FAC has comprehensive rights of review. Additionally, the FSC was of the opinion that the FAC had based its judgment on incorrect premises. It stated that agreements within article 5, paragraph 3 of the Cartel Act are significant by their nature. Moreover, it stated that agreements at retail levels are possible even if there is a ‘price dictate’ from the manufacturer. Finally, the FSC clarified that the agreement did not need to have a proven effect on competition. In conclusion, the FSC decided to refer the case back to the FAC in order to investigate and establish the circumstances and decide anew.