The Federal Competition Act, which is the central pillar of Swiss competition legislation, was significantly amended in 2003, with effect from April 1 2004. The main purpose of the amendment was to adapt Swiss competition legislation to European legislation by introducing a leniency programme and the power to impose direct sanctions against enterprises found to have participated in a serious cartel or to have committed an abuse of dominant position. Furthermore, the amendment sought to ease the burden of proof for the Competition Commission (Comco) by introducing specific presumptions concerning vertical restraints and extending the definition of dominant enterprises.
After five years of application, the effectiveness of this system is being assessed through an evaluation procedure conducted by the Director of the Secretariat of the Competition Commission (Secretariat) in order to enable the Swiss Parliament to submit proposals for further legislative change.
In this context, a proposal is being discussed to amend the sanction system of the Competition Act by introducing direct criminal sanctions against managers who are found liable of a breach of competition law, as individuals may at present face criminal sanctions only if they do not comply with an enforceable decision of Comco.
Applications for leniency
The leniency programme and the conducting of dawn raids, both introduced by the 2003 amendments to the Competition Act, were used several times in 2007, proving these instruments to be efficient tools against anticompetitive practices.
The most important case relates to an investigation begun in October 2007 against several companies active in the field of road transportation and logistics. The investigation was based on a self-denunciation that brought to Comco's attention the existence of agreements for the fixing of taxes and tariffs. The investigation, which is continuing, started with a series of dawn raids at the businesses' offices. European and US competition authorities were involved, as the matter had wider implications. International coordination ensured simultaneous dawn raids in several countries.
Another leniency application gave rise to an investigation concerning numerous agreements between companies active in the building of doors and windows, leading to dawn raids at the premises of a number of businesses concerned.
Anticompetitive agreements
The Revised Notice on the assessment of vertical agreements came into force on January 1 2008, replacing the previous notice of February 2002 on the same subject. The Revised Notice incorporates the amendments of the Competition Act of 2003 and the Notice on Agreements with Limited Market Effects of December 2005 and seeks harmonisation with EU competition law.
The Revised Notice elaborates new principles regarding vertical restraints and provides, in particular, a de minimis threshold and an amended catalogue of blacklisted clauses. This applies regardless of the market shares of the participating parties and in addition to the clauses already explicitly banned by the Competition Act. It provides for possible justifications based on economic efficiency and gives further guidance for the assessment of certain vertical restraints, including selective distribution, non-compete clauses and price recommendations.
The main aim of the Revised Notice is to prohibit practices intended to foreclose the Swiss market or lead to higher price levels. Vertical clauses (resale price maintenance and prohibition of passive sales outside the contractual territory) are subject to direct sanctions and entail the presumption that effective competition is eliminated, according to Article 5(4) of the Competition Act.
On the horizontal level, the case of the Swiss National Library is especially interesting. Comco eventually had to close its investigation due to a lack of evidence after an appeal to the Swiss Federal Court, which had returned the case to Comco. The investigation had shown indications of an unlawful price-fixing agreement between four construction companies in the public procurement of the renovation of the Swiss National Library. Although proof of unlawful price-fixing could not be obtained, Comco nevertheless prohibited the four enterprises from entering into similar agreements in the future. This case confirms that competition law also applies in the context of public procurement, where the rules seek to promote a higher level of competition in order to better serve the public interest.
Abuse of dominant position
The first direct fines were imposed upon businesses on the basis of the amended Competition Act in 2007. In March, Comco imposed a fine of SFr2.5 million ($2.2 million) upon Publigroupe for an abuse of its dominant position in the field of the marketing of advertisement space in the written press. Comco blamed Publigroupe's use of discriminatory criteria to refuse to pay commissions to certain intermediaries. In this case, the penalty was reduced in order to reflect Publigroupe's decision to give up its anticompetitive practice, this decision having been taken by the company during the investigation period.
The highest fine so far was imposed by Comco in February 2007 against Swisscom Mobile (a legal successor to the former state-owned monopoly of the Swiss telecommunication sector). Comco imposed a fine of SFr333 million on Swisscom Mobile for abusing its dominant position on the mobile phone market by applying an excessively high termination rate to the detriment of consumers. According to Comco, the fine takes into account the seriousness of the breach and the high profits earned by the company as a result of the abuse of its dominant position.
An appeal before the Federal Administrative Court is pending against both decisions.
The delicate question of the network access rate in the field of telecommunications gave rise very recently to a joint request for legislative change from Comco, the Communication Commission and the Price Supervisory Authority. These authorities, in particular the Communication Commission, require an efficient tool with which to directly intervene in the market by lowering prices if the conditions of network access are discriminatory or not based on actual costs. Such an intervention is only possible upon the request of a supplier and after a mandatory three-month negotiation between suppliers.
Merger control in the retail market
An important concentration in the retail distribution market concerned the merging of the leading Swiss retailer Migros and the leading discounter Denner. Comco cleared the merger after a Phase II investigation, subject to a series of requirements. Comco found that the market share of the parties, the role of the participants in the market, the distribution of the market share and the concentration showed that competition in the Swiss market would be substantially weakened if the merger was approved without alteration. It regarded the potential competition from other retailers as weak due to high entry barriers. While Comco found that there was some pressure from the discounters Aldi (who are expanding in Switzerland) and Lidl (who are due to enter the Swiss market), it held that this should not be overestimated as the price pressure only related to a limited range of products. There was little evidence that the merging parties could achieve a dominant position. However, due to the strong position of the other large retailer, Coop, Comco held that the merger created a collective dominant position of Migros/Denner and Coop that could eliminate effective competition. The concentration could, therefore, only be authorised subject to an alteration that prevented the competitive environment from deteriorating substantially before other competitors could enter the market.
In this case, Migros must comply with the following main requirements:
- Migros is obliged to leave Denner legally, organisationally and operationally independent;
- Migros is not allowed to acquire another food retailer or to establish stores with the label "M-budget", and all concentrations regarding these markets are subject to a mandatory notification;
- Migros must forgo exclusivity arrangements with the product suppliers;
- Migros and Denner must purchase their products separately, apart from products provided by multinational companies and large Swiss companies; and
- some suppliers have a right to continue providing Denner with products and Denner is only allowed to exchange suppliers with Migros industries under certain conditions.
All requirements will remain in force for seven years. If circumstances in the Swiss retail market change substantially, Migros has a right to apply for an abrogation or a modification of the obligations from January 2010.
Switzerland's second-largest retailer, Coop, also acquired Carrefour's sales structure in Switzerland. Comco cleared the merger after a Phase II investigation.
According to Comco, the concentration led to the creation or strengthening of the dominant position of Migros and Coop in the distribution and supply sides of the Swiss retail market. Despite this finding, Comco authorised the merger subject to certain requirements. Coop may not enter into exclusivity arrangements with the product suppliers and must find individual solutions for suppliers that are dependent on Carrefour and that are not taken over by Coop. In addition, Comco held that on the distribution side the concentration was particularly problematic in some local areas, and imposed upon Coop an obligation to sell 20,000m2 of its retail units in those areas. Furthermore, Coop is banned from acquiring other companies in the retail market for the next six years. However, if circumstances in the Swiss retail market change substantially, Coop has the right to apply for an abrogation or a modification of the obligations from January 2010.
| Author biographies |
Benoît Merkt
Lenz & Staehelin
Benoît Merkt is a partner in Lenz & Staehelin (Switzerland's largest law firm, with offices in Geneva, Lausanne and Zurich) and heads the firm's competition group in Geneva. He was educated at the Universities of Neuchâtel and Bern (lic iur and Dr iur) and the University of Oxford (MJur), where he won the Berrow Scholarship.
Benoit Merkt has extensive experience in merger control filings in Switzerland, as well as the coordination of multi-jurisdictional merger filings. He regularly advises Swiss and foreign clients on all areas of Swiss competition law, including competition law due diligence and compliance, unilateral practices, horizontal and vertical agreements and leniency. He represents clients in competition law investigations before the Swiss Competition Commission and before Swiss courts. He regularly represents clients from a wide range of industries, such as banking and insurance, telecommunication and media, gas and electricity, and the high-tech, automotive, retail, luxury, chemical and petrochemical industries.
Benoit Merkt lectures on European and Swiss competition law at the University of Geneva and on competition law at the World Trade Institute of the University of Bern. He is a member of various national and international competition law associations and is chairman of the Competition Commission of the Union Internationale des Avocats.
Benoit Merkt published his doctoral thesis on international cooperation between competition authorities (Walter H Price 2001) and is a regular speaker at competition law conferences, as well as having published extensively on Swiss and European competition law. He is also a regular contributor to Swiss and international competition law reviews. He is fluent in French, English and German.
Marcel Meinhardt
Lenz & Staehelin
Marcel Meinhardt (born 1965) was admitted to the Bar in 1992. He studied law at the University of St Gallen (lic iur), at the University of New York (LLM, 1994) and the College of Europe (LLM, 1995). He also studied at the University of Zurich, from which he received a doctorate in 1996 (Dr iur).
Meinhardt specialises in all areas of Swiss and European competition law, particularly in the postal services, automotive energy, media, retail and ticketing industries. He also advises on regulatory issues in connection with the electricity and gas industry. He has been responsible for a large number of merger notifications to the Swiss Competition Commission and has co-ordinated multi-jurisdictional filings.
Meinhardt advises on contentious and non-contentious matters and has acted in high profile cases on alleged abuses of dominant positions and vertical restraints.
Meinhardt is a member of various national and international competition law associations and is a regular speaker at competition law conferences. He has published articles on Swiss competition law and covered the essential facilities doctrine in his doctoral thesis. Meinhardt is a co-editor of the online competition law section of Westlaw/Swisslex and is fluent in German, English and French. |