Facts

On June 28 2016 the Federal Supreme Court issued a landmark competition law decision. The judgment concerned a 2009 Competition Commission (ComCo) decision regarding a production and distribution licence agreement between Swiss company Gaba and Austrian company Gebro for the production and distribution of Elmex toothpaste. ComCo concluded that the licence agreement prohibited Gebro from exporting products out of Austria and, in particular, from exporting them into Switzerland. This qualified as a restriction of parallel imports into Switzerland and ComCo issued a fine of Sfr4.8 million (approximately $4.9 million). ComCo's decision was confirmed in a 2013 Federal Administrative Court judgment. Contrary to Federal Supreme Court practice, in its 2013 judgment the Federal Administrative Court declared for the first time that the mere qualification as a hardcore restriction was sufficient to establish a significant restriction of competition. The Federal Administrative Court judgment has now been confirmed by the Federal Supreme Court. The Federal Supreme Court rejected an appeal by Colgate-Palmolive (previously Gaba) against the Federal Administrative Court judgment. The Federal Supreme Court judgment was taken following public deliberations by the court.

Decision

While the final judgment has not yet been published, the official press release and statements made during the public deliberation provide hints on future developments of competition law.

Significant restriction of competition

Deviating from its prior practice, the Federal Supreme Court held that certain types of behaviour (eg, agreements on price and quantity, as well as geographic market allocations, as specified in Articles 5(3) and (4) of the Cartel Act) should be considered "in principle as a significant restriction of competition". This would apply independent of any quantitative criteria, such as the market share of the participating companies or actual effects on the market. Such behaviour can therefore be justified based only on economic efficiencies. Previous cases took quantitative effects into consideration when assessing these types of behaviour. There was no unanimity among the judges on this point: two out of five judges dissented and voted against this change in practice. Further, the Federal Supreme Court also stated that in de minimis cases, ComCo would not have to intervene. However, the court provided no indication regarding the interpretation of the de minimis criteria.

Possibility to issue penalties

The court also decided on whether direct penalties could be issued in cases of hardcore restrictions (Article 5(3) and (4) of the Cartel Act), even if the legal presumption of elimination of competition could be rebutted. While the wording of the law could imply that in such a case a direct penalty is not possible, the judges decided by a vote of three to two that the wording was sufficiently clear and allowed issuing direct penalties.

Comment

Once the written conclusions of the judgment become available, it will be possible to assess whether it will have any additional effects. It can already be deduced that the judgment changes Federal Supreme Court practice. In future, it will be more difficult for companies to argue that certain agreements do not infringe competition law. They will have to show either that potentially problematic agreements are justified based on economic efficiencies or that they are de minimis.

This could be particularly problematic in light of ComCo's expansive practice regarding its territorial jurisdiction and its broad interpretation of agreements that could be considered problematic. The pending BMW case on restriction of parallel imports will provide the court with another opportunity to rule on these issues.

For further information on this topic please contact David Mamane at Schellenberg Wittmer by telephone (+41 44 215 5252) or email (david.mamane@swlegal.ch). The Schellenberg Wittmer website can be accessed at www.swlegal.ch.

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