Introduction

On June 29 2015 the Competition Commission revised the Notice of October 21 2002 regarding the Competition Law Treatment of Vertical Agreements in the Motor Vehicle Trade and its guidelines. According to the commission, the revision takes into account its case law, new developments in the market and changes in technology and modifications in European and Swiss competition law. Contrary to EU law, the revised notice, which came into force on January 1 2016, will continue to regulate the sale of new motor vehicles, maintenance and repair services and the distribution of spare parts (primary and secondary markets).

What is regulated?

The cartel prohibition under Swiss law is based on Article 5 of the Cartel Act. According to this provision, agreements that appreciably restrict competition are prohibited unless they are justified on grounds of economic efficiency. By contrast, agreements that eliminate competition are prohibited and cannot be justified on grounds of economic efficiency.

The Competition Commission has released a number of notices on specific subjects which have de facto force of law, but do not bind the courts. Among these notices, the commission released the Notice of June 28 2010 on the Competition Law Treatment of Vertical Agreements. This notice – which has significant practical relevance – was heavily influenced by EU Regulation 461/2010 and the respective guidelines.

Both versions of the 2002 notice list competition restrictions that are not part of the more general 2010 notice. According to Article 13 of the revised 2002 notice, the original 2002 notice has primacy over the 2010 notice. However, unless the revised 2002 notice states otherwise, the 2010 notice applies.(1) Therefore, the revised 2002 notice must be read in the context of the 2010 notice and, in particular, in connection with selective distribution systems.

The 2002 notice regulates the admissibility of vertical agreements between different market participants regarding the distribution of motor vehicles, the provision of repair and maintenance services for motor vehicles and the distribution of spare parts. In particular, it indicates which agreements the Competition Commission will consider to be qualitatively serious impediments to effective competition, including:

  • agreements between motor vehicle dealers and authorised distributors that:
    • limit the sale of motor vehicles by authorised distributors to final consumers either by:
      • varying the authorised dealer's remuneration based on the vehicle's destination or the final consumer's place of residence; or
      • making premium schemes or other arrangements of a financial nature or about product delivery dependent on the vehicle's final destination (Article 15(1) of the revised 2002 notice); or
    • oblige authorised distributors of new motor vehicles to offer repair and maintenance services or the supply of spare parts (Article 16(b) of the revised 2002 notice); and
  • agreements between motor vehicle dealers and authorised repairers:
    • not to undertake repair services or grant the legal supplier's warranty, cost-free maintenance or any services in the context of a product recall on all vehicles of the affected brand which have been sold in Switzerland or the European Economic Area. The provision of these services therefore cannot be made dependent on the purchase location (Article 15(2) of the revised 2002 notice); or
    • that oblige authorised repairers to sell new motor vehicles or spare parts (Article 16(a) of the revised 2002 notice).

In the context of the distribution and purchase of spare parts, the revised 2002 notice qualifies the following agreements as qualitatively serious impediments to effective competition:

  • agreements under which the authorised distributors of spare parts must also provide repair and maintenance services (Article 16(d) of the revised 2002 notice);
  • agreements that limit the sale of spare parts by members of a selective distribution system to independent repairers (Article 16(f) of the revised 2002 notice);
  • agreements that limit the sale of spare parts by the spare part producer to members of a selective distribution system, independent market players or final consumers (Article 16(g) of the revised 2002 notice); and
  • agreements that limit the freedom of members of a distribution system to purchase original or equivalent spare parts from a manufacturer or distributor and to use these parts for the repair or maintenance of motor vehicles. However, a supplier can prescribe the use of original spare parts provided by it for any work in the context of a warranty, free client service or product recall (Article 16(h) of the revised 2002 notice).

Finally, a qualitatively serious impediment to effective competition exists where restrictions are placed on so-called 'multi-brand sales'. This means that members of a distribution system must be allowed to sell vehicles and spare parts of other brands and provide repair and maintenance services with regard to vehicles of other brands.

What will change?

Unlike the original 2002 notice, the revised 2002 notice contains no list of per se inadmissible agreements. Agreements can be considered qualitatively serious impediments to effective competition if they imply one of the limitations listed in Articles 15 to 19 (see above). According to the revised 2002 notice, both qualitative and quantitative criteria must be considered, in accordance with the Cartel Act and the Vert-BM. Further, a justification based on economic efficiency is still possible (Article 14 of the revised 2002 notice).

The revised notice contains no notable substantive modifications compared to the original 2002 notice. However, particular attention must be paid to the following aspect: while under the original guidelines to the 2002 notice, suppliers can base their selective distribution system on qualitative criteria only – which consequently gives repairers a right to be part of the garage network if they meet these criteria(2) – the revised 2002 notice also gives suppliers the right to select their members on quantitative criteria. To do so, suppliers must prove that the feasibility and proper execution of repair and maintenance work may be hindered by introducing new repairers into their network.(3)

The revised 2002 notice has removed the obligation for suppliers to contract with genuine spare part dealers that fulfil the qualitative criteria of the selective distribution system.

Main similarities and differences between Swiss and EU rules

First, the hardcore restrictions in Article 5(a) and (b) of EU Regulation 461/2010 also constitute inadmissible practise under the revised 2002 notice. Further, agreements that oblige authorised repairers to sell new motor vehicles are inadmissible under both EU and Swiss law.(4)

However, an important difference between Swiss and EU law lies in the limitation of multi-brand sales. In Switzerland, multi-brand sales still cannot be limited. This means that authorised distributors and repairers of a brand can be authorised distributors and repairers of other brands. By contrast, the EU regulation, in principle, exempts single-branding obligations as long as the relevant market share of the supplier and buyer does not exceed 30% and the duration of the non-compete obligation does not exceed five years. The same principles apply to agreements between suppliers and their authorised repairers and spare parts distributors.(5) Beyond these limitations, a case-by-case examination will be conducted based on further criteria.(6)

The differences between EU Regulation 461/2010 and the revised 2002 notice imply that distribution systems in the motor vehicle sector, which are set up and spread throughout Europe, must be checked specifically under Swiss law. Given the special regulations under the 2002 notice, distribution systems that are permitted under EU law may be problematic under Swiss law.

For further information on this topic please contact Patrick Sommer at CMS von Erlach Poncet Ltd's Zurich office by telephone (+41 44 285 11 11) or email (patrick.sommer@cms-vep.com). Alternatively, contact Pascal G Favre at CMS von Erlach Poncet Ltd's Geneva office by telephone (+41 22 311 00 10) or email (pascal.favre@cms-vep.com). The CMS von Erlach Poncet Ltd website can be accessed at www.cms-vep.com.

Endnotes

(1) See Consideration VI of the revised 2002 notice.

(2) So-called 'obligation to contract' – see Paragraph 6 of the original guidelines to the 2002 notice.

(3) Paragraph 26 of the revised guidelines to the 2002 notice.

(4) Paragraph 71 of the Supplementary Guidelines.

(5) Paragraph 26 of the Supplementary Guidelines.

(6) Guidelines on Vertical Restraints, 2010/C 130/01, Paragraph 132 ff.

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