On 4 December 2015, the Swiss Federal Administrative Court (the “Court”) announced that it has rejected BMW’s appeal against the CHF156 million fine imposed by the Swiss Competition Commission (“ComCo”) on BMW in May 2012 for operating an illegal export ban.
The fine was imposed on BMW after ComCo found that it had implemented territorial restrictions in contracts with dealers located in the European Economic Area (“EEA”). These restrictions had the effect of preventing imports into Switzerland from the EEA resulting in Swiss consumers being unable to access cheaper BMW and MINI branded vehicles from dealers located outside of Switzerland.
The decision of ComCo as affirmed by the Court is particularly significant because it highlights the readiness of ComCo to investigate foreign agreements that have the potential for anti-competitive effects in Switzerland.
Investigation by ComCo
ComCo received a number of complaints in the latter part of 2010 from prospective Swiss consumers alleging that they were prevented from purchasing certain models of BMW and MINI branded vehicles from dealers located within the EEA. ComCo found that agreements between BMW and EEA dealers which prevented the dealers from selling the cars into Switzerland resulted in a significant reduction in competition in the Swiss automotive market and imposed a fine on BMW for infringing the Swiss Cartel Act.
In its determination, ComCo gave particular weight to the existence of significant differences between prices for BMW and MINI branded vehicles in Switzerland and prices in other countries. The complaints received by ComCo were made at a time when the Swiss franc had appreciated. This had the effect that prices in Switzerland rose by up to 25% causing Swiss consumers to look for cheaper deals from within the EEA.
ComCo considered that the anti-competitive territorial restrictions imposed by BMW on their dealers prevented Swiss consumers from benefiting from foreign exchange gains and reduced competitive pressure on sales of new BMW and MINI cars in the Swiss market.
The CHF156 million fine imposed on BMW represented a record fine against an automotive manufacturer in Switzerland, and was the third largest fine ever imposed by ComCo for a breach of the Swiss Cartel Act. ComCo also ordered BMW to amend its contracts with dealers located within the EEA to remove the restrictive conditions that had the effect of an illegal export ban.
BMW’s appeal to the Court
BMW submitted its appeal against ComCo’s decision in June 2012 and the Court announced its decision on 4 December 2015. The Court rejected the appeal, finding that BMW had failed to provide any justification for imposing the territorial restrictions.
Significantly, the Court confirmed that ComCo must be able to take action against conduct that produces anti-competitive effects in Switzerland even when the conduct was carried out in another territory.
BMW may choose to appeal the Court’s decision to the Swiss Federal Supreme Court.
This case is not the first time that a foreign company has been found to have infringed the Swiss Cartel Act for implementing restrictions on sales into Switzerland from the EEA where the agreement was intended to apply entirely outside of Switzerland. For example, in December 2013, the Court upheld ComCo’s decision to impose a fine on GABA International and Gebra Pharma for implementing restrictive licensing agreements that prevented sales of toothpaste into Switzerland from the EEA. Similarly, Nikon was fined CHF12.5 million for restricting imports by prohibiting its distributors from making passive sales into Switzerland.
Companies should take note of this case as further evidence of the readiness of ComCo to investigate foreign agreements that affect competition in Switzerland. Moreover, this case shows that companies may be particularly exposed to complaints and potential competition investigations during times of significant disparity in foreign exchange rates (particularly between eurozone and non-eurozone countries) as consumers look to shop around in the EEA and Switzerland and may therefore be more alert, and thus more likely to challenge, illegal trade restrictions.