Relative market power
Identification of case types
ComCo's enforcement priorities
In March 2021, Parliament adopted the counterproposal to the so-called "fair price initiative", which in particular provided for a revision of the provisions of the Federal Act on Cartels and other Restraints of Competition (CartA). As a result, the concept of "relative market power" has now been in force since 1 January 2022. In order to clarify these rules, the Secretariat of the Competition Commission (ComCo) recently published a guidance paper and a notification form on these provisions, which can help the companies concerned to legally assess and adjust their behaviour.
The newly introduced concept of "relative market power" extends the provisions regarding unlawful practices in article 7 of the CartA, such as abusive refusal to supply goods or discrimination between trading partners – previously applicable only to dominant undertakings – to undertakings with relative market power. According to the definition in article 4(2bis) of the CartA, a company is considered to have relative market power if other companies depend on it with respect to the supply or demand for a product or service in such a way that there is no sufficient and reasonable possibility to switch to other companies.
In its guidance paper, the ComCo states that the possibility of alternatives must always be assessed based on objective criteria and on a case-by-case basis. As a rule, alternatives are sufficient if other offers are available that can adequately satisfy the dependent undertaking's needs. For example, the following factors are significant in this regard:
brand loyalty of consumers; and
the market share of the undertaking with relative market power.
Possible alternatives are considered unreasonable if they are ruled out due to individual characteristics of the dependent undertaking, such as:
specific investments in connection with the business relationship;
the contractual relationship itself;
affected turnover in relation to total turnover; and
the occurrence of the alleged dependency (eg, cause of the dependency).
Furthermore, the ComCo clarifies in its guidance paper that companies wishing to invoke the provisions on relative market power must have already failed in finding reasonable alternatives.
The ComCo lists a number of possible dependency relationships by way of indicative case types in its guidance paper. In doing so, the ComCo confirms that it will also follow the German practice when assessing the dependence of a contracting party. The guidance paper mentions the following three case types:
- The reseller depends on the supplier's products due to the importance of the supplier's brand, so-called "must-in-stock" products (eg, Rimowa suitcases).
- The undertaking is dependent on the purchaser because the goods or services are specialised and tailored to the needs of specific customers, and there is a lack of alternative purchasers.
- An undertaking is tied to another company because it has aligned its business operations in long-term contractual relationships, in particular its investments to a specific supplier (eg, in cases of selective distribution or franchising arrangements).
ComCo's enforcement priorities
In procedural terms, the ComCo's guidance paper states that proceedings in cases of relative market power will proceed in the same way as other antitrust proceedings (ie, responding to complaints, market monitoring and opening a (preliminary) investigation). The intention of the ComCo is to focus primarily on cases that clarify important legal issues or concern widespread conduct in order to ensure a uniform interpretation of the rules. At the same time, the ComCo wants to fulfil its multi-layered role as a contact partner, expert in civil proceedings and investigation authority. It remains to be seen how many cases the ComCo will actually decide, as settlements seem to be an attractive solution for both sides (the undertakings and the authority).
A significant difference to infringements of article 7 of the CartA by dominant undertakings is that companies with relative market power do not face direct penalties for their first violation, but only behavioural remedies (eg, delivery obligation or non-discriminatory pricing). However, in the event of a subsequent infringement, the ComCo can fine companies up to 10% of the turnover generated in Switzerland in the preceding three financial years.
For more information please contact Marcel Meinhardt or Nina Beeler at Lenz & Staehelin by telephone (+41 58 450 80 00) or email ([email protected] or n[email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.