Marcel Meinhardt March 9 2023 Swiss Federal Court rules on tying as by object offence Lenz & Staehelin | Competition & Antitrust - Switzerland Marcel Meinhardt Competition & Antitrust IntroductionFactsDecisionIntroductionIn one of its most recent decisions, the Swiss Federal Supreme Court ruled, among other things, on an important competition law issue and, in doing so, reopened a second relevant topic. While it made clear that the offence of tying in article 7(2)(f) of the Federal Act on Cartels and other Restraints of Competition (CartA) is a by object offence – in other words, no actual effects need be proven – it stated that for group liability purposes it is undecided whether the control or the actual management principle shall prevail.FactsThe subject of the proceeding(1) was a dynamic currency conversion (DCC) service. The Swiss acquirer, Worldline, offered a DCC function to its merchants. The merchants, in turn, needed a DCC-enabled payment card terminal, or a terminal that supported the DCC function. For this, Worldline only allowed card terminals of its sister company and did not grant access to third-party terminals.On 29 November 2010, the Swiss Competition Commission (ComCo) found various infringements of article 7(2) of the CartA, including illegal tying. The parent company of the acting acquirer was fined a total of 7,029,000 Swiss francs (approximately £6,200). This decision was appealed first to the Federal Administrative Court and thereafter to the Federal Supreme Court.DecisionTyingThe Federal Supreme Court clarified four important questions regarding tying according to article 7(2)(f) of the CartA.First, the Federal Supreme Court confirmed that tying can take place in several steps. In this case, tying occurred through:acquiring services together with DCC services;DCC services and DCC terminals; andacquiring services and DCC terminals.According to the Court, this is the only way to prevent companies from circumventing the prohibition of tying by including further products between the tying and the tied goods.(2) Secondly, the Court stated that it is not necessary that the tied good is one of the undertaking with the dominant position, but can also be offered by a third party.(3) Thirdly, the Federal Supreme Court confirmed the opinion of the Federal Administrative Court that no effect-based analysis of the infringement is required in the context of article 7(2)(f) of the CartA. In the view of the Court, tying is particularly anti-competitive because it leads to two disadvantageous competitive effects – it:restricts the merchants' freedom of choice; andstrengthens the position of the sister company and eliminates competition on the market.According to the Court, article 7(2)(f) of the CartA is therefore fourthly a by object offence. The mere threat of the occurrence of abusive effects is sufficient.(4)In its judgment, the Court stated that its view that there is no need for an effect-based analysis is in line with the EU case law and literature on the Treaty on the Functioning of the European Union as well as a significant part of Swiss doctrine.(5) However, the Federal Supreme Court's view is indeed not in line with the most recent EU case law. Although the European Commission has taken the view that a tying transaction has per se an exclusionary effect on the market, more recent decisions of the European Commission and the European Court of Justice suggest under certain circumstances an effect-related analysis also for tying.(6) It remains to be seen how the Swiss courts will apply these judgments in the future and in other non-tying abuse cases.Group liabilityIn the recent past, ComCo not only fined the responsible company itself, but also the parent company of the group, applying a broad definition of "undertaking" in the Swiss Cartel Act. In this context, it applied the control principle under which the mere possibility of controlling another company is sufficient to prove that two companies belong to the same group. The management principle, by contrast, requires exercised and decisive influence.Even though the Federal Administrative Court stated that the mere possibility of control by the parent company was sufficient to create its liability,(7) the Federal Supreme Court explicitly left this issue open. It therefore remains unclear whether the management principle, as applied in the European Union,(8) is decisive under Swiss competition law.For more information please contact Marcel Meinhardt or Martina Studer at Lenz & Staehelin by telephone (+41 58 450 80 00) or email ([email protected] or [email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.Endnotes (1) Judgment of the Federal Supreme Court 2C 596/2019 of 2 November 2022.(2) Id, cons 8.5.3.(3) Id, cons 8.5.1.(4) Id, cons 8.6 and 10.2.3.(5) Id, cons 8.6 with reference to judgment of the Federal Administrative Court B-831/2011 of 18 December 2018, para 1379 et seq.(6) See:Google Android, judgment of the European Court of Justice of 14 September 2022, case T-604/18, paras 290 et seq and 842 et seq. The European Commission has also conducted such an analysis; andMicrosoft, judgment of the European Court of Justice of 17 September 2007, case T-201/04, para 867 et seq. The European Commission has also conducted such an analysis.(7) Judgment of the Federal Administrative Court B-831/2011 of 18 December 2018 para 44.(8) See judgment of the European Court of Justice of 10 September 2009, Rs C-97/08 P – Akzo Nobel, Slg 2009, I-8237, para 58.