Settlements and full immunity

In May 2016 the Competition Commission (ComCo) issued a ruling in which an investigation into vertical infringements of competition law was the subject of an amicable settlement with the competition authority. Even though the case is not a leading case with regard to the application of material law, it is a good opportunity to reflect on whether the application of leniency regimes to vertical cases is reasonable in general and whether full immunity could be justified in particular.


The case concerned a subsidiary of a group that distributes, among other things, medical devices and services in countries of the European Economic Area and Switzerland. In Germany, the products were distributed both directly to end customers and through independent resellers (dual distribution). While large portions of the decision have been redacted in the published version, it would seem that several contracts with German resellers contained clauses with territorial allocations and a general prohibition to sell products to customers outside the European Union actively and passively. This export ban effectively hindered sales from Germany into Switzerland, where the medical devices were distributed only through a group company.(1)

Following a leniency application, ComCo opened an investigation. In the later settlement the company agreed to refrain from any agreements that prevent future passive sales of German resellers into Switzerland, and to adapt all existing contracts with resellers as far as their wording does not allow passive sales to Swiss resellers or end customers in a sufficiently clear manner. A penalty was not imposed, meaning that the company was granted a 100% bonus (full immunity).

Regarding the legal assessment, the ruling is in line with recently established case law. Swiss competition law was applied even though the contract clauses were used and enforced in Germany. According to ComCo, the export ban clauses had "potential effects" on competition in Switzerland, without further assessing this alleged link to Switzerland. While this straightforward approach may still not convince all legal practitioners, it is in line with the recent BMW(2) and Nikon(3) decisions (for further details please see "International distribution systems under fire"). In its further assessment, ComCo qualified the export ban clause as a territorial allocation with absolute territorial protection. The legal presumption of Article 5(4) of the Federal Act on Cartels and other Restraints of Competition (Cartel Act) – according to which such absolute territorial protection eliminates effective competition – was overturned, as the concerned company was not the only supplier of such medical devices in Switzerland. Nevertheless, ComCo held that the export ban clause qualified as a significant restriction of competition, as territorial protection clauses are regarded as qualitatively severe. Thus, they are generally considered as having a significant anti-competitive effect, regardless of their quantitative effects (for further details please see "Landmark decision: stricter rules for licence and distribution agreements"). Against the background of another recent judgment,(4) this argument was to be expected, despite the persistent critique of legal practitioners. Still, the interesting point of this vertical case is not the application of competition law, but the fact that the company successfully applied for leniency and was rewarded with full immunity.


The original idea behind leniency regimes – which usually grant a 100% bonus on the penalty for the 'first one in' and bonuses of up to 50% for other cartel participants cooperating with the authority – was to detect existing cartels by destabilising the solidarity and fueling uncertainty among cartelists. The archetype of such cartels is a horizontal agreement between competitors active in the same market and at the same market level. In practice, leniency regimes work well and became one of the most important investigation tools of cartel authorities across the globe regarding fighting anti-competitive behaviour.

On the other side, vertical cases are characterised by the fact that the companies involved in a specific vertical agreement are typically active on different levels of the production and distribution chain. Following the theory of harm of vertical cases, the restriction of competition is typically embodied in a restriction of the freedom of action of the business partner on the downstream market (purchaser). Therefore, unlike in horizontal cases, where typically all cartel participants are held responsible for violating the law, in vertical cases it is, in practice,(5) often only the company on the upstream market (supplier) that risks being penalised. Accordingly, in the majority of cases only the supplier would actually benefit from leniency.

Considering the original motivation for the implementation of leniency regimes, the question arose of whether cartel authorities would also apply their leniency regimes to vertical cases. At first glance, it seems as if the typical aim of leniency, which is detecting cartels by provoking a rat race among the cartelists on the grounds of a bonus, cannot be reached in vertical cases. However, the purpose of competition law is not chasing down companies or increasing state revenues. The underlying objective is the protection of the functioning of effective competition by reducing wrongful behaviour. This objective can be reached if leniency regimes are also applied to vertical cases and manage to motivate companies to end wrongful behaviour. From this perspective, good reasons would also speak for applying leniency regimes to vertical cases. The legal framework of the Cartel Act allows for leniency in cases of all vertical and horizontal hardcore restriction, as well as abuse of dominance. In Europe, the EU 2006 Leniency Notice covers agreements and concerted practices between competitors and therefore does not cover vertical restraints. On the level of EU member states, only a few leniency programmes offer immunity in vertical cases.(6)

Settlements and full immunity

Even if members of vertical agreements can apply for leniency, another question is whether full immunity can be justified. In Swiss competition law full immunity is granted not only if a company was the first to inform the authority about a potential competition law infringement, but also if a company was the first to provide substantial evidence to establish an infringement after the authority became aware of a horizontal or vertical cartel through third-party hints or its own investigations. In both constellations, full immunity is granted only under further conditions (eg, that the leniency applicant was not the instigator or did not have a leading role). In general, this also applies to vertical cases, even if the mechanism was initially construed for horizontal cases.

However, in vertical cases, ComCo seems to tend towards the view that the supplier typically has a leading role in relation to its purchasers, so that usually full immunity cannot be considered. At first glance, this perspective might seem comprehensible when thinking of suppliers and manufacturers that clearly dictate their business conditions to the purchaser on the downstream market and force them into a behaviour that restricts their economic freedom of action. However, the economic reality often shows different scenarios, such as:

  • single purchasers with significant buying power (eg, automotive manufacturers towards the automotive supplier industry) that have substantial influence in forming the vertical relationship;
  • groups of purchasers that bundle their demand and exert buying power this way; or
  • single purchasers that simply balance the supplier's bargaining power by the implicit threat to purchase comparable products from another supplier in the future.

The examples show that a 'one size fits all' approach is not satisfying. In the case at hand, the leniency applicant was rewarded with full immunity, but the decision reveals no details of the specific situation. Nevertheless, the decision may serve as an example that ComCo does not categorically exclude full immunity in such situations. From the perspective of companies involved in potential vertical infringements, leniency is a lot more attractive if full immunity is a real option. This way, the option of full immunity would also better support effective public enforcement. Accordingly, full immunity is justified not only in horizontal, but also vertical cartel cases.

For further information on this topic please contact Karin Hummel or David Mamane at Schellenberg Wittmer by telephone (+41 44 215 5252) or email ([email protected] or [email protected]). The Schellenberg Wittmer website can be accessed at


(1) Competition Commission, May 23 2016, RPW 2016/2, page 434 – GE Healthcare.

(2) Federal Administrative Court, November 13 2015, RPW 2015/4, page 801 – BMW.

(3) Federal Administrative Court, September 16 2016, RPW 2016/3, page 831 – Nikon.

(4) Federal Supreme Court, June 28 2016, 2C_180/2014 – GABA.

(5) If there is an unlawful vertical agreement, both participating companies violate the law. However, penalties for the companies on the downstream market have been the exception so far.

(6) Cf ECN Model Leniency Programme Report on Assessment of the State of Convergence, paragraph 16 and note 18.