Preliminary investigations
Foreign exchange benefits
Market foreclosure
Merger control
On April 18 2012 the Competition Commission published its 2011 annual report(1) and announced that the optical-fibre sector and the failure to pass on exchange rate benefits will be its permanent priorities.
According to the commission, 2011 was marked by a high number of complex, preliminary investigations into the optical-fibre sector. Various regional energy supply companies and Swisscom had agreed jointly to construct future-oriented optical-fibre networks in certain cities in Switzerland. The parties notified certain clauses of their cooperation agreement under Article 49a(3) of the Cartel Act. Pursuant to this article, immunity from fines can be granted to undertakings that notify potentially restrictive agreements before they enter into effect, provided that the commission does not object by opening a preliminary or regular investigation within five months. In the preliminary investigation, the secretariat of the commission defined the relevant market as a "market for access to the physical network infrastructure with optical fibre-based transmission speeds". The secretariat concluded that there were clauses which might constitute unlawful agreements on quantities and prices, as well as on the allocation of markets according to trading partners. It further held that, from an ex ante perspective, there was at least a risk that such clauses would eliminate effective competition within the meaning of Article 5(3) of the Cartel Act. The secretariat did not prohibit the critical clauses given the ex ante character of the procedure chosen by the parties. It is for the relevant undertakings to assess the risk of sanctions and to structure their cooperation agreements in compliance with competition law.
Among the main topics discussed in the 2011 annual report is the failure by a high number of undertakings that are active in the Swiss market to pass on foreign exchange benefits. As a result of the exchange rate developments in the summer of 2011 (on August 10 2011 the Euro/Swiss franc exchange rate fell below 1.03%), the secretariat was confronted with a growing number of complaints. The highest number of complaints was filed in the clothing, newspaper/magazine and automobile/motorcycle sectors. In most cases, the complaints specifically related to price differences between Switzerland and its neighbour countries.
In 2011 the commission also rendered two landmark decisions on the issue of market foreclosure. In the first, the commission fined Nikon Sfr12.5 million for restricting parallel imports by using unlawful vertical agreements. It concluded that Nikon had illegally foreclosed the Swiss market by inserting clauses in foreign distribution contracts to restrict exports to Switzerland and, conversely, by inserting clauses in Swiss distribution contracts to restrict purchases from abroad. This decision reaffirms the commission's practice followed in Gaba v Elmex,(2) which is still pending before the Federal Administrative Court.
The second case related to Electrolux Ltd and V-Zug Ltd in connection with restrictions on online retailing of household appliances. The commission determined that the prohibitions on sales via online stores were unlawful in principle, and that internet sales should be restricted only under certain strict conditions. This procedure also allowed the commission to establish guidelines on restrictions on online retailing, drawing on the practice of the European Commission(3) and certain EU member state national authorities.(4) The decision also provides guidance on the commission's practice in relation to selective distribution systems.
As regards merger control, 2011 was marked by Swisscom v Groupe E, which involved a plan between E Group and Swisscom to create a joint venture in the Canton of Fribourg with the aim of building and operating an optical-fibre network. The joint venture was supposed to ensure the creation and widespread operation of the so-called 'last kilometre'. Under Swiss competition law, corporate joint ventures are subject to merger control if the joint venture company exercises all functions of an independent business entity on a lasting basis. If a joint venture company is newly formed by two or more undertakings, it is subject to merger control if, in addition to the above criteria, the business activities of at least one of the controlling shareholders are concentrated in it. After having conducted an in-depth investigation of the proposed joint venture, the commission concluded that the joint venture was not going to engage in autonomous commercial activities with respect to its parent companies in the near future. Thus, the incorporation of the joint venture did not require the clearance of the commission under the merger control regime. The cooperation was to be reviewed under the same legal rules as other optical-fibre network building projects in Switzerland.
For further information on this topic please contact Pascal Favre at Tavernier Tschanz by telephone (+41 22 704 3700), fax (+41 22 704 3777) or email ([email protected]).
Endnotes
(1) The annual report is available in English at www.weko.admin.ch/dokumentation/00226/index.html?lang=en.
(3) See EU Guidelines on Vertical Restraints, 2010/C 130/01.
(4) See German Federal Cartel Office, Decision B 3 – 123/08 – Contact lenses, September 25 2009. See also French Competition Council, Decision 08-D-25, October 29 2008, relating to practices implemented in the sector of cosmetics and personal care products sold under the guidance of a pharmacist.