EnforcementComplaints procedure for private parties
Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?
Private parties can explicitly complain to the Competition Commission (ComCo). According to article 26(1) of the Cartel Act, the Secretariat may conduct preliminary investigations at the request of enterprises concerned. If there are signs of unlawful restraint of competition, the Secretariat will open an investigation with the consent of a member of ComCo’s presiding body (article 27(1) of the Cartel Act). In return, if there are no such signs, the Secretariat will close the preliminary investigation without any further consequence. The approximate timeframe for such a preliminary investigation may be considerable and extend over a couple of years.
If alleged vertical restraints have effects solely on the relationship between private undertakings, do not make a significant impact on the market and thereby do not involve public interests, the Secretariat may refer the complaining party to private enforcement before a civil court.Regulatory enforcement
How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?
Swiss antitrust law is often applied to vertical restraints, as Swiss authorities are particularly concerned about the allegedly higher prices in Switzerland compared to neighbouring countries. However, the number of decisions does not match the number of (preliminary) investigations the Secretariat conducts. In 2002, the Swiss authorities reported some 120 cases regarding vertical agreements. Based on 76 cases that had been closed by the time the annual report for 2003 was published, not one unlawful vertical agreement had been found. Either the Cartel Act was not applicable, or there were no competition problems, or, in some cases, there was an amicable settlement. Between 2004 and 2019, the Swiss authorities conducted 71, 90, 80, 46, 39, 39, 42, 61, 55, 51, 41, 48, 46, 48, 39 and 33 (preliminary) investigations in a given year. The figures for 2020 have not yet been published. Based on the published statistics, one cannot allocate these cases to specific types of restraints, but a considerable proportion has concerned vertical restraints. In 2009, ComCo issued the first three decisions in which fines were imposed in cases of vertical restraint. ComCo issued no decision on vertical restraints in 2010, one decision in 2011, two decisions in 2012, one decision in 2013, no decision in 2014, one decision in 2015, two decisions in 2016, one decision in 2017 and 2018 respectively, two decisions in 2019 and one decision in 2020.
What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
A contract containing prohibited vertical restraints (a restriction eliminating effective competition or a restriction substantially affecting competition that cannot be justified) is null and void based on Swiss civil law (article 20(1) of the Code of Obligations). According to the principle of severability (which is outlined in article 20(2) of the Code of Obligations), if the defect only affects particular parts of the contract, then only those parts shall be null and void unless it is to be presumed that the contract would not have been concluded without the defective parts.
May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
The ComCo is empowered to impose penalties itself (articles 18(3) and 53 of the Cartel Act). The Secretariat, in return, conducts the investigations and makes proposals to the ComCo (article 23(1) of the Cartel Act). The ComCo may impose a fine of up to 10 per cent of the respective company’s turnover in Switzerland in the previous three business years (article 49a(1) of the Cartel Act). The amount of the sanction is dependent on the duration and severity of the unlawful behaviour. A remedy may consist in reaching an amicable settlement, which will be decided by the ComCo on a proposal from the Secretariat (article 30(1) of the Cartel Act). As far as remedies are concerned, the authorities are particularly interested in removing any obstacles to parallel imports and in scrutinising price recommendations having – allegedly – the effect of fixed prices. The Verticals Notice explicitly treats price recommendations with suspicion from the outset.
In 2009, the ComCo issued the first three decisions in which fines were imposed in cases of vertical restraints:
- fines of 55,000 Swiss francs in total were imposed for an agreement on resale price maintenance with respect to gardening scissors (this decision was based on a leniency application and an amicable settlement and was thus not appealed);
- fines of 5.7 million Swiss francs in total were imposed for public price recommendations regarding specific non-reimbursable pharmaceutical products. The Federal Administrative Court approved the appeals. This decision had been appealed to the Federal Supreme Court by the EAER and was set aside and remitted for reconsideration in January 2015. The Federal Supreme Court held that the Cartel Act does apply in this case considering that the regulatory framework for pharmaceutical products does not exclude competition. On that basis, the Federal Administrative Court issued a new decision in December 2017 holding that the price recommendations did not constitute a vertical agreement; and
- fines of 4.81 million Swiss francs were imposed for an agreement prohibiting parallel imports of Elmex toothpaste. The Federal Administrative Court approved the decision of the ComCo. This decision was confirmed by the Federal Supreme Court.
In 2010, the ComCo issued no decision in which a fine was imposed in cases of vertical restraints. In 2011, the ComCo issued one decision (Nikon) in which a fine was imposed in cases of vertical restraints, where fines of 12.5 million Swiss francs in total were imposed for an agreement prohibiting parallel imports in the area of photographic cameras (this decision was confirmed by the Federal Administrative Court, which reduced the fine to approximately 12 million Swiss francs, and not appealed further). In 2012, the ComCo fined BMW 156 million Swiss francs for impeding direct and parallel imports into Switzerland (decision confirmed by the Federal Supreme Court in October 2017) and imposed a fine of 470,000 Swiss francs for retail price maintenance agreements in relation to alpine sports products (decision set aside by the Federal Administrative Court in December 2015; the finding of an unlawful agreement by the ComCo was ultimately confirmed by the Federal Supreme Court). The ComCo imposed fines for vertical restraints concerning the exclusive supply terms for French-language books in 2013. This decision has been approved by the Federal Administrative Court. In the Jura case, no fine was imposed, since the vertical restrictions at stake did not fall under the presumption of elimination of competition set in article 5(3) and (4) of the Cartel Act. No decision in which a fine was imposed in cases of vertical restraints was issued by the ComCo in 2014. In 2015, the ComCo fined an importer and wholesaler of stringed instruments 65,000 Swiss francs for fixing maximum rebates to be applied by the resellers, thereby imposing minimum resale prices, and in 2016, the manufacturer and the Swiss general importer of warning flashlights for the prohibition of parallel imports. In 2017, the ComCo fined the manufacturer and the Swiss general importer of lawnmower robots for unlawful vertical price-fixing. In 2018, the ComCo approved an amicable settlement with Rimowa – a German trolley suitcase manufacturer, who restricted active and passive sales into Switzerland – and imposed a fine of 135,000 Swiss francs. In 2019, the Federal Administrative Court approved in principle ComCo’s decision concerning French-language books and a fine against nine undertakings; however, it lowered the fine of four of the involved undertakings to 14.3 million Swiss francs.Investigative powers of the authority
What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?
Parties to vertical agreements are required to provide the competition authorities with all relevant information and to produce all necessary documents (article 40 of the Cartel Act). The competition authorities may also hear third parties as witnesses and require the parties to the investigation to make statements (article 42(1) of the Cartel Act). The competition authorities may order searches and seize documents (hard copy and digital) (article 42(2) of the Cartel Act). In this context, all documents and electronic databases located at the undertaking’s premises, as well as at the houses of managers, can be searched and seized. Correspondence exchanged with Swiss attorneys or attorneys in EU or European Free Trade Association member states are generally protected by legal privilege. However, the scope of legal privilege in Switzerland is narrower than in other jurisdictions.
The competition authorities also demand information from suppliers domiciled outside Switzerland. Until recently, owing to a lack of international treaties in the area of competition law (with the notable exception of the area of civil aviation, where a bilateral agreement between Switzerland and the European Union exists), these requests may not have been enforceable. On 1 December 2014, a bilateral cooperation agreement on competition matters between the European Union and Switzerland came into force (the Cooperation Agreement). The Cooperation Agreement now provides a framework for exchanging information.Private enforcement
To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Private enforcement is possible under Swiss antitrust law. The right to sue, however, is limited to a person impeded by an unlawful restraint of competition from entering or competing in a market. Such a person may request removal or cessation of the obstacle (eg, the conclusion of contracts at market terms), damages and reparations, and the remittance of illicitly earned profits (articles 12(1) and 13 of the Cartel Act). Until now, private enforcement has not been used very frequently. This is mainly owing to the high burden of proof and the substantial cost risk since court costs and the other party’s legal costs must usually be borne by the losing party in the proceedings. In a 2008 report on the evaluation of the effectiveness of the Cartel Act, measures for strengthening private enforcement were recommended. In a consultation proposal published in 2010 for an amendment of the Cartel Act, the Swiss government suggested implementing only one of these proposals, concerning the statute of limitations.