Abuse of dominance in Switzerland

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

In general, dominant undertakings are considered to act unlawfully ‘if they, by abusing their position in the market, hinder other undertakings from starting or continuing to compete, or disadvantage trading partners’ (article 7, paragraph 1 of the Cartel Act). Article 7, paragraph 2 of the Cartel Act lists examples of conduct that may be considered as abusive (see question 6).

The Cartel Act contains no per se prohibitions. The abusive character of a conduct is to be determined on a case-by-case basis, taking into account the specific market conditions. In practice, the Comco and the appellate courts examine the effects of a specific conduct on the market, particularly in cases where the conduct of a dominant undertaking falls under the categories covered by article 7, paragraph 2 of the Cartel Act. The former Competition Appeal Commission recognised that it is the anticompetitive effect of a practice that justifies its prohibition, which position is also confirmed by the Federal Supreme Court’s requirement that examples of article 7, paragraph 2 of the Cartel Act should be applied in conjunction with its paragraph 1 (Federal Supreme Court, LPC 2013/1 - Publigroupe, p. 114).

Particularly when it comes to conduct solely covered by the umbrella clause of article 7, paragraph 1 of the Cartel Act, recent decisions show a trend towards an effects-based approach. Indeed, for example, in the Swisscom decision, the Federal Administrative Court imposed a substantial fine on Swisscom for a price squeeze in the broadband internet sector (ADSL), which falls solely under the general provision of article 7, paragraph 1 of the Cartel Act (Federal Administrative Court, LPC 2015/3 - Preispolitik Swisscom ADSL, p. 561).

Does the concept of abuse cover both exploitative and exclusionary practices?

Article 7 of the Cartel Act covers both exploitative and exclusionary practices. Exclusionary practices target mainly competitors, while exploitative practices aim at harming commercial partners or consumers. However, the distinction between exploitative and exclusionary practices is rather academic.

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

In practice, the Comco requires a link between dominance and abuse. However, the causal link is not understood as limiting the finding of an abuse to the market in which the undertaking is found dominant. The practice and legal doctrine accepts that unilateral conduct of dominant undertakings may have an impact (or negative effect) in adjacent markets (Comco, LPC 2006/4 - Valet Parking, p. 625). In the Valet Parking case, the refusal of Zurich Airport to grant authorisation for parking within the airport to competitors was considered as an abuse of a dominant position, even though the behaviour had a negative effect on the off-airport parking market (ie, outside the airport).

On the other hand, the causal link between dominance and a possible abusive behaviour, in itself, is not sufficient to effectively establish an abusive conduct. The behaviour itself should comprise separate elements that qualify it as abusive. In the context of unfair (or excessive) prices where the dominance itself is the cause of the dominant undertaking’s power to set monopolistic prices, this close link between dominance and price setting is not sufficient to prove that the price was abusive. In addition, it should be demonstrated that the dominant undertaking was indeed able to coerce clients to accept monopolistic prices (Federal Supreme Court, LPC 2011/3 - Terminierungspreise im Mobilfunk, p. 440). Yet, there is considerable legal uncertainty as to what kind of coercion the dominant undertaking must have been able to impose.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

Although the law does not provide for defences, the case law recognises the possibility to successfully invoke defence arguments such as legitimate business reasons. Ultimately, the interests of the individual undertaking have to be balanced with the interests in the ‘institutional’ competition on the market (Federal Supreme Court, LPC 2013/1 - Publigroupe, p 114). In any case, however, it is crucial that the specific conduct is proportional, namely, that it does not go beyond what is required to achieve the legitimate business reasons’ goal.

The former Competition Appeal Commission has already confirmed the possibility of invoking legitimate business reasons, which might be retained if the company’s conduct is justified to protect its objective commercial interests, and if the conduct under investigation is not substantially different from what would have prevailed in a competitive market (LPC 2002/4 - Entreprises Electriques Fribourgeoises, p. 276). The Competition Appeal Commission mentioned legitimate business reasons, including the necessity to ensure the quality of products, efficiency or technical reasons (eg, lack of capacity).

In the TicketCorner case (Comco, LPC 2004/3 - TicketCorner, p. 778), the Comco discussed efficiency gains in the administration of ticket sales, in the improvement of seller agents’ training, and the prohibition of free riding. However, the exclusivity agreements between the agent seller (TicketCorner) and the event organisers were not considered necessary to achieve such efficiency gains (see also Federal Administrative Court, LPC 2016/4 - Vertrieb von Tickets im Hallenstadion Zürich, p. 1085).

The existence of objective justifications of a technical nature has been assessed in the decision of the Comco dated 19 December 2016 in the Kommerzialisierung von Medikamenteninformationen case, but finally denied.