Legal framework

Antitrust law

What are the legal sources that set out the antitrust law applicable to vertical restraints?

The relevant legislation in Switzerland is the Federal Act on Cartels and Other Restraints of Competition of 6 October 1995 (the Cartel Act). Also, the Competition Commission (ComCo) issued a notice regarding the competition-law treatment of vertical agreements of 28 June 2010, which entered into force on 1 August 2010 (the Verticals Notice (VN)), replacing a previous notice of 2 July 2007, and amended on 22 May 2017. Further, ComCo published explanatory comments to the VN on 12 June 2017, amended on 9 April 2018, which shall serve as an interpretation aid and a guide to ComCo’s case law in the area of vertical restraints. Legal sources in the area of antitrust law are available on the ComCo website in the official Swiss languages of German, French and Italian. Some of them are also available in an unofficial English translation (without legal force).

Types of vertical restraint

List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?

Article 5 of the Cartel Act distinguishes three types of unlawful agreements in terms of the intensity of the restraint of competition:

  • agreements that do not significantly affect competition are lawful;
  • agreements that significantly affect competition are lawful if they can be justified on grounds of economic efficiency and unlawful if they cannot be so justified; and
  • agreements that eliminate effective competition are unlawful.

 

Article 5(4) of the Cartel Act, defines two types of vertical agreements presumed to lead to the elimination of effective competition. Accordingly, agreements between undertakings on different market levels regarding minimum or fixed prices as well as clauses in distribution agreements regarding the allocation of territories, provided distributors from other territories are prohibited from sales into these territories, are presumed to eliminate effective competition. The rules in article 5(4) of the Cartel Act are widely held to declare unlawful prohibitions of passive sales into exclusive territories (ie, absolute territorial protection).

The concept of vertical restraints itself is defined in section 1 of the Verticals Notice. Vertical agreements include binding or non-binding agreements and concerted practices between two or more enterprises at different levels of the market that have as their object or effect a restraint of competition and concern the commercial terms on which the relevant enterprises may purchase, sell or distribute goods or services.

Legal objective

Is the only objective pursued by the law on vertical restraints economic, or does it also seek to promote or protect other interests?

The main objective pursued by the law on vertical restraints is the protection of competition. However, there is also a notice of 19 December 2005 regarding agreements with limited market effects meant to provide a safe harbour for small and medium-sized enterprises (the SME Notice). The VN takes precedence over the SME Notice (section 9(2) of the VN).

Responsible authorities

Which authority is responsible for enforcing prohibitions on anticompetitive vertical restraints? Where there are multiple responsible authorities, how are cases allocated? Do governments or ministers have a role?

In Switzerland, only federal administrative bodies have the power to implement the Cartel Act; namely, ComCo and its Secretariat. The main administrative body enforcing the Cartel Act is ComCo. It is independent of the federal government (article 19(1) of the Cartel Act). ComCo is the sole administrative body with the power to issue decisions prohibiting anticompetitive vertical restraints and to impose fines (article 53(1) of the Cartel Act). ComCo decisions can be appealed to the Federal Administrative Court and the Federal Court consecutively.

The Secretariat of ComCo conducts investigations and preliminary investigations and prepares ComCo decisions (article 23(1) of the Cartel Act). The Secretariat has the power to open investigations with the consent of a member of ComCo’s presiding body (article 27(1) of the Cartel Act) and to perform preliminary investigations (article 26 of the Cartel Act).

Also, every civil court can decide about the legality of anticompetitive vertical restraints if parties raise this issue in civil litigation.

Jurisdiction

What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially? Has it been applied in a pure internet context and if so, what factors were deemed relevant when considering jurisdiction?

The Swiss antitrust law applies to vertical restraints whose effects are felt in Switzerland, even if they originate in another country (article 2(2) of the Cartel Act).

In a decision dated 11 June 2011, ComCo fined two companies active in Switzerland for obstacles to online sales. ComCo concluded that such a distributor must be allowed to use the internet to sell products. This was the first precedent regarding vertical restraints where the law was applied in a pure internet context. ComCo confirmed its policy stance in a settlement dated 30 June 2014 with the Jura company. Thus, prohibitions of online sales are considered restrictions of passive selling by ComCo.

At the end of 2012, ComCo opened an investigation into several online hotel reservation companies and examined, inter alia, potentially anticompetitive most-favoured-nation (MFN) clauses with hotels. The investigation was closed in October 2015 and ComCo decided that the broad MFN clauses applied by hotel booking platforms in the past were unlawful and prohibited their use. ComCo further held that hotel booking platforms may make use of narrow MFNs.

In November 2009, ComCo fined two companies, one of which had its headquarters in Austria, thus applying the law extraterritorially. ComCo considered that restrictions of passive sales in a licence agreement infringed article 5(4) of the Cartel Act. In this decision regarding the prohibition of parallel imports of Elmex toothpaste, ComCo held that the presumption of elimination of effective competition by an agreement on absolute territorial protection applies not only in distribution agreements (as the wording of article 5(4) of the Cartel Act would seem to imply), but also if such a clause is contained in a licence agreement. In December 2013, the Federal Administrative Court confirmed this decision. In June 2016 and April 2017, the Federal Supreme Court confirmed the decision upon appeal of the two companies. The Federal Supreme Court held that it is sufficient for the application of the Cartel Act if conduct originating abroad ‘has or can have effects in Switzerland’.

In May 2012, ComCo fined BMW AG, which has headquarters in Munich, 156 million Swiss francs for impeding parallel imports into Switzerland. According to the decision, a clause in BMW Group’s contracts with authorised dealers in the European Economic Area (EEA) prohibits them from selling BMW and Mini vehicles to customers outside the EEA (to which Switzerland does not belong). The investigation was opened in autumn 2010 after ComCo received several complaints by Swiss customers who had tried unsuccessfully to purchase a BMW or Mini vehicle from a dealer in Germany. The Federal Administrative Court confirmed the decision of ComCo in November 2015 and held that the said contract clause was an unlawful vertical agreement regarding the allocation of territories. This decision (and thereby the ComCo decision) was confirmed by the Federal Supreme Court in October 2017.

Agreements concluded by public entities

To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?

Swiss antitrust law equally applies to vertical restraints in agreements concluded by public or state-owned entities (article 2(1) of the Cartel Act). However, to the extent that particular provisions establish an official market or price system or that provisions entrust certain enterprises with the performance of public-interest tasks, by granting them special rights, these provisions take precedence over the provisions of the Cartel Act (article 3(1) of the Cartel Act).

Sector-specific rules

Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry (motor cars, insurance, etc)? Please identify the rules and the sectors they cover.

In the motor-vehicle sector, there is the special Notice on the Competition Law Treatment of Vertical Agreements in the Motor Vehicle Trade (the MV Notice). ComCo issued an updated version in June 2015, which entered into force on 1 January 2016, including explanatory comments, replacing the previous notice and explanatory comments of 21 October 2002. Both the MV Notice and the explanatory comments were amended on 9 September 2019, and the validity of the MV Notice was prolonged until the end of 2023. This notice takes precedence over the VN (article 13 of the MV Notice).

General exceptions

Are there any general exceptions from antitrust law for certain types of agreement containing vertical restraints? If so, please describe.

There are no general exceptions from antitrust law for certain types of vertical restraints as such.

However, ComCo regards vertical agreements other than those explicitly listed in sections 10 and 12 of the VN usually as non-significant restrictions of competition, provided the market share of all the enterprises involved does not exceed a threshold of 15 per cent on any of the relevant markets (section 13(1) of the VN). The VN takes precedence over the notice of 19 December 2005 regarding agreements with limited market effects meant to provide a safe harbour for small and medium-sized enterprises, which generally applies to agreements with limited market effects (section 9(2) of the VN).

Further, statutory provisions that do not allow competition in a market for certain goods or services take precedence over the provisions of the Cartel Act. These statutory provisions include in particular provisions that establish an official market or price system and provisions that grant special rights to specific undertakings to enable them to fulfil public duties (article 3(1) of the Cartel Act). In December 2013, the Federal Administrative Court approved the appeals lodged by the manufacturers of pharmaceutical products against a ComCo fining decision on the basis that the Cartel Act does not apply owing to regulatory and factual impediments to price competition concerning the sale of the products at stake (ie, Viagra, Levitra and Cialis). This decision had been appealed to the Federal Supreme Court by the Federal Department of Economic Affairs, Education and Research 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 on the merits, holding that the mere adherence of resellers to non-binding public price recommendations is insufficient to establish an agreement in the sense of article 4(1) of the Cartel Act. This decision was again challenged before the Federal Supreme Court and is still under appeal.