In brief: the enforcement of vertical agreements in Switzerland


Enforcement

Complaints procedure for individuals

Is there a procedure for private parties to complain to the antitrust enforcement authority about alleged illegal vertical restraints?

The Cartel Law explicitly provides for the possibility for the Secretariat to conduct preliminary investigations at the request of an involved company or in response to a complaint from third parties (Article 26(1) of the Cartel Law). The approximate time frame for such a preliminary investigation may extend over several years. If there are indications of an unlawful restriction of competition, the Secretariat, in consultation with a member of the decision-making body of the Competition Commission (ComCo), initiates an investigation (Article 27(1) of the cartel law). In return, if there are no such indications, the Secretariat will close the preliminary investigation without further consequences. If an alleged vertical restraint only affects the interests of the companies involved, without significant impact on the market or public interests, the Secretariat may refer the complaining party to a private action in civil court.

Application of regulations

How often is antitrust law applied to vertical restraints by the antitrust enforcement authority? What are the main enforcement priorities regarding vertical restraints?

Vertical restraints are of great practical importance in Swiss competition law. The main reason for this is a traditional ComCo concern about the level of prices in Switzerland compared to neighboring countries.

In 2009, the ComCo issued the first three decisions in which fines were imposed for vertical restraints. In the following years, the 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 respectively in 2018, two decisions in 2019, one decision in 2020 and (as of November 2021) no decision in 2021. The main enforcement priorities relate to the areas of absolute territorial protection and fixed prices or minimal.

What are the consequences of an infringement of competition law for the validity or enforceability of a contract containing prohibited vertical restraints?

According to Swiss civil law, a contract is void if its clauses are illegal (article 20, al. 1, of the Code of Obligations). This fully applies to contracts containing prohibited vertical restraints, i.e. vertical restraints eliminating or significantly restricting effective competition without being justified on grounds of economic efficiency. According to the principle of severability, when the defect relates only to certain clauses of a contract, only these clauses are void unless there is reason to suppose that the contract would not have been concluded without them (Article 20 (2) of the Code of Obligations).

Can the authority responsible for enforcing the antitrust laws directly impose sanctions or must it make a request to 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?

ComCo can impose sanctions directly (Articles 18(3), 30 and 53 Cartel Law). It may impose a fine of up to 10% of the turnover achieved by the company concerned in Switzerland during the last three financial years (Art. 49a, para. 1 of the Cartel Act). In addition, ComCo may decide on any other appropriate measure, including the prohibition or imposition of a particular behavior, a declaratory decision or the approval of an amicable settlement at the request of the Secretariat (article 30 , paragraph 1 of the Cartel Act). Competition authorities focus on the one hand on obstacles to parallel imports and on the other hand on price recommendations which can have the same effect as fixed or minimum prices, both of which have recently resulted in fines considerable.

In 2009, the ComCo imposed fines totaling 5.7 million Swiss francs for public price recommendations by three pharmaceutical companies (Off-List Case; this decision was confirmed on the merits by the Federal Court (2021), but sent back to the Federal Administrative Court for review of the fine) and a fine of 4.81 million Swiss francs for an agreement prohibiting parallel imports of toothpaste (Gaba; this decision was upheld by the Federal Court (2016)). In 2011, the ComCo issued a decision on the prohibition of parallel imports in the field of cameras, resulting in fines of a total of 12.5 million Swiss francs (Nikon Case; confirmed by the Federal Administrative Court (2016), which reduced the fine to approximately 12 million Swiss francs). In 2012, the ComCo imposed a fine of 156 million Swiss francs on BMW for impeding direct and parallel imports into Switzerland, which is to date the highest fine in competition law in the field of illegal agreements (BMW Case; confirmed by the Federal Court (2017)). In 2013, the ComCo imposed (unpublished) fines in a decision on barriers to parallel imports of French-language books (Books in French Case; confirmed by the Federal Administrative Court (2019) with total fines reduced to 14.3 million Swiss francs). In 2017, the ComCo approved an out-of-court settlement with the Swiss manufacturer and general importer of robotic lawn mowers and imposed a fine of around 657,000 Swiss francs for illegal vertical price-fixing (Husqvarna Case). In 2018, the ComCo approved an out-of-court settlement with a wheeled suitcase manufacturer that had restricted active and passive sales in Switzerland and imposed a fine of 135,000 Swiss francs (Rimowa Case). In 2019, the ComCo approved out-of-court settlements and imposed fines on a Swiss ski producer for maintaining the resale price (Stockli Case; fine of approximately 140,000 Swiss francs) and a wholesaler of agricultural machinery and spare parts for agreements with dealers that resulted in absolute territorial protection (Bucher Landtechnik Case; fine of approximately 150,000 Swiss francs).

Investigative powers of the authority

What investigative powers does the antitrust enforcement authority have when enforcing the ban on 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 Law). The competition authorities may also hear third parties as witnesses and require statements from the parties to the investigation (Article 42(1) of the Cartel Act). Competition authorities can order searches and seize documents (paper and digital) (Article 42(2) of the Cartel Law). In this context, all documents and electronic databases located on the premises of the company, as well as in the homes of the managers, can be searched and seized. Correspondence exchanged with Swiss lawyers or lawyers from EU or EFTA member states is generally protected by professional secrecy. However, the scope of legal privilege in Switzerland is narrower than in other jurisdictions. The competition authorities may also request information from suppliers domiciled outside Switzerland. In particular, a bilateral cooperation agreement on competition issues between the European Union and Switzerland has provided a framework for the exchange of information between Swiss and European competition authorities since 2014.

Private app

To what extent is private execution possible? Can non-parties to agreements containing vertical restraints obtain judgments or declaratory injunctions and sue for damages? Can the parties to the agreements themselves sue for damages? What remedies are available? How long should a business expect private enforcement action to take?

A person prevented by an unlawful impediment to competition from entering or competing on a market is entitled to demand the removal or abandonment of the impediment, damages and satisfaction in accordance with the Swiss Code of Obligations , and the restitution of the illicitly made profits in accordance with the provisions relating to the mandate without mandate before a civil court (article 12, paragraph 1, of the law on cartels). Therefore, as a general rule, only those engaged in competition have a right of action, but not, for example, consumers or employees.

Private enforcement of antitrust law is not yet widespread in Switzerland, which is mainly due to the high burden of proof and cost risk, as court costs and opposing party’s legal costs usually have to be borne by the losing party. Although there is a lack of generalizable data, proceedings can regularly take several years until a binding decision is issued.

In 2021, the government published a preliminary draft of a partial revision of the Swiss law on cartels, which aims in particular to facilitate the private application of competition law, in particular by granting a right of action to end customers (while until now only those prevented from entering or competing in a market had the right to do so).

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