Swiss Parliament Rejects Antitrust Reforms

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The Swiss competition law is governed by the Federal Law of October 6, 1995, on Cartels and Other Restraints of Competition (the Cartel Act). The regulatory framework is accompanied by numerous federal ordinances and communications of the Federal Competition Commission. On February 22, 2012, the Swiss Federal Council submitted to Parliament its draft for a number of amendments of the Cartel Act for approval. On September 17, 2014, the Parliament rejected in its entirety the proposed revision of the Cartel Act.

Many proposals have been at issue, including per se prohibition of hard-core restrictions, institutional reform and reform of merger control. The draft also provided for amendments to the Cartel Act in the following areas: strengthening of private enforcement, introduction of criminal sanctions, mandatory reduction of sanctions in the case of compliance programs and procedural improvements to increase legal certainty. Last but not least, the draft included a very controversial proposal introducing a new concept of abuse of dominance, intended to impose a requirement on all multinational companies to supply Swiss buyers at the most favorable price obtainable worldwide. As a result, any company in an OECD member state that refused to sell its products to a customer in Switzerland at the same prices it charged locally would have been exposed to illegal discrimination sanctions. The most controversial proposals are presented below.

Per se prohibition of hard-core restraints

The draft legislation provided that hard-core restraints, such as horizontal and vertical agreements to fix prices, to limit the quantities of goods or services to be produced, purchased or supplied and to allocate markets or customers would be governed by a per se prohibition. Such agreements would have been automatically prohibited, unless justified on grounds of economic efficiency. This shift from an effects-based approach towards vertical and horizontal hard-core restraints to a mere form-based assessment has been rejected by the Parliament. According to the present practice, the hard-core restrictions are only unlawful if the relevant practice has an appreciable effect on effective competition.

Prohibition of price differentiation

The second very controversial proposal concerned the prohibition of illegal differentiation in price — in other words, an obligation for foreign companies to deliver products to Swiss customers at the same prices as offered to customers in their own countries. As a result, international companies would be forced to sell their products at the same prices charged in other OECD countries. This proposal has been rejected as an impermissible intervention into multinational companies’ freedom to implement international price differentiation strategies.

Institutional reform

Presently, the Competition Commission is made up of the Commission, the decisive body, and the Secretariat, the investigating body. The amalgamation of those two bodies into one authority has been severely criticized. Moreover, the critique relates to the fact that the Commission is partly composed of representatives of industry, trade associations and unions, and therefore is not independent. The draft legislation proposed the introduction of a Competition Authority (CA), which would have conducted investigations without having any decisive power. No representatives of industry, trade associations or unions would have been allowed in the CA. Furthermore, the proposed legislation provided the Federal Administrative Court with full jurisdiction to make decisions upon motions of the CA.

Reform of merger control

Under the current regime, mergers may only be prohibited if, firstly, they lead to the creation or strengthening of a dominant position, and secondly, if such dominant position is liable to eliminate effective competition. Critics hold that under the current regime it has been very difficult for authorities to meet the burden of proof required to prohibit concentration. As a result, the draft proposed replacing the current substantive test with the “significant impediment of effective competition (SIEC) test” presently used under the European merger systems.

Pending decisions

Going forward, it will be interesting to monitor the decisions of the appeal courts relating to the recently rejected legislative proposals. Several important decisions of the Competition Commission are now pending before the courts. Of particular interest is the outcome of the long-running Gaba/Gebro case, which concerns parallel imports and vertical agreements in relation to territory. In this case a manufacturer licensing agreement was held to be unlawful because it contained an export ban which allegedly prevented the Austrian licensee from selling the products into the Swiss market. If the Federal Highest Court upholds the judgment of the Federal Administrative Court, part of the revised cartel legislation will come into force after all.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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