i ENFORCEMENT POLICIES AND GUIDANCE
The Federal Law on Cartels and Other Restraints of Competition of 6 October 1995, as amended (the Cartel Act) is the legislation regulating cartels in Switzerland. The regulatory framework is complemented by several federal ordinances and general notices and communications of the Competition Commission (the Commission).
The federal authorities responsible for the investigation of cartel matters are the Commission and the Secretariat of the Commission (the Secretariat). They are independent of the federal government. The Commission consists of 12 members who are elected by the Federal Council. The Commission is headed by the president and two vice-presidents. The majority of the Commission’s members must be independent experts (having no interest in or special relationship with any economic group whatsoever) – usually professors of law or economics. The Commission is the deciding body in cartel matters, while investigations are conducted by the Secretariat. The Secretariat also prepares the Commission’s decisions. The Secretariat is organised into four services responsible for the product, services, infrastructure and construction markets respectively. Each service is headed by a vice-director. The Secretariat has more than 70 employees, including a significant number of economists.
The Cartel Act prohibits unlawful restraints of competition such as anticompetitive agreements or concerted practices. Anticompetitive agreements are characterised by the following three elements:
- a Regarding the content and effect of an agreement limiting effective competition in the market for certain goods or services, either the purpose or the effect of the agreement must be to significantly impede competition or to eliminate effective competition.
- b Irrespective of the form of the agreement, any agreement qualifies under the Cartel Act, be it bilateral (a cooperative or non-enforceable agreement, a binding or non-binding or a ‘gentlemen’s agreement’) or the concerted practices of several undertakings.
- c Regarding the parties to the agreement, the Cartel Act applies both to agreements between undertakings operating at the same level of the market and to those between undertakings operating at different levels of the market (horizontal and vertical agreements).
The Cartel Act is based on the principle of abuse. The mere existence of an anticompetitive agreement does not, in principle, mean that the agreement is unlawful. To be unlawful, such an agreement must either eliminate effective competition or significantly restrict effective competition without being justified on economic efficiency grounds.
However, by law (Article 5(3) and (4) of the Cartel Act), certain horizontal and vertical restraints (hard-core restraints) are presumed to eliminate effective competition, namely:
- a horizontal agreements that:
- • directly or indirectly fix prices;
- • restrict quantities of goods or services to be produced, purchased or supplied; or
- • allocate markets geographically or according to trading partners; and
- b vertical agreements that:
- • contain minimum or fixed resale prices; or
- • foreclose geographical markets.
Such a presumption may be rebutted if it can be shown that, as a matter of fact, effective competition is not eliminated by these agreements. In case competition is not eliminated, it has to be assessed whether the agreement significantly restricts competition. According to a recent decision of the Federal Supreme Court hard-core agreements on prices, quantities and territories constitute in principle per se significant restraints of competition and are unlawful if they cannot be justified on economic efficiency grounds (see Section VIII, infra).
In addition, in exceptional cases and upon request of the undertakings concerned, the Federal Council may authorise specific conduct of undertakings for compelling public interest reasons.
ii COOPERATION WITH OTHER JURISDICTIONS
As Switzerland is not part of the EU, investigations, prosecutions and sanctions decided by the European Commission have no legal implications for the Commission. The same applies for decisions by antitrust authorities in other jurisdictions. Even if the EU regulatory framework and case law has often made significant inroads into the Commission’s practice, the Federal Supreme Court has held explicitly that Swiss competition law must be interpreted independently from EU law.
However, the bilateral agreement between the EU and the Swiss Confederation on Air Transport provides for directly applicable substantive and procedural provisions regarding competition law. According to the agreement, the European Commission rules on the admissibility of agreements, decisions and concerted practices as well as abuses of a dominant position concerning routes between Switzerland and the EU whereas the Commission remains responsible for routes between Switzerland and third countries. In the case of investigations on possible infringements that are carried out under these competences, the Swiss and European authorities are obliged to fully cooperate (i.e., to give the other party all necessary information and assistance in the case).
Also, Switzerland was the first state to sign a second generation cooperation agreement in competition matters with the EU, which entered into force on 1 December 2014. This agreement is the legal basis for cooperation between the European Commission (but not the Member States) and the Swiss authorities. Its aim is closer cooperation. By improving access to evidence, reducing administrative overlaps and ensuring due consideration of mutual interests, the European Commission and the Commission seek to combat cross-border anticompetitive practices more effectively. Therefore, the competition authorities may inform each other of enforcement activities and coordinate investigation procedures (e.g., parallel dawn raids) as well as transmit certain information even without the consent of the undertakings concerned and may use this information for the enforcement of their respective competition laws. The exchange of information without consent is subject to narrow restrictions. The competition authorities must investigate the same or related conduct. Information obtained under leniency or settlement procedures must not be exchanged without consent. The same applies to information that has been received in breach of procedural rights, such as legal professional privilege and the right against self-incrimination. Further, the competition authorities are entitled but not obliged to exchange information.
In the absence of an agreement, the Swiss authorities are able to share confidential information with other competition authorities if all the undertakings concerned issued a waiver.
iii JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
According to Article 2(2), the Cartel Act applies to all concerted practices and agreements that have a direct, substantial and reasonably foreseeable effect within Switzerland (the effects doctrine). Therefore, agreements concluded abroad or conduct that takes place outside Switzerland but that has such effects in Switzerland may fall under Swiss jurisdiction. In its recent practice, the Commission imposed severe sanctions on Nikon and BMW because their European dealer agreements contained provisions prohibiting exports to countries outside the European Economic Area (EEA). As Switzerland is not part of the EEA (and was, as a result, affected by those provisions), the Commission was of the opinion that these restrictions led to a foreclosure of the Swiss market. In general, the Commission tends to interpret effects in Switzerland rather broadly – the mere possibility of effects suffices.
In September 2016 and November 2015 respectively, the Federal Administrative Court confirmed in the Nikon and the BMW cases that pursuant to the effects doctrine restrictions of competition committed outside Switzerland also fall into the geographic scope of the Cartel Act. It is sufficient that the restriction of competition may have had an effect on the Swiss market. Whether the restrictions of competition actually had an effect on the Swiss market is not decisive.
iv LENIENCY PROGRAMMES
The Cartel Act provides for a leniency programme. According to the Cartel Act, an undertaking that cooperates with the Commission in view of the discovery and the elimination of a restraint of competition may benefit from total or partial immunity.
There are no statutory deadlines for applying for immunity or leniency. However, only the first applicant may enjoy total immunity. Markers are available and may be applied for preferably by email or fax and precedent announcement by phone. In addition, it is also possible to deliver the marker in person or to have it delivered by a representative, to send it by mail or in agreement with the Secretariat to make an oral statement on record at its premises. However, one must bear in mind that these options are slower than a notification by email or fax, particularly during a dawn raid. Further, if the submission is delivered by post, it may not be possible under certain circumstances to precisely timestamp the report upon receipt and to establish the order of precedence/ranking. It is not possible to apply for a marker by phone. Marker requirements are set out in the notice on leniency published by the Secretariat, including a brief description of the company and the conduct. There are no statutory deadlines for applying or perfecting a marker.
The Secretariat will acknowledge receipt of the leniency application and specify the date and time of its receipt. With the consent of the president or either of the two vice-presidents of the Commission, the Secretariat will communicate to the applicant whether it deems that the conditions for total immunity from fines are met, any additional information that the disclosing undertaking should submit and, in cases of anonymous disclosure, the time frame within which the undertaking shall reveal its identity.
The threshold for total immunity is rather high. Pursuant to the Ordinance on Sanctions, the Commission may grant immunity from fines if an undertaking is the first to either:
- a provide information enabling the Commission to open an in-depth investigation and the Commission did not have, at the time of the filing of the leniency application, sufficient information to open a preliminary or an in-depth investigation (disclosure cooperation); or
- b submit evidence enabling the Commission to find a hard-core horizontal or vertical agreement, provided that no undertaking has already been granted conditional immunity from fines and that the Commission did not have, at the time of the filing of the leniency application, sufficient evidence to find an infringement of the Cartel Act (identification cooperation).
Moreover, the undertaking has to fulfil the following conditions:
- a it has not coerced any other undertaking into participating in the infringement of competition and has not played the instigating or leading role in the relevant infringement of competition;
- b it voluntarily submits to the competition authority all available information and evidence relating to the infringement of competition that lies within its sphere of influence;
- c it continuously cooperates with the competition authority throughout the procedure without restrictions and without delay; and
- d it ceases its participation in the infringement of competition upon submitting its voluntary report or upon being ordered to do so by the competition authority.
In its recent practice, the Secretariat has repeatedly insisted that a leniency applicant must at least admit its involvement in an unlawful agreement subject to potential sanctions. It made it clear that it is not sufficient to simply produce factual elements. In the Secretariat’s view, a leniency applicant would, in principle, have to admit that the unlawful agreement had effects on the markets. However, the recent decisions of the Federal Administrative Tribunal in the Metal Fittings for Windows case clearly state the right of the leniency applicants to argue against the Commission’s legal interpretation of the facts. The decision is not yet final.
Where an undertaking does not meet these conditions, but has cooperated with the Commission and terminated its involvement in the infringement no later than the time at which it submitted evidence, the Commission still has the possibility to reduce the sanction.
In addition, no fine will be imposed if the undertaking itself notifies the restraint of competition before it produces any effects (notification procedure). For that purpose, the Commission has published specific filing forms. In contrast, a sanction may be imposed if the Commission communicates to the notifying undertaking the opening of a preliminary investigation (Article 26 of the Cartel Act) or the opening of an in-depth investigation (as per Article 27 of the Cartel Act) within a period of five months following the notification of the restraint and the undertaking continues to implement the restraint of competition.
In addition, Article 29 of the Cartel Act provides that the Secretariat may propose settlements to undertakings involved concerning ways to eliminate the restraint of competition. A settlement must be made in writing and requires formal approval of the Commission. The settlement will also include a proposal of the range of the fine that has to be finally decided by the Commission. Settlements are binding on the parties and the Commission, and may give rise to administrative and criminal sanctions in the case of a breach of any of its provisions by the parties (see Section V, infra).
The right of access to witness statements, minutes of hearings and other documents relevant to the investigation may be limited to protect cooperating parties. The level of confidentiality protection is the same for all leniency applicants. Anonymous leniency applications are allowed, although the leniency applicant will be required to reveal its identity within a specific time frame established by the Secretariat on an ad hoc basis.
The Commission and the Secretariat are aware of a leniency applicant’s need for confidentiality and, in the recent past, have established several measures to protect leniency applicants. However, these measures have not been tested in court so far. The catalogue of protective instruments includes the possibility to submit oral statements, paperless proceedings and restricted access to the files. Access rights of other parties to an investigation were, in the Secretariat’s practice, limited to access the files at the premises of the Secretariat. The right to take photocopies was limited to annexes, while copies of the main body of corporate statements or minutes of hearings were not allowed. In addition, access to the files was only granted shortly before the investigation had finished. The Secretariat has also implemented a number of specific internal measures to protect leniency applicants. Internal access to the file is restricted, and only the case team of the Secretariat knows about the existence or identity of leniency applicants. Moreover, the leniency documents are stored in a separate file.
In case of the opening of an investigation, the Secretariat gives notice by way of official publication. The notice states the purpose of and the parties to the investigation. There is no express obligation to keep the identity of the leniency applicant confidential. In practice, the Secretariat keeps the leniency applicant’s identity confidential as long as possible. However, even if the final decision does not reveal the name of the leniency applicant, it is not excluded that a party familiar with the facts of the case may deduce its identity from the context.
Furthermore, according to its practice, the Commission excludes leniency information completely from the disclosure of data of a cartel investigation, that is closed and the respective Commission’s decision is final and binding, to third parties.
Under Swiss law, a counsel may represent the employees under investigation as well as the undertaking; provided that it discloses the fact to both parties and that there is no conflict of interest. Given that two different kinds of sanction apply to individuals and undertakings, as a general rule it is advisable to seek independent legal advice (see Section V, infra).
From a civil law point of view, the sanction for cartel activities lies in the total or partial nullity of the agreement in question. Although generally accepted in the actual doctrine, it has not yet been confirmed that the nullity of the agreements applies ex tunc.
From an administrative law point of view, under Article 49a of the Cartel Act, direct sanctions (fines) are imposed on undertakings that participate in a hard-core horizontal cartel according to Article 5(3) of the Cartel Act or participate in hard-core vertical restraints pursuant to Article 5(4) of the Cartel Act (see Section I, supra).
The Ordinance on Sanctions lays down the method of calculation of the fines. In addition, the Commission has issued an explanatory communication on the Ordinance of Sanctions.
The maximum administrative sanction is a fine of up to 10 per cent of the turnover realised in Switzerland during the past three financial years (cumulative). The amount of the fine is calculated by taking into account the duration and gravity of the unlawful agreements or practices, as well as the presumed profit arising from the unlawful agreements or practices. In a first step, the Commission determines the base amount of the penalty that, depending on the seriousness and nature of the infringement, may amount up to a maximum of 10 per cent of the turnover achieved by the undertaking concerned in the relevant markets in Switzerland during the preceding three financial years. In a second step, the base amount is increased based on the duration of the infringement. In a third step, the penalty may be increased or reduced because of aggravating and mitigating factors such as achieving a profit that is particularly high by objective standards, playing an instigating or leading role in the restraint of competition or playing a strictly passive role in the restraint of competition. A discount can also be obtained based on leniency cooperation or on settlement. Finally, in a last step, the Commission will ensure that the penalty imposed is proportional. By determining the penalty level the Commission is bound by the maximum amount of the sanction.
Furthermore, an undertaking that violates to its own advantage an amicable settlement, a legally enforceable decision of the Commission or a judgment of the Federal Administrative Tribunal or the Federal Supreme Court can be fined up to 10 per cent of the turnover it achieved in Switzerland in the preceding three financial years. In assessing the amount, the likely profit that resulted from the unlawful behaviour is taken into account.
Finally, an undertaking that fails to provide information or produce documents, or that only partially complies with its obligations during an ongoing investigation, can be fined up to 100,000 Swiss francs.
The Commission has not yet imposed sanctions against individuals acting as private undertakings in cartel cases.
The Cartel Act contains no specific regulation on the exclusion from public procurement procedures in cases of cartel conduct. However, the Swiss Public Procurement Act provides that the contracting authority may exclude undertakings from an ongoing procurement procedure or delete them from a list of qualified undertakings in cases of cartel conduct. In addition, several cantonal procurement acts provide that undertakings may be banned from participating in procurement procedures for a period of several years in cases of cartel conduct.
There are no direct criminal sanctions for individuals for cartel activities in the Cartel Act. Swiss law does not provide for imprisonment for cartel conduct. However, individuals acting for an undertaking, but not the undertaking itself, violating a settlement decision, any other enforceable decision or court judgment in cartel matters may be fined up to 100,000 Swiss francs. In addition, individuals who intentionally fail to comply or only partly comply with the obligation to provide information in an ongoing investigation can be fined up to 20,000 Swiss francs. Individuals who can be fined include executives and board members, as well as all de facto managers and directors. These sanctions are time-barred after five years following the incriminating act. The Commission has yet to impose fines against individuals in cartel cases. Further, in case of cartel conduct in public procurement proceedings the individuals may be subject to direct criminal sanctions under the Swiss Criminal Code (i.e., particularly for fraud and forgery of documents).
VI ‘DAY ONE’ RESPONSE
The Secretariat has broad investigative powers. The Secretariat may hear the parties who have allegedly committed a competition law infringement, as well as third parties concerned (such as competitors or suppliers), ask for statements and hold hearings. It can compel testimony from witnesses, although not from the parties alleged to have entered into an unlawful anticompetitive agreement. Any hearings or witness statements must be evidenced in the minutes. The parties involved have the right to comment on these minutes. The parties in the investigation are, in principle, required to disclose information and documents. The competition authorities may use all kinds of evidence to establish the facts, such as documents, information supplied by third parties, testimony and expert opinions. Moreover, according to Article 42(2) of the Cartel Act, the president or each vice-president of the Commission has the power to order inspections and dawn raids and seizures upon request of the Secretariat. In case of a dawn raid the Secretariat has the right to search all types of premises, both business premises and private apartments and all types of devices. In the field of electronic data, the search authorisation extends to all data that can be accessed from within the searched premises.
The persons concerned have an obligation to endure the dawn raid passively and not interfere with any investigation activity. Access to the rooms and computer systems to be searched has to be granted by opening doors and safes and disclosing passwords. Further, no documents or data may be destroyed or hidden. Otherwise, it cannot be ruled out that such behaviour may be classified as preventing an officer from performing a duty, which is punishable according to the Swiss Criminal Code. In addition, violations of the obligation to submit may – as it already happened – be taken into account as an aggravating factor when calculating the sanction.
However, the persons concerned have no duty to cooperate as long as the undertaking has not decided to file for leniency. They are not required to actively participate in the search.
Undertakings subject to an inspection have the right to be assisted by external lawyers. Nevertheless, the representatives of the Secretariat in charge of the investigation will not wait for the external lawyer to arrive before searching the premises or seizing documents and electronic data. However, any evidence discovered while external lawyers are not present will be separated. Once an external lawyer is on site, he or she may screen the evidence collected in his or her absence, comment on its content and, if necessary, ask for it to be sealed.
In view of the above, it is advisable for an undertaking to have dawn raid guidelines redacted and implemented stating the following: first, the search warrant as well as the IDs of the inspectors have to be inspected carefully and copied; second, the inspectors have to be granted access and be accompanied by an employee; third, the legal department and the CEO have to be informed immediately; and fourth, the employees must not prevent or impede the search (i.e., neither to destroy nor to hide any documents or data).
vii PRIVATE ENFORCEMENT
Third parties impeded by an unlawful restraint of competition from entering or competing in a market may request before the civil courts:
- a the elimination of the unlawful agreement or cartel;
- b an injunction against the unlawful agreement or cartel;
- c damages; or
- d restitution of unlawful profits.
However, contrary to the proceedings before the Commission the burden of proof in civil proceedings is with the claimant. Under Swiss law, the main difficulties are providing concrete proof of the damage incurred and establishing a sufficient connection between the anticompetitive agreement and the damage. This is even more difficult in the case of indirect purchaser claims. Also, court costs as well as legal costs must usually be borne by the losing party in the proceedings. As a consequence, civil proceedings are hardly existent in Switzerland.
The claim is limited to the damage actually incurred; no punitive damages are available in Switzerland. Passing-on defences are not excluded. However, a claimant may request the remittance of illicitly earned profits.
VIII CURRENT DEVELOPMENTS
i Settlement practice
The Commission has endorsed its settlement practice in hybrid cases where some of the parties participate in settlements and others do not. In such cases, the Commission renders a partial decision whereby the case is decided and closed with the settlement parties and continued with the rest of the parties. This allows the settling parties to have the investigation closed more rapidly.
ii Conditional access to files in cartel proceedings
In August 2016, the Swiss Federal Administrative Court has authorised the Commission to grant access to certain data of a closed cartel investigation regarding a bid-rigging cartel in the construction sector to a municipality seeking civil damage claims. However, the Court limited the access to file in various respects: first, data may only be accessed to the extent necessary, meaning that data retention for later use is not allowed; second, access is to be limited to data that ‘directly affects’ the requesting party; third, access may only be granted and data may only be used to serve the purpose disclosed in the access request and a legal obligation must be imposed on the requesting party to that effect; and fourth, access to the files must not include data of companies that were involved in the investigated conduct but that had not been addressees of the decision.
In the case at hand, the Court did not have to decide on information requests of private undertakings. It would appear that in such a case the conditions applied by the Court are all the more relevant. Also, the Court did not formally decide on the issue of access to leniency application data. However, the Court explicitly endorsed the practice of the Commission to exclude leniency information completely from access of third parties. Whether these third parties are public or private entities should have no bearing.
iii Tightening of Swiss cartel law: per se significance of hard core restraints
In June 2016, the Federal Supreme Court rejected Gaba’s appeal and decided that a contractual clause prohibiting a licensee to export into other territories constitutes an illegal agreement that significantly restricts competition. The Federal Supreme Court decided that vertical and horizontal agreements on price, quantity and territory according to Article 5(3) and (4) of the Cartel Act, in principle, significantly restrict competition. The significance of the competition restraints is assumed for hard-core agreements because of their quality without the need to examine quantitative effects, such as market shares. Significance is only absent – according to the Federal Supreme Court’s oral debate on this ruling – in case of minor effects on competition, such as ‘bagatelle offences’, which were not further defined. Therefore, horizontal and vertical hard-core agreements are only permissible if they can be justified on the grounds of economic efficiency. In its judgment, the Federal Supreme Court also held that direct sanctions may be imposed for hard-core agreements according to Article 5(3) and (4) of the Cartel Act that significantly restrict but do not eliminate competition. This question had been disputed for a long time in Swiss doctrine. The written statement of the grounds is still outstanding.
iv Further decisions regarding geographic scope of the Cartel Act and the per se significance of hard-core restraints
In November 2015, the Federal Administrative Court confirmed the fine imposed on BMW for restricting direct and parallel import into Switzerland by clauses in BMW’s EEA dealer contracts. It stated that, pursuant to the effects, doctrine restrictions of competition committed outside Switzerland also fall into the geographic scope of the Cartel Act. It is sufficient that the restriction of competition may have had an effect on the Swiss market. By contrast, whether the restrictions of competition actually had an effect on the Swiss market is not decisive. In the case at hand, it was sufficient that BMW’s EEA dealer contracts could affect the selling of new vehicles into Switzerland. Furthermore, the Federal Administrative Court held – in line with the most recent Gaba decision of the Supreme Court from June 2016 – that territorial restrictions (in particular absolute territorial protection) within the meaning of Article 5(4) of the Cartel Act are per se to be qualified as significant restrictions of competition.
In September 2016, the Federal Administrative Court also confirmed the fine imposed on Nikon for restricting parallel import into Switzerland by clauses in distributor contracts. The Nikon decision is the first decision of the Federal Administrative Court in which the Gaba decision of the Federal Supreme Court had to be taken into consideration. The Federal Administrative Court took its decision in accordance with the Gaba decision and held that even in the light of the Gaba decision it has to be assumed that the actual implementation of a restricting clause still needs to be examined.
Neither the BMW nor the Nikon case has entered into legal force yet.
1 Marcel Meinhardt, Benoît Merkt and Astrid Waser are partners at Lenz & Staehelin.