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, and is headed by a president and two vice presidents. The majority of the members must be independent experts (having no interest in or special relationship with any economic group whatsoever) – they are 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. It 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 it takes, any agreement qualifies under the Cartel Act, be it bilateral (a cooperative or non-enforceable agreement, a binding, non-binding or ‘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 decision by 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).
In addition, in exceptional cases and at the 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 European Community 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 cooperate fully (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.
The Federal Supreme Court confirmed in the Gaba and BMW cases that, pursuant to the effects doctrine, restrictions of competition committed outside Switzerland also fall into the geographical scope of the Cartel Act. It is sufficient that the restriction of competition may potentially have 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, with the agreement of 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 or 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 should 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, one decision of the Federal Administrative Court in the Metal Fittings for Windows cases clearly states the right of the leniency applicants to argue against the Commission’s legal interpretation of the facts.
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 option of reducing 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 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).
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 yet been tested in court. The catalogue of protective instruments includes the option of submitting 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 accessing 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 parties to the investigation and its purpose. 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 for as long as possible. However, even if the final decision does not reveal the name of the leniency applicant, it is not impossible that a party familiar with the facts of the case may deduce the applicant’s identity from the context.
Furthermore, according to its practice, the Commission excludes leniency information completely from the disclosure to third parties of data of a cartel investigation, which is closed and the respective Commission’s decision is final and binding.
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 different kinds of sanction apply to individuals and undertakings, as a general rule it is advisable to seek independent legal advice (see Section V).
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).
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 by either the Federal Administrative Court 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 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, who violate 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 during an 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 the case of cartel conduct in public procurement proceedings, the individuals may be subject to direct criminal sanctions under the Swiss Criminal Code, 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, dawn raids and seizures at the request of the Secretariat. In the 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 – as has already happened – violations of the obligation to submit may 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 participate actively 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: (1) the search warrant as well as the IDs of the inspectors have to be inspected carefully and copied; (2) the inspectors have to be granted access and be accompanied by an employee; (3) the legal department and the CEO have to be informed immediately; and (4) the employees must not prevent or impede the search (i.e., neither to destroy nor 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 very rare 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 Tightening of Swiss cartel law: per se significance of hard-core restraints
On 21 April 2017, the Federal Supreme Court published its written reasoning for its landmark decision on Gaba of 28 June 2016. In its decision, the Federal Supreme Court rejected Gaba’s appeal and confirmed fines against Colgate-Palmolive Europe Sàrl (formerly Gaba International Corporation) and Gebro Pharma LLC. In light of the effects doctrine set out in Article 2(2) of the Cartel Act, the Federal Supreme Court considered the Cartel Act to be applicable to all situations which may have effects in Switzerland. According to the Federal Supreme Court’s decision, it is neither necessary nor permissible to examine the significance of the effects of anticompetitive behaviour in Switzerland, meaning that agreements or unilateral behaviour of market-dominant companies, even outside Switzerland, can be covered by the Cartel Act, regardless of how plausible any effects in Switzerland are. In this respect, the Federal Supreme Court decided that an agreement regarding the ban on passive sales for the territory outside Austria between Gaba and Gebro is covered by the Cartel Act. The Federal Supreme Court further decided that a contractual clause prohibiting a licensee to export into other territories constitutes an illegal agreement that significantly restricts competition, and 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 in the case of minor effects on competition, such as ‘bagatelle offences’, which were not further defined in the written reasoning. 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.
ii Further decisions regarding the geographical scope of the Cartel Act and the per se significance of hard-core restraints
In November 2017, the Federal Supreme Court confirmed the fine imposed on BMW for restricting direct and parallel imports 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 geographical 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. The Federal Supreme Court, however, clarified that a restriction of a US company to sell into Canada would not fall within the scope of the Cartel Act. Furthermore, the Federal Supreme Court held – in line with its Gaba decision of 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. The Federal Supreme Court consequently upheld the imposed fine of 157 million Swiss francs.
In September 2016, the Federal Administrative Court confirmed the fine imposed on Nikon for restricting parallel imports into Switzerland by clauses in distributor contracts. The Nikon decision was the first made by the Federal Administrative Court in which the Gaba decision of the Federal Supreme Court had to be taken into consideration. The Federal Administrative Court made its decision in accordance with the Gaba decision and held that even in light of that decision, it has to be assumed that the actual implementation of a restricting clause still needs to be examined.
iii Revised Vertical Notice issued subsequent to the Gaba decision
In June 2017, following the Gaba decision of the Federal Supreme Court (see above), the Commission has revised and modified the Notice on the Competition Law Treatment of Vertical Agreements of 28 June 2010 (the Notice). The Notice is supplemented with explanatory notes that assist with interpretation. Section 12(1) of the Notice states that agreements under Article 5(4) of the Cartel Act that do not eliminate competition are, in principle, significant according to Article 5(1) of the Cartel Act. The term ‘in principle’ implies that bagatelle cases are exempted. Neither the Notice nor the explanatory notes define a minor case. The Notice does, however, clarify that a vertical agreement on absolute territorial protection cumulatively requires a distribution agreement, the allocation of a territory and an inter-territorial sales ban. Furthermore, according to the established practice of the competition authorities, which is now set out in the Notice, the following five circumstances do not fall within the scope of Article 5(4) of the Cartel Act:
- a bans on passive sales imposed on the supplier;
- b group-internal vertical agreements as long as they do not include market foreclosing practices of dealers not belonging to the group;
- c international price differences without corresponding agreements;
- d limitations on passive sales to specific customer groups; and
- e the prohibition of active sales into territories allocated to other dealers (relative territorial protection).
iv Commission prohibits merger between ticket distributors
In May 2017, the Commission prohibited the proposed merger between the two Swiss ticket distributors Ticketcorner and Starticket. Ticketcorner and Starticket both distribute tickets for concerts and shows, through physical and online channels. They also provide software solutions for the direct sale of tickets. As a result of the merger, Starticket would have become a wholly owned subsidiary of Ticketcorner. The Commission undertook an in-depth review and concluded that the proposed merger would not have been problematic in the market for ticketing software. However, the Commission was of the view that in the primary ticketing market, there was evidence that Ticketcorner had a dominant position. According to the Commission, the proposed merger would have allowed both companies to control the national market for primary ticketing and eliminated effective competition. Furthermore, the Commission was of the view that no remedies existed that could have corrected such elimination of effective competition. Thus, the Commission decided to prohibit the proposed merger. The case is of major significance as it is only the second case being prohibited by the Commission (the first being the France Télécom/Sunrise case). The Ticketcorner/Starticket case has not entered into legal force yet.
1 Marcel Meinhardt, Benoît Merkt and Astrid Waser are partners at Lenz & Staehelin.