The Cartels and Leniency Review: Switzerland
Enforcement policies and guidance
In Switzerland, competition law is governed by the Federal Act on Cartels and other Restraints of Competition (the CartA). The legal framework for competition law is complemented by federal ordinances and the notices and communications of the Competition Commission (COMCO).
COMCO enforces competition law in first instance administrative proceedings in Switzerland. It typically decides cases with substantial impact on competition and may impose fines in cases of competition law violations. Decisions are taken by a simple majority of the COMCO members present. Currently, COMCO consists of 12 members and is headed by a president and two vice presidents. The majority of its members are independent experts, typically professors of law or economics. A minority of members are representatives of business associations and consumer organisations. The president has the casting vote in the event of a tie.
COMCO is supported by a secretariat (the Secretariat). The Secretariat investigates suspected cartel conduct and submits the corresponding case files to COMCO for a decision to be taken. It also gives legal advice to businesses and public administrations on competition matters upon formal request and monitors the various markets in Switzerland. The Secretariat is organised into four divisions, which are each responsible for specific markets (i.e., product markets, services, infrastructure and construction). In addition, the resources division is responsible for administrative and technical tasks within the Secretariat. In total, the Secretariat has more than 70 employees with legal and economic expertise. It is headed by an executive board, consisting of a director, a deputy director, three vice directors and the head of the resources division.
In a government cartel investigation, the Secretariat can conduct preliminary investigations ex officio, based on a leniency application or in response to a complaint from businesses and consumers. If the Secretariat finds indications of an unlawful restraint of competition, it can request COMCO's approval to open a formal investigation. At the end of a formal investigation, the Secretariat summarises its findings in a draft decision. The parties subject to investigation may comment on the Secretariat's draft decision in writing. COMCO will decide the case on the basis of the Secretariat's draft decision and the parties' comments thereto, or it will conduct hearings and instruct the Secretariat to carry out additional investigative measures. Appeals against a COMCO decision are possible, to the Federal Administrative Court in St Gallen and to the Federal Supreme Court in Lausanne.
Unlawful restraints of competition according to Articles 4(1) and 5 of the CartA include any agreement or concerted practice:
- between at least two undertakings operating at the same or at a different market level (i.e., a horizontal or vertical agreement),
- that has actual or potential effects in Switzerland; and
- that has the object or effect of significantly restricting effective competition in a market for specific goods or services and cannot be justified on grounds of economic efficiency, or that eliminates effective competition in a specific market.
Agreements according to Article 5(3) and (4) of the CartA are presumed by law to lead to the elimination of effective competition. These agreements, known as hardcore restrictions, include:
- horizontal agreements and concerted practices (i.e., between undertakings operating at the same market level):
- to directly or indirectly fix prices, including price elements;
- to limit the quantities of goods or services to be produced, purchased or supplied; and
- to allocate markets geographically or according to trading partners; and
- vertical agreements and concerted practices (i.e., between undertakings operating at different market levels):
- regarding fixed or minimum resale prices (resale price maintenance); and
- regarding the allocation of territories in distribution contracts to the extent that sales by other distributors into these territories are excluded (absolute territorial protection clauses).
The presumption that hardcore restrictions eliminate effective competition can be rebutted by demonstrating effective competition in the market. If effective competition is not eliminated, and the presumption can thus be rebutted, the competition authorities will examine in a first step whether the agreement in question significantly restricts competition. If so, the competition authorities examine in a second step whether the conduct in question is justified on grounds of economic efficiency. According to Federal Supreme Court precedent (in the Gaba decision) regarding the first step of the assessment, hardcore restrictions are per se significant and thus unlawful by their very nature (i.e., irrespective of the actual effects on the relevant market), unless the restrictions can be justified on grounds of economic efficiency. The strict stance taken by the Federal Supreme Court in the Gaba decision has been criticised, because a justification on grounds of economic efficiency is rarely successful.
If an agreement or concerted practice is found to be unlawful because it eliminates or significantly restricts competition and cannot be justified on grounds of economic efficiency, the Federal Council may authorise the agreement at the request of the undertakings involved if there are deemed to be compelling public interests. In practice, exceptional authorisations on public interest grounds are of very minor importance.
Cooperation with other jurisdictions
Cooperation with European competition authorities is governed by the 'Agreement between the European Union and the Swiss Confederation concerning cooperation on the application of their competition laws' (the Agreement on Cooperation), which entered into force on 1 December 2014. The Agreement on Cooperation creates the framework for enforcement cooperation between COMCO and the European Commission in the form of mutual information and coordination of investigation steps, such as dawn raids. The Agreement on Cooperation also provides for the exchange of confidential information without the undertaking's consent, provided that the authorities investigate the same or related cartel conduct. However, restrictions may apply (e.g., disclosure of information obtained under leniency or after the beginning of settlement procedures requires the consent of the undertaking under investigation).
Investigations in the air transport industry are governed by the 'Agreement between the European Community and the Swiss Confederation on Air Transport', of 21 June 1999. The Agreement contains substantive provisions regarding anticompetitive agreements, decisions by associations and concerted practices, as well as abuses of dominance. It also provides for procedural rules, which create the basis for close cooperation within the scope of application of the Agreement. The relevant areas of responsibility are divided between the European Commission and COMCO. While COMCO is competent to investigate and decide on conduct relating to routes between Switzerland and third countries (i.e., countries outside the EU), the European Commission is responsible for routes between Switzerland and the EU.
Outside the scope of a formal cooperation agreement, Swiss authorities may only share confidential information with foreign authorities on the basis of a waiver of all undertakings concerned.
Jurisdictional limitations, affirmative defences and exemptions
The CartA has a broad scope of application. It applies not only to practices on Swiss territory but equally to practices abroad that have or may have an effect in Switzerland. This 'effects doctrine' is particularly important in relation to vertical agreements that may have an effect in Switzerland, even in cases where both supplier and distributor are located outside Switzerland. This typically applies to distribution agreements containing restrictions on parallel imports into Switzerland, such as an obligation on distributors not to sell products outside the European Economic Area (to which Switzerland does not belong). Such restrictions qualify as absolute territorial protection clauses in the sense of Article 5(4) of the CartA.
The principle of territoriality can make effective enforcement of the CartA abroad difficult. The jurisdiction for enforcement of fines is limited to Switzerland. However, subsidiaries or branches domiciled in Switzerland can often be held responsible for anticompetitive conduct of foreign undertakings belonging to the same group of companies.
The leniency programmes of the CartA and the Ordinance on Sanctions provide for complete or partial immunity from sanctions.
Based on Article 49a(2) of the CartA, COMCO typically waives a sanction in whole or in part if an undertaking assists in the discovery and elimination of a restraint of competition. However, only the first undertaking filing a leniency application is entitled to complete immunity from a sanction (amnesty). In addition, an undertaking seeking amnesty must also be the first to either:
- provide information or indications, or both, of an unlawful restraint of competition enabling COMCO to open a government cartel investigation (disclosure cooperation); or
- submit evidence enabling COMCO to find a hardcore restriction, which requires that no undertaking has already been granted conditional amnesty and that COMCO did not have, at the time the leniency application was filed, sufficient evidence to find a competition law infringement (identification cooperation).
Moreover, amnesty can be granted only if the undertaking:
- has not coerced any other undertaking into participating in the cartel conduct and has not played the instigating or leading role in the relevant cartel conduct (no ringleader);
- voluntarily submits to COMCO all available information and evidence relating to the cartel conduct that lies within its sphere of influence;
- continuously cooperates with COMCO throughout the procedure without restrictions and without delay; and
- ceases its participation in the cartel conduct upon submitting its leniency application or upon being ordered to do so by COMCO.
Markers define the order of precedence among undertakings filing a leniency application. A marker can be set in the form of an automatically generated email by completing and submitting an online form on COMCO's website (an 'e-marker'). A marker can also be delivered in person or by a representative, sent by mail or put on record at the Secretariat's premises. Setting a marker by phone or fax is not possible. The advantage of e-markers over other markers is that e-markers can be precisely timestamped. However, there will be no confirmation email for e-markers, meaning there will be neither a copy of the email created for and sent to the notifying undertaking nor an email with a confirmation of receipt. Undertakings may set any kind of marker at any time, especially during a dawn raid concerning the practice being investigated. Marker requirements are set out in COMCO's notice on leniency. A marker form, which is handed out at the beginning of a dawn raid, is included in the appendix of COMCO's notice on leniency.
Once an undertaking applies for a marker, the Secretariat confirms the receipt of the marker indicating the date and time. The Secretariat then sets a deadline for the undertaking to submit the leniency application. In the leniency application, the undertaking must at least disclose its involvement in sanctionable conduct and explain what the reported conduct was intending to achieve and what effects it had on the market, without invalidating the information and evidence provided or generally denying possible negative effects on competition. However, case law has confirmed that leniency applicants have the right to question the legal interpretation of the facts and thus are not required to admit that a specific competition law provision has been infringed.
The Secretariat will inform each undertaking whether it considers there to be a disclosure or identification cooperation, notify the undertaking if any additional information is needed and, in the event of an anonymous leniency application, set the time frame within which the undertaking must reveal its identity. At the end of the proceedings, COMCO will decide whether an undertaking meets the conditions for amnesty as specified above.
For undertakings that have filed a leniency application but are not granted amnesty, the sanction can be reduced by up to 50 per cent. An undertaking is eligible for a reduction if it has voluntarily cooperated in the proceedings and has ceased participating in the cartel conduct at the time the evidence is submitted. The reduction amounts to up to 80 per cent of the sanction if an undertaking voluntarily provides information or submits evidence on further hardcore restraints that were not known to COMCO at the time of the submission (amnesty plus).
Furthermore, according to Article 49a(3) letter (a) of the CartA, an undertaking may notify the Secretariat of a restraint of competition before it has any effects on the market. If the Secretariat does not open a preliminary or formal investigation within five months of the undertaking submitting its notification, and if the undertaking does not engage in the conduct that may be considered unlawful within this period, sanctions for the notified conduct are waived. Currently, this 'notification procedure' is of little practical relevance as it does not adequately provide immediate legal certainty with respect to the admissibility of the particular conduct. The upcoming revision project of the CartA (see Section VIII) aims at strengthening the notification procedure. In particular, sanctions shall already be waived if the Secretariat does not open a preliminary and formal investigation within two months of the notification.
Finally, the Secretariat can propose a settlement concerning ways to eliminate an unlawful restraint of competition. A settlement is regularly the most time- and cost-efficient way to end an antitrust investigation. It is drafted by the Secretariat, proposed to the undertakings involved and approved by COMCO in a ruling. The Secretariat also submits a proposal for a possible sanction. The amount of the proposed sanction is not negotiable, but the Secretariat informs the undertakings of the range in which the sanction will lie before concluding the settlement. Settlements are binding, and violations are subject to criminal and administrative sanctions (see Section V).
Undertakings that participate in hardcore restraints according to Article 5(3) and (4) of the CartA (see Section I) or abuse their dominant position in the sense of Article 7 of the CartA are subject to direct sanctions in the form of fines. According to Article 49a(1) of the CartA, a fine may be a maximum amount of up to 10 per cent of the group turnover that the undertaking realised in Switzerland during the preceding three financial years.
The exact amount of a fine depends on the duration and severity of the cartel conduct and takes the presumed profit into account that resulted from the unlawful behaviour. The Ordinance on Sanctions and COMCO's explanatory communication on the Ordinance on Sanctions specify the method of calculation of fines:
- In a first step, COMCO determines the base amount of the fine depending on the severity and nature of the violation. In the case of serious violations, the base amount of the fine will regularly be in the upper third of the maximum amount of the fine.
- In a second step, the base amount of the fine is increased depending on the duration of the cartel conduct.
- In a third step, the amount of the fine is increased or reduced according to aggravating or mitigating circumstances 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. The fine can also be reduced based on leniency cooperation or settlement.
- Finally, COMCO must ensure that the fine is proportional to prevent a market exit of the undertaking. In any case, the fine is capped at 10 per cent of the group turnover that the undertaking realised in Switzerland during the preceding three financial years.
The CartA provides for fines for other violations in cartel matters. Pursuant to Article 50 of the CartA, an undertaking that violates a settlement, an enforceable decision of COMCO or a decision 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 during the preceding three financial years. In accordance with Article 52 of the CartA, an undertaking that fails to fully provide information or produce documents can be charged up to 100,000 Swiss francs.
The CartA does not provide for (direct) criminal sanctions against individuals who engage in cartel activities. However, individuals acting for undertakings may face (indirect) criminal sanctions for other violations in cartel matters. According to Article 54 of the CartA, any person who wilfully violates a settlement decision, or any other enforceable decision or court judgment in cartel matters, can be fined up to 100,000 francs. Based on Article 55 of the CartA, individuals who wilfully fail to fully comply with the obligation to provide information during an investigation can be fined up to 20,000 francs. Individuals subject to fines include members of the board of directors, (de facto) managing directors and any other independent decision-maker, such as majority-controlling shareholders in the undertaking.
'Day one' response
In a formal investigation, the Secretariat may order and conduct unannounced dawn raids and seize evidence. The Secretariat's search team has the right to search business premises and private residences. When seizing evidence, the search team has the right to inspect documents and electronic files. In relation to electronic files, all data that can be accessed from within the searched premises may be searched.
During a dawn raid, the employees are obliged to passively endure the search and must not obstruct any investigative activity. Access to rooms, containers and IT systems that are covered by the search warrant must be granted. Refusal to do so may constitute an offence according to the Swiss Criminal Code and may be considered aggravating circumstances in relation to the sanction.
The employees have a general obligation to disclose information and documents upon specific request. However, there is no obligation to actively participate in the search unless a leniency application has been filed. In either case, the employees may invoke the protection of attorney–client privilege to preclude an actual search of documents and data carriers by the search team. Attorney–client privilege applies to all documents produced by independent attorneys. Work products of in-house counsels are not covered by attorney–client privilege. In addition, objections to the search may be raised by asserting professional privilege, the private nature of the data, or any other search prohibition to arrange for the sealing of documents and other records. The objection must be raised immediately or, at the latest, at the end of the search.
The first interrogations of employees, as well as executives, may take place during the dawn raid (i.e., on the same day). In 2021, the Supreme Court ruled that individuals who are formal or de facto executives of the undertaking at the time of the interrogation qualify as 'party representatives' and may remain silent in accordance with the principle of nemo tenetur if the undertaking they represent is subject to sanctions. They can also be represented by the undertaking's attorney. In contrast, former executives are interrogated as witnesses as they no longer have a direct interest in the outcome of the proceedings and a possible sanction. Such former executives, as well as current and former employees and other individuals who have allegedly committed or witnessed a competition law infringement, must be represented by a private attorney if they wish to seek legal advice. Any hearings or witness statements must be put on record. Individuals subject to interrogation have the right to read the record and comment on their statements on conclusion of the interrogation.
Undertakings are advised to prepare for the possibility of a dawn raid. It is advisable to appoint an internal dawn raid response team consisting of a team leader (ideally a member of the in-house legal department), a member of management and an internal IT specialist. In addition, an external competition law specialist may be appointed as a contact person who is able to arrive on the premises on short notice in the event of a dawn raid. Additionally, it is advisable to establish dawn raid guidelines. Generally, it is useful to have a short version for reception staff and a more comprehensive version for the internal dawn raid response team. Important topics to be addressed in the more comprehensive version of such guidelines are: (1) the composition of the dawn raid response team and contact details of any external lawyer; (2) description of the steps to be followed during a dawn raid, such as the immediate decision on whether a leniency application shall be filed; (3) codes of conduct during a dawn raid, such as the principle that the officers conducting the dawn raid should be accompanied at all times and that the dawn raid should not be obstructed; and (4) a description of the areas of competence of the officers, such as an outline of the types of files that may be searched and seized. As a further preparatory element, the dawn raid response team and further employees affected by a dawn raid should be trained on how to behave and what steps to take during a dawn raid.
Third-party companies impeded from entering or competing in a market by an unlawful restraint of competition may request the following in civil proceedings:
- the elimination of an unlawful restraint of competition;
- an injunction against an unlawful restraint of competition;
- damages; or
- the remittance of illicitly earned profits.
Claims for damages are limited to the damage incurred as a result of the unlawful restraint of competition. Under Swiss law, there are no punitive damages.
If the admissibility of a restraint of competition is in question, the civil court must submit the case to COMCO for an expert opinion. Although the civil court is not bound by COMCO's opinion, generally it will not deviate from the expert opinion or any previous decisions in this matter.
Civil proceedings are rare in Switzerland. One of the reasons for this is that the court and legal fees incurred in such proceedings are borne by the unsuccessful party. In addition, the claimant bears the burden of proof but often has no access to the evidence, held mainly by the defendant. Also, the claimant must provide full proof of the competition law violation and any damage incurred as a result of this violation. Those affected by unlawful restraints of competition thus often prefer to submit a complaint to COMCO, even if this does not lead to damages being awarded.
If the upcoming revision of the CartA is adopted in the form currently suggested (see Section VIII), civil proceedings will be strengthened. The preliminary bill of the planned revision suggests giving customers legal standing in civil procedures and introducing a right to have a restraint of competition declared unlawful by civil courts. These elements are also likely to lead to an increase in requests for expert opinions from COMCO. The preliminary bill also proposes that the payment of damages be considered in the calculation of fines. This element is intended to create incentives for undertakings to compensate those affected by unlawful restraints, especially since the fact of having made extraordinarily high profits from unlawful restraints can lead to a higher fine.
i Ongoing and anticipated amendments and revisions
Partial revision of the CartA initiated
On 24 November 2021, the Federal Council issued a preliminary bill for a partial revision of the CartA. An important element of the preliminary bill concerns the substantive test in the Swiss merger control regime. The Federal Council plans to replace the current 'dominance-plus test' with the internationally well-known 'significant impediment to effective competition' (SIEC) test. While the turnover thresholds for notification will remain unchanged, the SIEC test is likely to lead to more in-depth (Phase II) analyses of mergers and might also lead to more mergers being blocked or cleared subject to conditions. The preliminary bill also includes two elements adopted by Parliament from a motion submitted by Jean-René Fournier in 2016.2 The first element concerns the introduction of regulatory deadlines, on a 'comply or explain' principle, to speed up administrative proceedings and to limit the duration of such proceedings to five years. The second element concerns the introduction of party compensation for legal fees for all proceedings before COMCO in which the investigated undertakings prevail. The preliminary bill also contains proposals to strengthen civil competition law procedures (see Section VII) and to improve the notification procedure (see Section IV). These two elements are likely to reduce the barriers to litigating competition law claims in civil courts and notifying restraints of competition to COMCO, which may eventually influence the number of administrative proceedings and leniency applications.
The proposed revision of the CartA also considers the 'Motion Français',3 submitted by Olivier Français in 2018, which suggests abandoning the strict stance taken by the Federal Supreme Court in the Gaba decision (see Section I). According to the Motion Français, instead of assuming the per se significance of certain hardcore restrictions, both qualitative and quantitative effects on competition shall be considered in each individual case. Although the Federal Council rejected the requested amendment, the motion was accepted by Parliament and now forms part of the preliminary bill.
The revision process is still at an early stage. A public consultation on the preliminary bill is being held until 11 March 2022. Thereafter, the Federal Council will issue a proposal for the amendment of the CartA based on the results of the public consultation. The potential entry into force of the revision is expected in 2023 at the earliest.
Fair Price Initiative and indirect counterproposal
In view of the Fair Price Initiative to combat the comparatively high price levels in Switzerland, Parliament adopted a final counterproposal for the amendment of the CartA and the Unfair Competition Act (UCA) in March 2021. The amendment of the CartA will introduce the concept of 'relative market power' and the 'prohibition of Swiss and foreign price and customary condition splitting' into the Swiss abuse-of-dominance regime. In the UCA, a new prohibition on discrimination in distance selling will be introduced. The changes entered into force on 1 January 2022.
The newly adopted concept of relative market power applies both to companies abroad that supply goods or services to Swiss customers and to companies domiciled in Switzerland. A company may have relative market power if another company is dependent on it with respect to the supply of or demand for certain products or services because of a lack of sufficient alternative sources or business partners. This will regularly be the case for 'must-in-stock' products and in the case of lock-in effects. In most other cases, the assessment will be difficult. Unlike the concept of market dominance, relative market power does not relate to a general possibility of the dominant undertaking behaving independently of its trading partners. Rather, it always concerns a specific relationship between two undertakings. In addition, the scope of the concept of relative market power is broad. Companies with relative market power will be subject to the abuse-of-dominance regime of the CartA. However, there will be no sanctions for first-time infringements. Sanctions in the form of fines will only be levied in cases of repeated abuse of relative market power.
The abuse-of-dominance regime of the CartA includes a newly adopted right for Swiss companies to purchase goods and services from any company with relative market power at the same prices and customary conditions that apply abroad. As yet, it is uncertain whether this obligation will also introduce a 'most-favoured' requirement.
Finally, the prohibition of discrimination in distance selling bans geo-blocking in online shops based outside Switzerland. In particular, a person acts unfairly if, in relation to a customer in Switzerland, he or she (1) discriminates in price or payment terms, (2) restricts or blocks access to a website, or (3) automatically redirects the customer to another website without the customer's consent. However, there is no obligation to offer delivery to Switzerland of goods purchased in online shops.
ii Selected developments relating to cartels
The covid-19 pandemic did not have a major impact on the competition law landscape and practice in Switzerland. On the contrary, COMCO issued a statement in March 2020 in which it pointed out that competition law would remain fully applicable during the crisis.
A focus on combating restrictions of parallel and direct imports into Switzerland has constituted an important practice area in COMCO and court decisions in recent years. Leading cases such as the 2016 Gaba decision of the Federal Supreme Court have had a major impact on Swiss competition law practice (see Section I). Most recently, COMCO closed an investigation into a tobacco producer for alleged restrictions of parallel and direct imports into Switzerland, imposing a fine of 270,000 francs.
Combating bid rigging and collusion in procurement cases has continued to be an important area of COMCO's activities. In 2021, COMCO published a report on a preliminary investigation into long-term joint working groups for joint construction projects. COMCO emphasised that such joint working groups need to be assessed on a case-by-case basis but can often be justified. They may, however, be problematic (e.g., if a disproportionate number of joint projects are later carried out individually or if the decision to make a joint bid is not taken on a case-by-case basis, but rather for certain types of projects or certain geographic areas). Furthermore, COMCO widened its investigation into possible agreements in the construction sector in the Moesa region in the canton of Grisons, a canton in which COMCO has already conducted several investigations into construction bid rigging cartels in recent years.
In 2021, the Federal Supreme Court rendered important decisions regarding resale price recommendations in three parallel proceedings against manufacturers of erectile dysfunction drugs. The Federal Supreme Court ruled that the resale price recommendations furnished by the three manufacturers all qualified as unlawful resale price maintenance in the sense of Article 5(4) of the CartA, despite the absence of pressure or incentives from the manufacturers for the recipient pharmacies to comply with the recommended resale prices. One main factor in the Federal Supreme Court's decision was that the resale price recommendations were communicated to the recipient pharmacies electronically and on a regular basis via a database operated by a third party. In this way, the price recommendations were entered directly into the cash register systems of the recipient pharmacies as a default price. This led the majority of the recipient pharmacies to follow the recommended resale prices. Furthermore, the Federal Supreme Court considered that the manufacturers were pressured by some pharmacies to issue recommended resale prices, supporting the Court's reasoning of a concerted practice in restraint of competition. The decisions were rightfully criticised by legal commentators. Resale price recommendations should not be regarded as a generally prohibited practice as long as the recipients are completely free to set their own resale prices. The cases were remanded to the Federal Administrative Court for determination of the fines, which are expected to be substantial.