The Swiss Supreme Court tightens the screw for anticompetitive agreements

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Agreements which lead to a significant restriction of competition may be sanctioned as well

On Tuesday 28 June 2016, the Swiss Supreme Court answered some of the most controversial questions regarding Swiss competition law of the last years. In its Gaba decision (BGer 2C_180/2014), the Supreme Court upheld a fine in the amount of CHF 4,820,580 imposed in November 2009 by the Swiss Competition Commission on Gaba, the manufacturer of the tooth paste “Elmex”, for prohibiting its Austrian licensee from passively selling “Elmex” products outside the assigned territory (in the case at hand Austria). The Competition Commission considered this behaviour to be an illicit prevention of parallel imports. In December 2013, the Federal Administrative Court upheld the fine imposed on Gaba.

In the public deliberations on the Gaba appeal, the Supreme Court judges discussed and decided on two hotly debated topics under Swiss competition law.

First, the Supreme Court decided that even if the presumption of eliminated effective competition can be rebutted, vertical or horizontal agreements between undertakings mentioned in article 5 paragraph 3 and 4 of the Swiss Cartel Act in principle automatically lead to a significant restriction of competition in terms of article 5 paragraph 1 of the Cartel Act. In such cases, analyzing in detail the actual effects on competition is generally not necessary anymore. Therefore, the competition authorities can directly proceed with assessing whether such agreements are justified by reasons of economic efficiency. If such justification fails, the respective agreement violates Swiss competition law. Before the Gaba decision of the Supreme Court, there was considerable legal uncertainty regarding the examination procedure of agreements covered by article 5 paragraph 3 and 4 of the Cartel Act, in particular due to the unclear wording of the Cartel Act itself as well as the inconsistent case law of the Federal Administrative Court.

Second, the Supreme Court decided that it is possible to impose sanctions in terms of article 49a of the Cartel Act (i.e., fines of up to 10 per cent of the turnover achieved in Switzerland in the preceding three financial years) on undertakings even in cases where agreements listed in article 5 paragraphs 3 and 4 of the Cartel Act did not lead to an elimination of effective competition (e.g., due to the existence of inter-brand competition).

Articles 5 paragraph 3 of the Cartel Act, which addresses horizontal agreements between actual or potential competitors, covers a) agreements to directly or indirectly fix prices, b) agreements to limit the quantities of goods or services to be produced, purchased or supplied and c) agreements to allocate markets geographically or according to trading partners. Article 5 paragraph 4 of the Cartel Act, which deals with vertical agreements between undertakings active at different levels of the production and distribution chain, encompasses a) fixed or minimum prices and b) the allocation of territories to the extent that (passive) sales by other distributors into these territories are not permitted (i.e., restrictions of parallel imports).

In the light of the new Gaba decision, undertakings should now – regardless their size and market position – pay even more attention to avoid entering into any of the abovementioned agreements falling under article 5 paragraph 3 and 4 of the Cartel Act, as otherwise they risk facing substantial turnover-based sanctions in terms of article 49a of the Cartel Act. Since the competition authorities will in such cases usually no longer have to conduct a time-consuming analysis of the effects of such agreements on competition, considerably smaller efforts will be required for sanctioning such agreements. Moreover, private antitrust litigation might become easier and thus more attractive for undertakings harmed by such illicit agreements.

This Gaba case also reminds us that Swiss competition law applies to practices that have an effect in Switzerland, even if they originate in another country. Even if the same kind of illicit clause targeting the Swiss market had been agreed between two foreign undertakings, the same reasoning would apply, irrespective of the law governing the contract.

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