INVESTIGATIONS
The Competition Commission is Conducting an Investigation Regarding Internet Sales Restrictions
On September 15, 2010, the Competition Commission opened an investigation concerning restrictions to internet sales of household appliances. The investigation must show whether the restriction of internet sales constitutes a violation of competition law. It is the first investigation of the Competition Commission about restrictions to the e-commerce. The results should lead to standards for the online commerce that can apply beyond household appliances.
At this time, the investigation is directed against Electrolux AG and V-Zug AG. According to the Competition Commission's press release1, Electrolux AG completely prohibited distributors from selling products online. V-Zug AG imposed restrictions to its distributors regarding this type of sales. The investigation might be extended to other companies in the branch of "white goods" (household appliances).
The secretariat of the Competition Commission had opened a preliminary investigation following a complaint from distributors. This preliminary investigation led to indications that restrictions to internet sales could constitute anticompetitive and illegal agreements. According to the (new) Notice on the Competition Law Treatment of Vertical Restraints issued on June 28, 2010 by the Competition Commission2, distributors must be given the possibility to have access to internet and to meet online orders. Indeed, the Notice includes a new, more detailed definition of "passive sales". Passive sales may not be prohibited even in the case of exclusive distribution agreements. Internet sales are generally considered to be passive sales, unless sales activities are targeted to customers located outside of the distributor's exclusive area.
Electrolux AG and V-Zug AG already expressed their intention to cooperate with the secretariat of the Competition Commission so as to establish, in the context of the investigation, standards for online commerce.
LEGISLATIVE PROPOSALS
The Swiss Federal Council Consults on the Review of the Cartel Act
On June 30, 2010, the Federal Council (the executive body in Switzerland) opened a public consultation until November 19, 2010 regarding the partial review of the Competition Act. The main aim of this reform is to bring material and institutional improvements to the law3.
On January 14, 2009 the Federal Council was presented with a Synthesis Report issued by the Taskforce Cartel Act, a panel of experts formed during Winter 2006/2007 by the Head of the Federal Department of Economic Affairs (FDEA) to evaluate the ongoing effects and functioning of the Competition Act4. Article 59a of the Competition Act requires the Federal Council to evaluate the efficiency and conformity of any proposed measure under the act before submitting a report and recommendation to Parliament in relation to such measure.
In its report of March 25, 2009, the Federal Council decided to maintain the underlying concepts of the Act, as introduced in 1995 and revised in 2003, as well as the instruments added in 2003 (direct sanctions, leniency regime, dawn raids and opposition proceedings). It however acknowledged gaps in the text and asked the FDEA to elaborate concrete proposals for the adaptation of the Competition Act. On June 30, 2010, the Federal Council took note of the proposals and opened the public consultation.
One of the main elements of the reform is an improvement of the institutions to strengthen the rule of law. Currently, cases are prepared, investigated and processed by the Secretariat of the Competition Commission and decided by the Competition Commission. The Competition Commission includes 12 members who were nominated by the Federal Council, the majority of which are independent experts (i.e., law and economics professors). Deputies of business associations and consumer organisations take the other seats. The Taskforce Cartel Act pointed out issues related to the size of the Competition Commission and its non professional members, the allocation of power between the Competition Commission and its Secretariat and the independence of the Competition Commission, as some of its members represent lobbies. An independent competition authority is therefore to be created by the reform. Its role will be to conduct investigations and, where relevant, to refer matters to a newly created first instance court (the Federal Competition Court) that will have the power to decide on cases. As the competition field requires extensive knowledge and a solid experience in economy, the Federal Competition Court will be composed of ordinary judges and specialised deputy judges, similarly to the Federal Patent Court. Moreover, all judges will have to be thoroughly independent from economic or political lobbies.
The partial revision also includes material improvements, aimed at enhancing competition in the general economic interest:
- The objection procedure should be improved and, in particular, accelerated. This procedure allows undertakings to benefit from a certain legal certainty in case of questionable behaviours with regard to cartel rules.
- The treatment of vertical agreements should be improved. The legal presumption of illicit practice in case of minimum or fixed price setting or allocation of absolute territorial protection (as currently set forth in Article 5(4) of the Competition Act) should be abandoned. A case by case analysis would avoid market foreclosure, without impeding the implementation of economically legitimate distribution agreements. However, the Competition Act should keep direct sanctions available in case the existence of a minimum or fixed price setting or the allocation of territories that prohibits passive sales is established.
- Merger control should be strengthened and simplified: on the one hand, the criteria to assess mergers should be strengthened to avoid harmful concentrations of the market; on the other hand, there should be an administrative simplification to reduce multiple examinations of international concentrations. Indeed, pursuant to the (current) Article 10 of the Competition Act, the Competition Commission may prohibit a concentration or authorise it subject to conditions and obligations if the investigation indicates that the concentration (i) creates or strengthens a dominant position, (ii) is liable to eliminate effective competition and (iii) does not improve the conditions of competition in another market such that the harmful effects of the dominant position can be outweighed. In a 2007 decision, the Swiss Supreme Court held that conditions (i) and (ii) were cumulative. Following the Synthesis Report issued by the Taskforce Cartel Act, the Federal Council takes the view that compared to other countries, the Swiss system, which only prohibits concentrations that can eliminate effective competition, shows certain deficiencies and provides a relatively weak arsenal to effectively enhance competition. According to the Federal Council, a risk exists that concentrations having a strong negative effect on competition might be approved. It thus recommends reducing the administrative workload with respect to transnational concentrations, as well as implementing modern instruments to control the criteria governing intervention in the case of concentrations (i.e. introduction of the SIEC-test or, alternatively, removal of the condition of elimination of effective competition).
- A legal basis for the cooperation between Swiss and foreign competition authorities should be created, as many infringements to competition law have an international scope.
- Regarding civil proceedings against breaches to antitrust law, final clients should be entitled to bring a case to justice, to obtain damage for cartel behaviours.
Footnotes
1. http://www.news.admin.ch/message/index.html?lang=fr&msg-id=35158.
2. The text of the Notice is available in French at the following address: http://www.weko.admin.ch/dokumentation/01007/index.html?lang=fr.
3. The text of the draft amendments is available in French at: http://www.weko.admin.ch/aktuell/01024/index.html?lang=fr.
4. The text of the Synthesis Report is available in French at: http://www.weko.admin.ch/dokumentation/00216/index.html?lang=fr.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
