COMCO publishes factsheet and notification form on the amendment of the Cartel Act – the introduction of the concept of relative market power from January 1, 2022

Joëlle Marciano
Joëlle Marciano

As a result of the adoption of the Swiss Parliament’s indirect counter-proposal to the Fair-Price-Initiative, new antitrust law provisions will come into force on January 1, 2022 (in particular art. 4 para. 2bis and art. 7 para. 2 lit. g of the new CartA). The new provisions introduce the concept of relative market power and thus extend the previous prohibition of abuse of dominance under antitrust law to companies with relative market power. Certain practices that were previously only illegal for companies with a dominant position in the market will now also be illegal for companies with relative market power.
On December 14, 2021, COMCO published a fact sheet and notification form regarding the new regulations.

The concept of relative market power is new to Swiss antitrust law and is thus fraught with uncertainties for companies. Even if the concept already exists under German law, from whose practice certain case groups can be derived, the assessment of the existence of relative market power in a general manner remains impossible. Whether such position exists must always be determined in relation to a specific business relationship – it is possible for a company to have relative market power regarding one business relationship, but not with regard to another.

What does “relativemarket power” mean?

The legal definition of the concept can be found in the new art. 4 para 2bis CartA. Relative market power exists if customers or suppliers are dependent on a company for lack of sufficient and reasonable alternatives. It is not illegal to have relative market power – it is the abuse of such by hindering or disadvantaging dependent companies in competition that is illegal.

The newly published fact sheet clarifies that an alternative option is generally sufficient if other offers are available that can adequately satisfy the needs of the presumably dependent company. It is objective criteria that is decisive here, not the subjective assessment of the situation. Product characteristics, purchasing conditions, brand reputation, brand loyalty of customers as well as the market share of the company with presumably relative market power can play a role here.

The fact sheet further explains that an alternative option is unreasonable if it can be ruled out as an alternative due to the individual characteristics of the dependent company. For example, specific investments in relation with a business relationship, switching costs, the specific contractual relationship, the affected turnover in relation to the total turnover as well as the occurrence of the alleged dependency (including causes of the dependency taking into account the decisions of the affected company) can be taken into account.

In addition, the fact sheet states that companies invoking the relative market power provisions must, as a rule, have already unsuccessfully sought reasonable alternative options.

What behavior is prohibited?

Among other things, art. 7 para. 2 CartA is expanded by letter g with a new type of abuse according to which it may be abusive to restrict the possibility to purchase goods offered in Switzerland and abroad at the conditions prevailing abroad. This is intended to prevent Swiss companies purchasing abroad from being subject to conditions other than those applicable there. Based on the effects principle, foreign companies with relative market power are also subject to Swiss antitrust law if the abuse of the position affects competition in Switzerland. However, enforcement against foreign companies will be problematic from COMCO, especially if the foreign company has no business establishments or subsidiaries in Switzerland. In such a case, it may be more advantageous for the Swiss company to pursue the matter through a civil court.

But also other behavior, such as the refusal of business relations, the discrimination of trading partners with regard to prices or other terms and conditions, or the condition that additional services must be accepted or provided in order to enter into or continue business relations may constitute abusive practices. Companies should thus review their rebate systems and any price differentiations carefully.

Who can rely on the new provisions?

Companies within the meaning of the Cartel Act. The regulations protect all corporate activities, including those carried out by public authorities. Consequently, however, consumers cannot invoke the provisions.

A company that suspects that another company is violating the rules on relative market power can either address it to the competition authorities or enforce its rights through a civil proceedings. COMCO provides a notification form for the description of the relevant facts. Subsequently, an overall assessment is made to determine whether proceedings should be initiated. However, a reporting company has no right to the opening of proceedings – if the competition authorities decide not to open proceedings, the reporting company will be informed with a reasoning and the possibility of enforcement through civil proceedings remains.

What are the consequences of abuse of relative market power?

If COMCO establishes such an abuse, it can impose conduct orders and cease and desist orders or approve a possible amicable settlement. These orders become legally effective for the company concerned if it does not challenge them before the Federal Administrative Court. For example, COMCO can impose a supply obligation on a company with relative market power in favor of certain companies or require non-discriminatory pricing.

The Cartel Act does not contain any direct sanctions for the abuse of relative market power. However, COMCO has the possibility to impose a sanction in case of a repeated infringement if a company does not comply with an order.

Outlook

In view of the soon to be in force changes to the Cartel Act, companies should evaluate their individual business relationships and sales structures, in particular whether they have business partners on whom they are dependent and vice versa. Particular attention should be paid to business conditions and pricing structures. If necessary, these relationships and structures must be adjusted. Since it will be difficult to assess whether relative market power exists on a case-by-case basis, COMCO has announced that it will seek to issue guidance quickly after the new rules come into force. It is to be expected that these case groups will be based on the German classification.

 
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