The Competition Commission (COMCO) is in charge of promoting free competition and upholding compliance with antitrust law in Switzerland. After all, functioning competition is of fundamental importance to a free-market economy. Antitrust law expert Prof. Patrick L. Krauskopf from the law firm AGON PARTNERS Legal Ltd. and compliance expert Dr Fabio Babey from the law firm IXAR Legal Ltd. explain to us why SMEs are also affected by antitrust law.
Why is antitrust law a key issue for SMEs?
Antitrust law applies to all companies. Major companies are not the only ones attracting the attention of COMCO, SMEs are also a target. Most of the investigations launched by COMCO over the past few years have been into SMEs. COMCO targets the following issues:
COMCO intervention
Cartels:
non-compete agreement
Where companies coordinate their market activity to restrict competition. This may take the form of contracts, gentlemen’s agreements or regular meetings. COMCO can pursue cartels even if they have been inactive for some time, but a period of limitation of five years applies.
Monopolist behaviour:
abuse of market power
A company is market dominant if it is in a position to behave independently of its competitors or to unilaterally dictate terms to its customers or suppliers. This turns into a legal issue where this dominance enables the undertaking to obstruct other companies from competing.
Mergers:
corporate
merger
If two companies with a turnover of more than CHF 100 million merge in Switzerland, they must – alongside other requirements – notify COMCO of this beforehand. The merger can only go ahead once COMCO has given its authorisation. If necessary, COMCO may prohibit the merger or allow it subject to certain requirements/conditions to protect the economy.
What kind of non-compete agreements are permissible? What kind are forbidden?
Most of the investigations launched by COMCO relate to non-compete agreements, i.e. cartels. SMEs in particular must exercise great caution here: they are often unaware that they run the risk of running afoul of antitrust law and COMCO.
“Most house searches and investigations conducted by COMCO relate to illegal cartel agreements. Those in charge of the companies affected are almost always shocked by the size of the fines. So always keep an-titrust law risks in mind.”
Prof. Patrick L. Krauskopf, antitrust law expert at AGON PARTNERS Legal Ltd.
Why COMCO proceedings can become expensive for SMEs
Illegal non-compete agreements can be very costly. They come with the risk of fines of up to ten per cent of the sales generated in the previous three years. Companies can benefit from voluntary disclosure and cooperation with COMCO, which can then reduce the sanction or waive it in full.
Case study: Price fixing between a producer and distributor
In August 2019, COMCO concluded an investigation against a ski manufacturer:
- What happened? The SME, a ski manufacturer, and its distributors engaged in illegal price fixing between the end of 2003 and the end of 2018. The distributors were forbidden from undercutting the manufacturer’s recommended resale prices.
- Why is this forbidden? Such an agreement constitutes what is referred to as illegal resale price maintenance. It obstructs competition between distributors.
- How much was the sanction? Because the SME cooperated with COMCO, a sanction of roughly CHF 140,000 was imposed. Failure to cooperate would have resulted in a much higher fee.
Case study: Price fixing in a tendering procedure
In 2019, COMCO concluded proceedings against a construction firm in the canton of Graubünden:
- What happened? Road construction companies in the canton of Graubünden shared road construction projects among themselves between 2004 and 2010 and fixed bid prices.
- Why is this forbidden? Coordinated bidding in a tendering procedure constitutes an illegal price cartel.
- How much was the sanction? COMCO fined the construction company, which included a number of SMEs, roughly CHF 11 million.
Why compliance measures are always worth it for SMEs
Antitrust law risks and sanctions are high, and SMEs should always bear these in mind. As such, preventative antitrust law compliance is a must for SMEs.
Measures you can put in place for your SME:
- Risk analysis: Effective prevention starts with identifying existing antitrust law risks, in the current legal environment, the market and the company (contact with competition, suppliers and customers). Seek the assistance of your in-house Compliance department or an external antitrust law specialist to determine and evaluate the risks.
- Compliance Management System (CMS): Implement a CMS to create and uphold a sustainable compliance culture. The CMS should identify and prevent significant regulatory infringement risks ahead of time. As even the most efficient CMS would never be capable of preventing 100% of regulatory infringements, your CMS should ensure that emerging infringements are identified ahead of time and addressed appropriately.
About the author
Your point of contact for questions of antitrust law: the law firm AGON Partners Legal Ltd. specialises in antitrust law and compliance. AGON can advise and represent you before competition authorities and courts in all nature of antitrust law civil and administrative proceedings. The company also works with company managers to implement and monitor compliance programmes for the prevention of competition law violations.
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