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COMCO Secretariat – Horizontal purchase price fixing permitted under certain conditions

The Secretariat of the Swiss Competition Commission has published a consultation on buying syndicates. According thereto, the fixing of purchase prices between competitors in the context of a purchasing pool may be permissible under certain conditions. This assessment is remarkable and to be welcomed in the light of the rigid GABA case law of the Swiss Federal Supreme Court. It could also lead the way for the assessment of other (allegedly) anti-competitive agreements.

Background

Background of the request for consultation (Beratungsanfrage) was the intention of four partly competing undertakings to let their purchase conditions negotiate in the future by a purchase syndicate in form of an independent corporation established under Swiss law (Purchase Syndicate).

According to the parties, the parties are only partially active in the same purchase and sales markets. This is why the products covered by the Purchase Syndicate would only to some extent be part of identical sales channels. The combined market share on all these markets is below 15%.

Competition law assessment by the COMCO Secretariat

In the consultation published in LPC 2020/2 (see pages 405 et seqq.; only in German), the Secretariat of the Swiss Competition Commission (COMCO Secretariat) outlined its opinion on the competition law assessment of purchasing syndicates. Although no conclusive assessment was reached due to the lack of facts, the consultation provides important indications for the assessment of purchasing pools and, in principle, of any hardcore agreement, i.e. an agreement pursuant to Art. 5(3) and (4) of the Swiss Cartel Act (Cartel Act).

In the following, we will briefly summarize the considerations that we deem most relevant. A more detailed summary of the consultation can be found in our article in German.

Purchasing syndicates do in general not restrict competition by object or effect in the sense of Art. 4(1) Cartel Act

According to the COMCO Secretariat, arrangements on joint purchasing cannot in principle be assumed a restriction of competition by object, subject to the forming of a hidden cartel.

Furthermore, the COMCO Secretariat shares the view that anti-competitive effects are also unlikely to arise from a purchasing syndicate if the market power of the participating companies is insignificant. According to the Horizontal Guidelines of the European Commission, to which the COMCO Secretariat referred in its consultation, the relevant threshold is a cumulative market share of all participating companies of a maximum of 15%. However, exceeding this market share threshold in individual or all relevant markets does not automatically render the purchasing pool illegal due to anti-competitive effects. Rather, in this case a comprehensive case-by-case analysis is required.

In conclusion, the COMCO Secretariat ultimately left the question open whether the Purchase Syndicate qualified as anti-competitive agreement within the meaning of Art. 4(1) Cartel Act.

Joint purchase price negotiations qualify as a price fixing within the meaning of Art. 5(3) Cartel Act, but an exception to the principle of per se significance is accurate

With regard to the question of the type of agreement, the COMCO Secretariat concluded that, if a purchasing syndicate qualified as an agreement affecting competition, the fixing of elements of the purchase price constitutes also in this context a price fixing agreement within the meaning of Art. 5(3) lit. a Cartel Act. Thus, the legal presumption of the elimination of effective competition applies. However, based on the low market shares of the parties, the COMCO Secretariat saw this presumption rebutted.

With regard to the subsequently required assessment of significance of the syndicate’s effects, the COMCO Secretariat first referred to the case law of the Federal Supreme Court in the GABA case (BGE 143 II 297). According to this judgment, hard-core agreements, in the event of rebuttal of the presumption of elimination of competition, in principle fulfil the criterion of significance pursuant to Art. 5(1) Cartel Act, rendering the respective agreement illegal subject to a justification for economic efficiency reasons. However, with reference to the doctrine of Andreas Heinemann, the president of the COMCO, according to which agreements which by their nature are not harmful are to be excluded from this per se significance, the COMCO Secretariat broke through the principle of significance in hardcore agreements in the case of purchasing cooperations.

The COMCO concluded that in particular based on the rather insignificant market positions and their exposition to relatively strong competitive pressure from suppliers, no restrictive effects on competition were to be assumed from the Purchasing Syndicate. However, it ultimately left open whether the Purchasing Syndicate restricted competition significantly in the sense of Art. 5(1) Cartel Act.

Efficiency justification successful with necessary countervailing power against strong suppliers

In the assessment of a possible justification for efficiency reasons according to Art. 5(2) Cartel Act, the COMCO Secretariat concluded that the purchasing pools were justified for reasons of economic efficiency to the extent that this was necessary to create countervailing buyer power vis-à-vis suppliers that were authorised to make offers. However, the COMCO Secretariat could not examine this question conclusively for a lack of relevant information in particular regarding procurement volume and the magnitude of the seller power.

Conclusion of the COMCO Secretariat

Based on the (incomplete) information provided by the parties, the COMCO Secretariat concluded that the companies involved in the Purchasing Syndicate had insignificant market power on the relevant markets and therefore deemed the Purchasing Syndicate pro-competitive, without arriving to a final judgement.

Our Thoughts

We welcome the approach taken by the COMCO Secretariat since it does not immediately draw the formalistic per se conclusion the GABA case law would suggest. Rather, the COMCO Secretariat examines the competitive effects of a horizontal purchasing pool without formalistic pre-judgment. The consultation thus once again reveals the weaknesses of the GABA case law (see also the critical appraisal of the ruling in The Federal Supreme Court’s ”Elmex”-Toothpaste DecisionsThe Federal Supreme Court’s ”Elmex”-Toothpaste Decisions). It is also to be welcomed that the consultation actually examines whether the purchase pools actually lead to an anti-competitive agreement within the meaning of Art. 4(1) Cartel Act. In the practice of the Swiss competition authorities, this important step in the examination process is all too often merely formally dealt with, without any serious investigation as to whether an agreement actually has the object or effect of restricting competition.

In conclusion, the consultation and its considerations are in our view not only fruitful for purchasing pools, but should in principle be taken into account with regard to all (allegedly) anti-competitive agreements. It remains to be seen, however, whether the Swiss competition authorities will actually be guided by this in their future practice.

CORE Attorneys is a boutique law firm in Switzerland, focusing on competition/antitrust law, regulatory and distribution law matters. Visit our News & Insights and follow us on LinkedIn for regular updates on all our focus areas.