Despite discontent in business circles, competition watchdogs will not be given tighter shackles in their fight against tough cartels. The Council of States decided this on Tuesday. However, agreements on wage caps in professional sports leagues will be permitted in the future.
The matter sounds technical, but it is currently stirring up emotions in politics and business: under what rules should competition authorities fight cartel agreements? Business circles and antitrust lawyers want to put tighter shackles on the Federal Competition Commission (Weko) in order to curb its allegedly “excessive” activism. Critics of such attempts to curb competition, including Weko and the Federal Council, warn against Switzerland falling back into the old cartel economy.
The decision was made on Tuesday in the Council of States. The occasion was the debate about the revision of the antitrust law. This concerns the “heart of the Swiss market economy”, stressed the Solothurn Council of States member Pirmin Bischof. The antitrust law protects competition. Competition is not an end in itself, but a key driver of the high level of prosperity in Switzerland and elsewhere.
According to current law, hard cartel agreements are generally prohibited if they eliminate or significantly impair effective competition. These hard agreements include agreements between competitors on prices, quantities and territories, as well as agreements between different market levels (such as producers and traders) on prices and territorial protection.
The Elmex effect
In 2016, the Federal Supreme Court clarified the following in connection with Elmex toothpaste (Gaba ruling): In the case of hard cartel agreements, it can be assumed that competition is significantly impaired due to their very nature, except in minor cases. The Competition Commission therefore does not have to prove the specific damage in Swiss francs and centimes in each individual case.
To be fined, it is sufficient to prove that such an agreement existed and that it cannot be justified on grounds of economic efficiency. In a certain sense, this legal situation is comparable to traffic offences such as driving while intoxicated or speeding: these offences are, by their nature, considered a danger to society and are fined even without concrete proof of damage.
The majority of the Economic Committee of the Council of States wanted to turn back the clock and demanded that the Competition Commission “explain” the harmfulness qualitatively and quantitatively in each individual case, even in the case of hard agreements. According to the proponents of this formulation, the required “explanation” is not about hard proof, but about making the damage plausible based on qualitative and quantitative criteria.
“Constitutionally questionable”
Various critics of the status quo have cited Weko’s 2015 fines for cartel agreements in the sanitary wholesale trade as an illustration: Weko wrongly imposed these fines only on the basis of gross price lists, although in practice there was strong competition with discounts of up to 50 percent. This case is still pending before the Federal Administrative Court. According to Beat Rieder, a member of the Valais Centre Council of States, the level of proof required of Weko is “worryingly” low in terms of the rule of law.
According to opponents, the proposed change would make it much more difficult to combat hard cartels and extend the already lengthy proceedings even further. According to Economics Minister Guy Parmelin, civil cartel proceedings would also be made much more difficult. According to Parmelin, critics should not express their anger at the Competition Commission by reforming the antitrust rules, but by reforming the Competition Commission’s institutional system, which will be the subject of a future revision of the law.
In the end, the defenders of the status quo narrowly prevailed: the Council of States rejected the proposed tighter restrictions on the Competition Commission by 24 votes to 20. The same applied to the way the Competition Commission deals with abuses by market-dominating and relatively powerful companies. Here too, the Economic Commission’s proposal to require a statement of the harmfulness to effective competition in specific individual cases failed.
After the Council had narrowly accepted this motion at the first attempt, a motion to reconsider called for a second vote, taking into account possible discrepancies between the rules of the game for hard cartel agreements and for companies with market power. In the second attempt, the discussed additional requirement for the Competition Commission failed by 17 votes to 22.
Wage cartel should be permitted
On one point, the Council of States voted 28 to 16 against the will of the Federal Council in favor of relaxing the antitrust law. In leagues with professional play, agreements between clubs on wage caps should be permitted. In essence, this is a “Lex Ice Hockey”: 12 of 14 clubs in the top Swiss ice hockey league had spoken out in favor of such a relaxation, according to the supporters; only SC Bern and ZSC saw it differently.
The relaxation, which would also apply to professional football, is intended to allow clubs to curb the wage spiral via cartel agreements and thus reduce the industry’s tendency to produce losses. Financially weaker clubs should thus have somewhat better chances.
The average salary in the top Swiss ice hockey league is over 300,000 francs, said Fabio Regazzi, a member of the Ticino Council of States and a member of the board of directors of HC Lugano. Opponents of the relaxation unsuccessfully argued that the antitrust rules should apply to all sectors, that the proposal unilaterally represents the view of the clubs and that the federal parliament should not make a sports wage policy.
The antitrust dossier will now go to the National Council, which will still have a lot to discuss.