First Weko decision on relative market power

The high-price island of Switzerland is a constant source of discontent. Prices for many goods and services are higher here than in neighboring countries. A few years ago, parliament – alarmed by a popular initiative – decided to do something about it.

It passed a change to the antitrust law. The aim: foreign companies should no longer be allowed to “rip off” their customers in Switzerland by, for example, charging excessive prices. The rules also apply between companies within Switzerland.

New rules on relative market power

The provisions on so-called relative market power have been in force since the beginning of 2022. They are an innovation in competition policy: it is no longer about protecting competition, but about protecting individual market participants. Specifically, companies can turn to the Competition Commission (Weko) if they think they are being disadvantaged by a supplier or buyer. A company is considered to have relative market power if the business partner is “dependent” on it, i.e. has no reasonable alternative. The Weko must examine quantitatively in each individual case whether this is the case.

One application case is Swiss surcharges – i.e. when a powerful foreign supplier demands possibly excessive prices from its customers in Switzerland. However, a discussion has also arisen within Switzerland as to whether the two major retailers Migros and Coop may have relative market power compared to their suppliers and are abusing this position.

Precedent in healthcare

The Comko has now made its first decision on the question of relative market power. Specifically, it concerns a case in the healthcare sector. The plaintiff was the wholesaler Galexis, which belongs to the Galenica Group. It purchases medicines and healthcare products from companies in Switzerland and abroad and sells them in Switzerland.

Galexis was annoyed by the behavior of the German company Fresenius Kabi, a leading manufacturer of sip and tube feeding formula, which is used primarily to feed patients in hospitals. Fresenius had refused to allow Galexis to purchase these products abroad at favorable conditions, was the accusation. Weko had to examine whether Fresenius had relative market power compared to Galexis and was possibly abusing this position.

The competition authorities have now denied both. Firstly, they found that Galexis is not dependent on Fresenius Kabi. The wholesaler can only switch to liquid nutrition from other manufacturers to a limited extent. But in principle this option is available, as is the possibility of not selling the products at all. According to the Competition Commission, Galexis would suffer certain losses in sales and profits as a result of the termination of the supply relationship. But these losses would be small and therefore reasonable.

Secondly, the Weko did not find any abuse. Even if Fresenius Kabi had a relatively strong market position, the company would probably not have behaved abusively. According to the Weko, the foreign conditions for the delivery of the products in question are only slightly better than in Switzerland.

High prices due to isolation

The first Weko decision on the subject shows that one should not expect too much from the new rules on relative market power. It is not enough for a company to supply an important product. The dependency of the buyer must be so great that the end of the business relationship would effectively put the company’s existence at risk. In addition, in this case the price differences between Switzerland and the EU were not great.

Critics of the new rules have always complained that the reasons for the high-price island lie primarily in Switzerland itself. In fact, the largest price differences with neighboring countries are found in isolated areas of the domestic market, such as food, energy supply or the construction sector.