Home / Publications / The Merger Control Review in Switzerland

The Merger Control Review in Switzerland

The Law Reviews

Introduction

Merger control in Switzerland is governed primarily by the Federal Act on Cartels and Other Restraints of Competition (CartA) and the Merger Control Ordinance (MCO; see Section III). These competition regulations came into force on 1 July 1996 and were first revised in 2003.

Concentrations are assessed by the Competition Commission, an independent federal authority based in Berne that consists of up to 15 members. There are currently 12 members who were nominated by the federal government, the majority of whom are independent experts (i.e., law and economics professors). Deputies of business associations and consumer organisations take the other seats. Cases are prepared and processed by the Secretariat of the Competition Commission (with a current staff of more than 70 employees (full-time and part-time), mostly made up of lawyers and economists), organised under four divisions: product markets, services, infrastructure and construction. A resources division is in charge of administrative and technical tasks within the Secretariat of the Competition Commission.

The types of transactions that are subject to merger control are mergers of two or more previously independent undertakings; direct or indirect acquisitions of control by one or more undertakings over one or more previously independent undertakings, or parts thereof. Joint ventures are also subject to merger control if the joint venture exercises all the functions of an independent business entity on a lasting basis. If a joint venture is newly established, it is subject to merger control if, in addition to the above criteria, the business activities of at least one of the controlling shareholders are transferred to it.

Pursuant to Article 9 of the CartA, pre-merger notification and approval are required if two turnover thresholds are reached cumulatively in the last business year before the concentration as follows:

  1. the undertakings concerned have reported a worldwide aggregate turnover of at least 2 billion Swiss francs, or an aggregate turnover in Switzerland of at least 500 million Swiss francs; and
  2. at least two of the undertakings concerned have reported individual turnovers in Switzerland of at least 100 million Swiss francs.

These thresholds are considered to be relatively high in comparison with international standards. A particularity of the Swiss regime is that, if the Competition Commission has previously issued a legally binding decision stating that an undertaking holds a dominant position in a particular market, such undertaking will have to notify all of its concentrations, regardless of the turnover thresholds, provided that the concentration concerns that particular market or an upstream, downstream or neighbouring market. According to Article 4(2) of the CartA, an undertaking is considered to hold a dominant position if it is ‘able, as regards supply and demand, to behave in a substantially independent manner with regard to the other participants in the market (competitors, suppliers, buyers).

If the thresholds are met, or, as explained above, in the case of a dominant undertaking, the concentration must be notified to the Competition Commission before its implementation. If a concentration is implemented without notification or before clearance by the Competition Commission (or if the remedies imposed are not fulfilled), the companies involved may be fined up to 1 million Swiss francs. Members of the management may also be fined up to 20,000 Swiss francs. So far, the Competition Commission has imposed several fines on companies for failure to notify, but there has been no criminal sanction of members of management.

Furthermore, the Competition Commission may order the parties to reinstate effective competition by, for instance, unwinding the transaction.

The CartA does not stipulate any exemptions to the notification requirements. However, if the Competition Commission has prohibited a concentration, the parties may in exceptional cases seek approval from the federal government if it can be demonstrated that the concentration is necessary for compelling public interest reasons. Such approval, however, has not been granted so far.

Specific rules apply to certain sectors. Thus, a concentration in the banking sector may be subject to a review by the Swiss Financial Market Supervisory Authority, which may take over a case involving banking institutions subject to the Federal Law on Banks and Saving Banks, and authorise or refuse such concentration for reasons of creditors’ protection alone, irrespective of the competition issues. If the parties involved in a concentration hold special concessions (e.g., radio, television, telecommunications, rail, air transport), a special authorisation by the sector-specific regulator may be required. Moreover, under the Federal Law on the Acquisition of Real Estate by Foreign Persons, for any concentration involving a foreign undertaking and a Swiss real estate company holding a portfolio of residential properties in Switzerland, the approval of the competent cantonal or local authorities may also be necessary.

The Swiss merger control regime features a very high standard of assessment compared with other jurisdictions; this is sometimes called the ‘dominance-plus test’. Pursuant to Article 10 of the CartA, the Competition Commission may prohibit a concentration or authorise it subject to conditions and obligations if the investigation indicates that the concentration:

  1. creates or strengthens a dominant position;
  2. is capable of eliminating effective competition; and
  3. causes harmful effects that cannot be outweighed by any improvement in competition in another market.

In two decisions issued in 2007, Swissgrid and Berner Zeitung AG/20 Minuten (Schweiz) AG, the Swiss Supreme Court had to determine whether a concentration could be prohibited if there were a mere creation or strengthening of a dominant position or whether conditions (a) and (b) (i.e., creation or strengthening of a dominant position and elimination of effective competition) were cumulative. This question has significant practical consequences, because if the two conditions are cumulative, then a concentration must be authorized even if a dominant position is created or strengthened if it cannot be established that the concentration will eliminate (or is capable of eliminating) effective competition. In the Swissgrid case, seven Swiss electricity companies wanted to integrate their electricity-carrying network under a common company. The Swiss Supreme Court held that conditions (a) and (b) were cumulative. The reasoning followed by the Supreme Court was that merger control is part of the control of market structure. Therefore, to justify an administrative intervention, the concentration must result in a concrete negative change in the market structure and the competition must be altered. In this case, the Court found that competition did not exist prior to the concentration. Accordingly, the concentration would not change the market conditions and the administrative intervention was not justified. In some cases (notably the Tamedia/PPSR (Edipresse) case from 2009), the Competition Commission examined whether the concentration could eliminate effective competition, but in a way that might indicate that it is in fact reluctant to give an autonomous scope to that criterion. In practice, the efficiency gains provided in condition (c) have only very recently started playing a role (see the Gateway Basel North joint venture in Section II).

Please download below the full article.

Reproduced with permission from Law Business Research Ltd. 
This article was published in the eleventh edition of The Merger Control Review in August 2020. The Switzerland chapter was written by Dr Pascal Favre and Marquard Christen. 

Publication
The Merger Control Review | Chapter on Switzerland - 11th Edition
Download
PDF 353.4 kB
Source
The Law Reviews
Read more

Authors

Portrait ofPascal G. Favre
Dr Pascal G. Favre
Managing Partner
Geneva
Portrait ofMarquard Christen
Marquard Christen, LL.M., MAS
Partner
Zurich