Fair Price Initiative in Parliament

Abstract

Upcoming Regulation of Relative Market Power

Overview

The popular ballot initiative «Stop to the high price island – for fair prices» (Fair Price Initiative) provides for the introduction of the concept of relative market power. It intends to extend the rules on abuse of dominance under Swiss competition law to companies with relative market power. A company has relative market power if another company does not have sufficient and appropriate alternatives and is therefore dependent upon such company. The concept of relative market power will extend the prohibition of abusive behavior to a large number of domestic and international companies.

Main characteristics and status of legislation

The parliament currently debates the Fair Price Initiative and a counter-proposal to the initiative by the Swiss government, the Swiss Federal Council. In its decision of December 2, 2020, the Council of States, as the second chamber of parliament deliberating upon the initiative and counter-proposal, deviated from the National Council’s version of the counter-proposal. Hence, parliament has not yet agreed on a final counter-proposal to the initiative. Nevertheless, the National Council and the Council of States agree that the concept of relative market power shall be introduced.

The popular ballot initiative submitted in December 2017 intends to subject companies with relative market power to the rules on abuse of dominance under competition law. In addition, it grants dependent companies the right to purchase goods and services from companies with relative market power in foreign countries at local prices and conditions.

The Federal Council opposed the initiative with an indirect counter-proposal that adopted its core demands. However, the concept of relative market power was limited to cases of foreclosure of the Swiss market. For this purpose, a new, specific form of abuse of dominance for the purchase of goods and services abroad was introduced.

The National Council amended the Federal Council’s counter-proposal in such a way that it effectively implements the initiative. With its decision of December 2, 2020, the Council of States in principle follows the National Council, but deviates from the latter in certain aspects. In particular, the Council of States has deleted the right to purchase goods and services abroad at local prices and conditions.

However, the extension of the prohibition on abuse of dominance under competition law to companies with relative market power has remained undisputed in both chambers of parliament. In view of this consensus, it has to be expected that the prohibition of abuse of dominance will in the future be extended to companies with relative market power.

Consequences for companies

The upcoming introduction of relative market power will have far-reaching consequences for companies operating in Switzerland:

  • The number of companies subject to the prohibition on abuse of dominance will significantly increase.
  • Companies must assess individually for their contractual relationships whether they have relative market power, i.e. whether their contract partners are dependent upon them. Unlike the review of market dominance the existence of relative market power is not determined by the characteristics of the company concerned, but by the individual dependency of its contract partners. This dependency may not be evident to the company concerned, and the assessment whether it has relative market power hence may be challenging.
  • In case of relative market power, companies need to review, and may need to adapt, their behavior towards dependent contract partners and amend respective agreements. In particular, dependent companies will need to be treated equally in terms of prices, discounts and further terms and conditions. Furthermore, the termination of agreements or the agreement of exclusivities may need to be justified by legitimate business reasons.

What’s next?

It is now up to the National Council to discuss the counter-proposal again in the next parliamentary session in spring 2021, and to settle the differences with the Council of States. It is hence currently not conceivable at what time the new law will enter into force.

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