New Developments in Swiss Competition Law on Refusal to Deal

Abstract

COMCO’s decision in the «Ice Hockey on Pay TV» case

A new decision of the Swiss Competition Commission is part of an increasingly interventionist trend in Swiss competition law on refusal to deal. Narrowly defined markets mean that more companies are subject to the strict rules on abuse of dominance. At the same time, the threshold of abuse for refusals to deal has been lowered. Even companies that do not consider themselves dominant should hence find it worth keeping an eye on these new developments. In addition, EU competition law continues to be highly relevant to understanding the evolution of Swiss antitrust practice. Companies with activities in Switzerland should therefore be familiar with EU competition law as well.

Targeting Sports Rights

According to a press release and a press kit published by the Swiss Competition Commission (COMCO) on October 20, 2020, in the Ice Hockey on Pay TV investigation, UPC has been fined approximately CHF 30 million for refusing to allow Swisscom to broadcast live ice hockey content.

Four years earlier, in a mirror image constellation, COMCO had fined Swisscom around CHF 72 million in its Sports on Pay TV investigation. According to COMCO, Swisscom had refused to allow competitors (including UPC predecessor Cablecom) to broadcast live football and live ice hockey content on reasonable terms. Swisscom subsequently filed a complaint against UPC with COMCO.

The two decisions against Swisscom and UPC are not yet final and binding.

«Ice Hockey on Pay TV» at a Glance

In summer 2016, UPC acquired exclusive rights to broadcast Swiss league ice hockey on pay TV (ice hockey content) for five consecutive seasons. As a program producer, UPC was able to make this content available to viewers via its own TV platform as well as via third-party TV platforms. Swisscom asked UPC to provide ice hockey content so that it could offer such content to its TV platform customers. According to COMCO, UPC refused to make an offer until summer 2020.

COMCO investigated whether UPC had abused its dominant position. According to COMCO, from the point of view of TV platform operators, there was a separate market for the provision of broadcasting rights regarding Swiss ice hockey league competitions on pay TV. As UPC had acquired the exclusive rights for the transmission of such ice hockey content, it was considered to have a dominant position on this market.

UPC was further held to have abused its dominant position by refusing to deal with Swisscom because TV platforms were assumed to be unable to replace ice hockey content by any other content.

Narrow Product Market Definition

The aim of market definition is to find out which goods are substitutable with the products and services under investigation and therefore may have a disciplining effect on their suppliers. It is the view of a reasonable average consumer that is relevant.

According to COMCO, UPC was held dominant on the national market for the provision of broadcasting rights regarding Swiss ice hockey league competitions on pay TV. COMCO defined the market narrowly as it had already done in its Sports on Pay TV decision. In that case, COMCO reached the conclusion that Swiss league ice hockey content was not substitutable with content such as feature films, TV series or other sports content, including foreign ice hockey content. In EU competition law, with regard to the licensing of broadcasting rights for TV content, it is common to distinguish between the categories of film, sports and other content. Further sub-categories are often discussed, but in the field of sports this is done only in connection with football broadcasting rights and with reference to the unique position football enjoys as the most popular sport in Europe.[1]

It is not clear whether COMCO’s market definition was based on the view of the average consumer – or that of a smaller group of die-hard ice hockey fans. It is obvious, however, that a narrow market definition is more likely to lead to a dominant position, which, in turn, leads to more companies being subject to the strict abuse of dominance (monopolization) rules. In the context of a related consultation procedure, the COMCO Secretariat held: «As a result of market dominance, the economic and contractual freedom of UPC is […] restricted. In particular, dominant companies are not allowed – subject to justification – to refuse to deal with […] or discriminate against their trading partners.»[2]

Lower Threshold for Abuse

According to the Swiss Federal Supreme Court and European court practice, an abusive refusal to deal requires that the resource in question (in this case: ice hockey content) be objectively necessary, i.e. indispensable, for the person requesting it.[3] In constant practice, COMCO has also embraced this criterion by demanding that an input be objectively necessary for effective competition to be maintained on a downstream or neighboring market.[4]

Recent Swiss antitrust practice has lowered the requirements for a finding of infringement – and thus increased the burden on (possibly) dominant companies. In this vein, the Federal Administrative Court held in its 2018 DCC ruling that only certain types of refusal to deal required that the input be indispensable.[5] It argued that there were constellations of refusal to deal which could be abusive even though the input in question was not indispensable. The court could not rely on the practice of the highest courts in Switzerland or the European Union to support its reasoning because they have both constantly considered the indispensability criterion to be an integral part of the abuse analysis. It remains to be seen whether the DCC ruling will prevail before the Swiss Federal Supreme Court.

Recent COMCO practice similarly shows an increased willingness to consider refusals to deal to be abusive. As part of its reasoning in its Ice Hockey on Pay TV decision, COMCO held that the lack of access to ice hockey content represented a «disadvantage» for Swisscom which it could not compensate for itself. If it were now good law that a refusal to deal only requires a «disadvantage» for the requesting party, the intervention threshold would have been lowered significantly. It was undoubtedly disadvantageous for Swisscom not to be able to offer ice hockey content. It is an entirely different question whether – and COMCO has not shown that – this content was also indispensable for Swisscom to be able to compete effectively.

Risk of Fines

The abuse analysis in the case law discussed above was based on a narrow market definition. Nevertheless, companies will be disappointed if they expect that fines will also be calculated on the basis of the (lower) turnover relating to these narrowly defined markets. In its Ice Hockey on Pay TV decision, COMCO calculated the fine for UPC on the basis of UPC’s (higher) sales figures on the downstream TV platform market, i.e. a market in which UPC was neither dominant nor accused of abusive behavior.

Fines may only be imposed if the inadmissibility of the conduct was foreseeable. The Swiss Federal Supreme Court held in its Swisscom ADSL ruling (2019) that inadmissibility under EU competition law was a directly relevant factor for the assessment of foreseeability under Swiss antitrust law.[6] Considering furthermore the prominent role that EU competition law played in the Federal Administrative Court’s recent approach to refusal to deal, it seems appropriate to conclude that EU competition law always has to be taken into account when assessing the state of Swiss law on abuse of dominance.

Conclusions for Companies

The new approach to refusal to deal in Swiss antitrust case law is relevant to companies in several respects:

  • Narrow market definition: Product and service markets are increasingly narrowly defined. Companies active in the manufacture of a (niche) product may now, contrary to expectations, be considered dominant. If this is the case, they are subject to stricter rules of conduct, including with regard to the choice of their business partners.
  • Strict approach to refusals to deal: Refusals to deal by dominant companies may be qualified as abusive even if the goods in demand are not indispensable. It may even be sufficient that the refusal to deal represents a mere disadvantage to the disappointed buyer. Potentially dominant companies should consider such risks when choosing their contractual partners.
  • Relevance of EU competition law: Every assessment of Swiss law on abuse of dominance needs to consider developments in European competition law. The Swiss competition authorities regularly draw inspiration from EU competition law and presuppose knowledge thereof.

[1] EU Commission, M.4519, 18/01/2007, Lagardère/Sportfive, para. 9 f. («football’s pre-eminence as the singularly most popular sport across most Member States and beyond»); EU Commission, M. 6369, 21/12/2011, HBO/Ziggo/HBO Nederland, para. 18, 20; EU Commission, M.7194, 24/02/2015, Liberty Global/Corelio/W&W/De Vijver Media, para. 52; EU Commission, M.9064, 12/11/2019, Telia Company/Bonnier Broadcasting Holding, para. 117.

[2] COMCO Secretariat, RPW 2017/2, 275 s., Ice Hockey on Pay TV Consultation, para. 13 (translation by the authors).

[3] BGE 139 II 319, Etivaz, para. 7; BGE 129 II 497, EEF, para. 6.5.1; ECJ, C-170/13, 16/07/2015, Huawei/ZTE, para. 49; ECJ, 29/04/2004, C-418/01, IMS Health, para. 38; ECJ, C-7/97, 26/11/1998, Bronner, para. 41; ECJ, C-241/91 and C-241/91, 06/04/1995, Magill, para. 53; ECJ, 6 and 7/73, 06/03/1974, Commercial Solvents, para. 25; EGC, T-851/14, 13/12/2018, Slovak Telekom, para. 98 f.; EGC, T-301/04, 09/09/2009, Clearstream, para. 147; EGC, T-201/04, 17/09/2007, Microsoft, para. 332.

[4] COMCO, RPW 2011/1, 96 ff., DCC, para. 308; COMCO, 32-0243, Sport on Pay TV, para. 615; COMCO, RPW 2017/3, 410 ff., Ice Hockey on Pay TV (interim measures), para. 50.

[5] FAC, judgment B-831/2011 of 18/12/2018, DCC, para. 976 ff.

[6] SFSC, judgment 2C_985/2015 of 09/12/2019, Swisscom ADSL, para. 8.3.4.

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