Source: https://www.iclg.co.uk/practice-areas/merger-control/merger-control-2017/switzerland
Timestamp: 2017-02-20 22:58:50
Document Index: 758384431

Matched Legal Cases: ['art. 19', 'art. 11', 'art. 2', 'art. 2', 'Art. 2', 'art. 4', 'art. 10', 'art. 43', 'art. 40', 'art. 15', 'art. 15', 'art. 25', 'art. 51', 'art. 51', 'art. 55', 'art. 23', 'art. 49', 'art. 36', 'art. 36']

Switzerland - Merger Control 2017 · ICLG - International Comparative Legal Guides
Home Practice area Merger Control Merger Control 2017 Switzerland
The Swiss Competition Commission (ComCo) is the competition authority that is in charge of merger control procedures. The ComCo receives support from its investigative body, the Secretariat of the Competition Commission (Secretariat). The Secretariat carries out merger control-related investigations, and is the primary counterpart of undertakings that notify a transaction. The Secretariat comprises four divisions, dealing with services, infrastructure, construction and product markets. The ComCo consists of 11–15 members (currently, it comprises 12 members), the majority of which are independent experts, such as university professors in the fields of law or economics. The remaining members are representatives of business and consumer organisations. The competition authorities are not political bodies but remain independent from the Government and the administrative authorities (art. 19 (1) CartA). The offices of the ComCo and the Secretariat are in Berne, the capital of Switzerland. Further information about the ComCo is available at: http://www.weko.admin.ch/index.html?lang=en.
There is no specific relevant legislation for foreign mergers. However, there are certain specific rules that are applicable to regulated industries, where special requirements, regulatory approvals or notification duties might apply (cf. question 1.4).
Furthermore, certain restrictions may apply to the direct or indirect acquisition of real estate in Switzerland by foreigners. While there have been continuous liberalisations over recent years, there are still some restrictions, e.g. passive capital investments in Swiss real estate can be executed without approval, unless such real estate is used for residential purposes.
Banking and Insurance: In Switzerland, banks and insurance companies require a licence issued by the Swiss Financial Market Supervisory Authority (FINMA) pursuant to the Banking Act and the Insurance Supervisory Act. Once licensed, they are subject to ongoing supervision by FINMA. One requirement to obtain and maintain the licence is that each individual or entity which (i) directly or indirectly holds at least 10% of the capital or the votes in a bank or insurance company, or (ii) otherwise has significant influence on the management (collectively: “Qualified Participations”), must ensure that its influence does not adversely affect the prudent and solid management of the bank or insurance company in question. Changes with respect to Qualified Participations must be reported to FINMA by the selling and the acquiring party prior to the transaction. Air Transport: According to art. 11 of the Bilateral Agreement between Switzerland and the EU on Air Traffic, the EU Commission will assess merger control procedures in this sector in cooperation with the Swiss ComCo. The authorities will apply the EU Merger Control Regulation No. 139/2004.
According to art. 2 (1) MCO, the acquisition of joint control by two or more undertakings over an undertaking that was previously not jointly controlled is a transaction that is subject to a merger control notification if the thresholds are exceeded (cf. question 2.4). In order to be a joint venture in this sense, the joint venture company must perform all functions of an economic entity on a lasting basis. In recent cases, the authority has, in particular, closely scrutinised whether or not the joint venture will be dependent on sales to the parent companies. Newly-formed joint ventures are only subject to merger control if, in addition, some business activities of at least one of the controlling undertakings are included in the joint venture’s business (art. 2 (2) MCO). In practice, this criterion has generally been considered to be fulfilled in most cases.
In recent cases, the authority re-confirmed that a joint venture which will supply goods and/or services only to the parent businesses, and which has no presence on the market or dealings with third parties, may not qualify as a full-function joint venture.
- the undertakings concerned had, in the last business year prior to the transaction, an aggregated worldwide turnover of at least CHF 2,000 million (approx. EUR 1,872 million or USD 2,078 million), or an aggregated turnover in Switzerland of at least CHF 500 million (approx. EUR 468 million or USD 520 million); and
- at least two of the undertakings concerned had, in the last business year prior to the transaction, an individual turnover in Switzerland of at least CHF 100 million (approx. EUR 94 million or USD 104 million according to average reference rates published by the Swiss National Bank for 2015: 1 EUR = 1.0681 CHF and 1 USD = 0.9624 CHF).
Art. 2 (2) CartA indicates that the CartA is only applicable to situations that have an effect in Switzerland. This has been interpreted in a very restrictive manner by the Swiss Federal Supreme Court. According to the Swiss Federal Supreme Court’s practice, an effect in Switzerland is given whenever the turnover thresholds (cf. question 2.4) are met. However, a notice published by the Swiss competition authority indicates an exception in the case of the acquisition or creation of a joint venture company that has neither any turnover in Switzerland, nor any current or future business activities in Switzerland. The Swiss competition authority considers that such transactions do not have any effect in Switzerland, even if the controlling undertakings fulfil the turnover thresholds. Therefore, such transactions generally do not need to be notified in Switzerland. Each case under this exception should be carefully evaluated.
2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions? The Swiss competition authority will take into consideration whether several transactions should be considered as one single economic transaction. The authority generally assesses this on the basis of the legal interdependence of the transactions, and will also take into consideration facts such as a single purchase price, single contractual document and concurrence of the timing.
For the purposes of calculating the turnover, art. 4 (3) MCO indicates that if two or more transactions take place between the same undertakings within a period of two years, resulting in the acquisition of control over parts of these undertakings, these transactions shall be treated as a single transaction. Furthermore, the Swiss competition authority’s notice confirms that transactions carried out in several steps may be considered a single economic transaction if there is joint control during a start-up period, which is transformed into sole control based on a legally binding agreement. Such transactions may be notified as a single transaction resulting in the sole control of the ultimate parent company if the start-up period does not exceed one year.
Any undertaking that is obliged to notify the transaction (i.e. the merging undertakings, or the undertakings acquiring control) may be fined with an amount of up to CHF 1 million (approx. EUR 0.94 million or USD 1.04 million) if it completes a transaction that should have been, but was not, notified. The ComCo has, in the past, issued such fines. In addition, members of the management may personally be fined with an amount of up to CHF 20,000 (approx. EUR 18,725 or USD 20,781). Such fines have not been issued to date.
In one case in 2012, the ComCo imposed a fine of CHF 35,000 (approx. EUR 32,768 or USD 36,367) for the failure to notify a concentration. The highest fine published to date was imposed in 1998 and amounted to CHF 68,400 (approx. EUR 64,038 or USD 71,072).
There are no filing fees as such. However, the ComCo will charge a lump-sum fee of CHF 5,000 (approx. EUR 4,681 or USD 5,195) for its Phase I investigation. For the Phase II investigation, the fee is based on hourly charges of CHF 100–400 (approx. EUR 94–374 or USD 104–416).
4.1 What is the substantive test against which a merger will be assessed? The substantive merger test under Swiss law is more limited than in other jurisdictions, e.g. in the EU. The review is based on a dominance test, which is extended by an additional test on the remaining amount of competition. On the basis of art. 10 (2) CartA, the ComCo may prohibit a transaction if:
Third parties do not have any party rights in merger control procedures (art. 43 (4) CartA). They may, however, provide their opinion in Phase II procedures, and may also be requested to provide their views in Phase I procedures. Once the ComCo has initiated an in-depth Phase II investigation, this will be published in the Official Gazette and third parties may submit their view. However, in Phase I procedures, there is no statutory right to provide such observations. The Federal Supreme Court has confirmed that third parties have no procedural rights in such investigations. In addition, third parties have no legal standing to appeal the merger control decisions of the ComCo.
The undertakings concerned, as well as affected third parties, are obliged to provide the Secretariat and the ComCo with all of the necessary information for their investigation, as well as to produce the respective documents (art. 40 CartA). The Secretariat may request information and documents, such as information on past or projected sales or turnover figures, on the market development and on the undertakings’ position in an international context. Such information must be provided even if the notification is confirmed to be complete (art. 15 MCO). According to art. 15 (2) MCO, the right to request information also extends to third parties to a merger transaction. In the absence of international agreements, the respective obligation is not enforceable outside of Switzerland. In cases of parallel notifications in Switzerland and with the European Commission, it should be noted that the EU/Swiss cooperation agreement in competition matters (which entered into force on 1 December 2014) also allows the authorities to exchange information in parallel merger control procedures (cf. question 6.1). An undertaking that fails to fulfil its obligation to provide information or produce documents may be fined an amount of up to CHF 100,000 (approx. EUR 93,624 or USD 103,907). In addition, natural persons may personally be fined with an amount of up to CHF 20,000 (approx. EUR 18,725 or USD 20,781). Such fines have not been issued to date.
The Secretariat and the ComCo are obliged by law not to disclose any business secrets (art. 25 CartA). However, the undertakings concerned are requested to indicate in their notification, as well as other submissions, which information is deemed to be a business secret. The ComCo has issued a notice regarding business secrets, which is available in German, French, and Italian at https://www.weko.admin.ch/weko/de/home/dokumentation/bekanntmachungen---erlaeuterungen.html. According to this notice, the competition authority will apply, by analogy, the criminal law standard with regard to business secrets. Therefore, in order to qualify as a business secret, a fact must not be obvious, the parties must have demonstrated their subjective will to keep the fact confidential, and there must be an objective interest in keeping the fact confidential (the fact must have an economic value and must relate to one single entity). Generally, the Secretariat prefers that parties simultaneously provide a non-confidential version of any notifications or submissions. Furthermore, prior to the publication of the final decision, the Secretariat will provide the undertakings concerned with a draft of the publication, in order that they may comment on whether the text includes any business secrets.
In Phase I, the regulatory process may end either by (i) a clearance decision, (ii) a clearance decision subject to conditions or obligations, (iii) the opening of an in-depth investigation (Phase II), or (iv) the transaction will be automatically cleared if the authority does not make any decision within the Phase I timeframe.
The CartA does not provide for any rules on the timing of the negotiation of remedies. Remedies may be negotiated in Phase I, as well as Phase II procedures. In order to allow for sufficient time for discussing the remedies, as well as possible market testing by the competition authorities, negotiations should be initiated as early as possible.
If an undertaking concerned fails to comply with a remedy attached to the authorisation decision, it may be sanctioned with a fine of up to CHF 1 million (approx. EUR 0.94 million or USD 1.04 million; art. 51 (1) CartA). In the case of repeated failure to comply with the remedy, the undertaking concerned may be sanctioned with a fine of up to 10% of the total Swiss turnover (art. 51 (2) CartA). Individuals may be sanctioned with a fine of up to CHF 20,000 (approx. EUR 18,725 or USD 20,781; art. 55 CartA).
The assessment by the ComCo will also include the assessment of ancillary restraints, which are necessary for, and linked to, the transaction. This concerns e.g. non-compete obligations, licence agreements and interim purchase-and-supply-obligations. Other restrictions will not be assessed within the merger control procedure, but may be submitted individually to the competition authorities for informal (art. 23 (2) CartA) or formal review (art. 49a (3) (a) CartA). The ComCo has not issued any guidelines about its approach to ancillary restraints.
Furthermore, the undertakings concerned can apply for an exceptional authorisation by the Federal Council within 30 days following the ComCo’s prohibition decision. Exceptional authorisation can only be provided for important public interest reasons. The period for appeal to the Federal Administrative Court will, in this case, only begin after the notification of the Federal Council’s decision (art. 36 (1) CartA). An exceptional authorisation may also be requested following the decision by the Federal Administrative Court or the Federal Supreme Court, and once the respective decision has become non-appealable (art. 36 (2) CartA). The Federal Council should decide within a non-binding timeframe of four months.
Currently, there are two bilateral agreements in place regarding information exchange with competition authorities from other jurisdictions: (i) the bilateral agreement between the European Community and the Swiss Confederation of 21 June 1992 on Air Transport, which allows for investigations in cooperation with the EU Commission in this sector; and (ii) the Agreement between the European Union and the Swiss Confederation concerning cooperation on the application of their competition laws. Based on this agreement, which entered into force on 1 December 2014, the Swiss and European competition authorities are entitled to exchange specific case-related information even without the consent of the undertakings concerned or affected third parties which provided the information in cases where the respective information is already in possession of the requested competition authority and the authorities are investigating the same transaction. However, the authorities are not obliged to transmit any information. With other jurisdictions, the Swiss authority could possibly request the parties to issue a waiver letter, in order to allow the exchange of information with a foreign authority.
The authors would like to acknowledge the assistance of their colleague Amalie Wijesundera, MLaw for her excellent support in the preparation of this chapter.