1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?
Merger control in Switzerland is mainly governed by the Swiss Federal Act on Cartels and Other Restrictions of Competition (Cartel Act) and the Swiss Ordinance on the Control of Concentrations of Undertakings. The Cartel Act and the ordinance came into effect on 1 July 1996, as amended.
The Swiss competition authorities (see question 1.3) have also issued an explanatory note and a form for merger control notifications, as well as a notice with regard to their practice on the notification and assessment of concentrations.
A major proposed revision to the Swiss merger control regime, which would have replaced the Swiss qualified market dominance test with the ‘significant impediment to effective competition' (‘SIEC') test, was rejected by the Swiss Parliament in September 2014 (see question 4.8).
1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?
The Swiss Federal Act on Cartels and Other Restrictions of Competition and the Swiss Ordinance on the Control of Concentrations of Undertakings include specific provisions for insurance companies, banks and other financial intermediaries on how to calculate turnover in order to assess whether the applicable turnover thresholds are met (see question 2.6).
Furthermore, the Swiss Financial Market Supervisory Authority (FINMA) may assume the role of the Swiss Competition Commission (COMCO) if a concentration concerning a bank within the meaning of the Swiss Banking Act is deemed necessary by FINMA for creditor protection purposes.
In addition, transactions in specific sectors may require (additional) clearance from other authorities, such as the Swiss Communications Commission or the Swiss Office of Communications.
1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?
Merger control is enforced by the Swiss Competition Commission (COMCO) and its Secretariat, both based in Berne. While the COMCO is the deciding body, merger control investigations are conducted by the Secretariat, which also prepares the decisions of the COMCO.
The COMCO consists of 11 to 15 members (currently 12) and is headed by a three-member presiding committee consisting of a president and two vice-presidents. Most of the COMCO's members must be independent experts - that is, persons with no interest in or special relationship with any economic group.
Based on the COMCO's internal rules of procedure of 15 June 2015, which entered into force on 1 November 2015, two separate chambers of the COMCO with independent decision-making power were established: a chamber for partial decisions and a chamber for concentrations. The chamber for concentrations was introduced in particular to decide whether an examination (Phase II) should be initiated or whether provisional approval to complete the contemplated concentration should be granted prior to clearance in the preliminary examination (Phase I; see question 3.8). All decisions that are not allocated to one of these two chambers shall be made by the COMCO as a whole.
With around 70 employees - including a significant number of economists - the Secretariat is organised into four operational divisions, respectively responsible for the construction sector, the service sector, the infrastructure sector and product markets. A separate resources and logistics division handles internal administrative matters. Each division is headed by a vice-director. In addition to these divisions, a number of cross-functional competence centres support the work of the Secretariat.
2 Definitions and scope of application
2.1 What types of transactions are subject to the merger control regime?
The following corporate transactions are considered concentrations under the Swiss merger control regime and are therefore subject to merger control:
- Statutory mergers of two or more previously independent undertakings;
- The acquisition of control over one or more previously independent undertakings or parts thereof, including through the acquisition of equity interests or the conclusion of agreements; and
- The joint establishment of an undertaking or acquisition of joint control over an existing undertaking (full-function joint ventures).
2.2 How is ‘control' defined in the applicable laws and regulations?
The Swiss merger control regime defines ‘control' as the ability to exert a decisive influence on the activity of another undertaking, whether by acquiring its shares or in any other manner. In particular, decisive influence is deemed to exist where one undertaking can determine the production, prices, investments, supplies, sales or distribution of profits of another.
Control is also assumed if major aspects of an undertaking's business activity or its general business policy may be decisively influenced. It is irrelevant whether control is assumed actually or potentially, directly or indirectly, de jure or de facto. However, the mere acquisition of a non-controlling minority interest or having a seat on the executive bodies of an undertaking is not subject to merger control notification (see question 2.1).
Importantly, a board or management representation could confer control if it is associated with specific rights of control - in particular, veto rights concerning strategic decisions. Similarly, other rights or contractual arrangements could give control if they allow for a decisive influence to be exerted on the composition, deliberations or decisions of executive bodies. Whether such rights or contractual arrangements confer control in the sense of the Swiss merger control regime must be assessed on a case-by-case basis.
2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?
Under the Swiss merger control regime, and unlike in other jurisdictions, the mere acquisition of a minority shareholding is not subject to merger control, except for any contractual arrangements or factual circumstances that allow the minority shareholder to exert a decisive influence on the undertaking concerned (see question 2.2) - in particular, veto rights concerning strategic decisions.
2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?
In principle, joint ventures are caught by the Swiss merger control regime in the following two situations:
- In case of the acquisition of joint control over an existing undertaking, if the joint venture performs all functions of an autonomous economic entity on a lasting basis (full-function joint venture); and
- In case of the incorporation of a new joint venture, if the joint venture qualifies as a full-function joint venture and the business activities of at least one of the controlling undertakings are transferred to the joint venture. According to the practice of the Swiss Competition Commission, the latter criterion is easily satisfied.
Joint ventures for a transitional period, such as project-based consortia, are generally not caught, unless the period envisaged is sufficiently long or the term is renewable.
2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?
The Swiss merger control regime applies to foreign-to-foreign mergers, provided that the relevant Swiss notification requirements are met (see question 2.6). According to the Swiss Federal Supreme Court, whenever the requirements as set out in the Swiss Federal Act on Cartels and Other Restrictions of Competition are met, an effect on the Swiss market is presumed, thus triggering the compulsory pre-merger control notification requirement.
As an exception, the otherwise notifiable establishment of a joint venture is not notifiable according to the practice of the Secretariat of the Swiss Competition Commission if the joint venture has no activities or turnover in Switzerland and such activities or turnover is neither planned nor foreseeable in the future.
2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?
Concentrations are subject to notification to the Swiss Competition Commission (COMCO) prior to completion (closing) if the turnovers of the undertakings concerned in the financial year preceding the concentration cumulatively exceeded the following thresholds:
- The undertakings concerned had an aggregate worldwide turnover of at least CHF 2 billion (at current exchange rates, approximately €1.87 billion or $2.062 billion); or (alternatively)
- The undertakings concerned had an aggregate turnover in Switzerland of at least CHF 500 million (at current exchange rates, approximately €467 million or $515 million); and (cumulatively)
- At least two of the undertakings concerned each had an individual turnover in Switzerland of at least CHF 100 million (at current exchange rates, approximately €93 million or $103 million).
The relevant turnover is calculated on a net and consolidated basis - that is, including all turnovers of the respective group and excluding all reductions such as discounts, rebates, value added tax and other consumption taxes, as well as other taxes directly related to turnover and intra-group business. The turnover of the seller is not taken into account.
In general, the test for the geographical allocation of the turnover is the place of performance - that is, the contractual delivery place of a product and the place where competition with other alternative suppliers takes place, respectively. The billing address, in principle, is irrelevant, which in particular plays a role for trading companies.
In the case of insurance companies, instead of ‘turnover', the annual gross insurance premium is taken into account for determining the relevant thresholds. The turnover calculation for banks and financial intermediaries is based on gross income. With respect to the geographical allocation of turnover, the notification form of the COMCO provides that the turnover of a bank or financial intermediary is deemed to be generated in Switzerland if it is booked at a branch or office in Switzerland.
In addition, irrespective of the turnover thresholds set out above, the pre-merger notification requirement applies if one of the undertakings concerned has been held to be dominant in a market in Switzerland. For the dominance threshold to apply, the contemplated concentration must concern either this market, an adjacent market or a market upstream or downstream thereof (Article 9, paragraph 4 of the Swiss Federal Act on Cartels and Other Restrictions of Competition [Cartel Act]). Furthermore, the concerned undertaking must have been deemed dominant in the binding part of a final and binding decision of the COMCO or the appellate courts, respectively, in a proceeding under the Cartel Act. In contrast, no compulsory notification obligation is triggered if only the reasoning of a decision holds an undertaking to be dominant in a Swiss market.
In general, according to the Swiss Federal Administrative Tribunal, Article 9, paragraph 4 of the Cartel Act should be interpreted narrowly. In a subsequent recommendation, however, the COMCO held that a single economic entity between a joint venture and its mother companies had to be assumed. As a consequence, in a joint venture set-up, the companies controlling the joint venture must also be considered in order to determine whether a notification obligation is triggered.
There exists neither an official nor an unofficial publication of the COMCO listing all undertakings held to be dominant.
Importantly, notification to the COMCO is also required even if the concentration is subject to EU merger control (no one-stop shop), since Switzerland is neither a member of the European Union nor of the European Economic Area.
2.7 Are any types of transactions exempt from the merger control regime?
The filing of a merger control notification is compulsory prior to completion (closing) of a contemplated concentration whenever the notification requirements as set out in question 2.6 are met. Apart from joint ventures that have no effect in Switzerland (see question 2.5), no exemptions to this principle exist.
3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?
The filing of a merger control notification is compulsory prior to completion (closing) of a contemplated concentration, provided that the requirements as set out in question 2.6 are met. No exceptions to this principle exist.
3.2 Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?
Pre-notification is not compulsory, but is customary with the Secretariat, not with the Swiss Competition Commission (COMCO). In the pre-notification phase, unlike in other jurisdictions, the Secretariat in principle only reviews the draft notification and assesses whether it is complete; in general, it does not enter into pre-notification discussions with regard to the substantive assessment of the concentration.
However, it is possible to discuss with the Secretariat the scope of the information to be provided with the notification. This often happens in the case of foreign-to-foreign concentrations that meet the notification requirements (see question 2.6), but do not significantly affect the Swiss market, and to avoid further requests for information to complete the initial notification.
There is no formal simplified notification procedure or form. However, for valid reasons, the Secretariat may release the notifying undertaking(s) from the obligation to provide certain information and materials (Article 12 of the Ordinance on the Control of Concentrations of Undertakings). The pre-notification phase is kept confidential by the Secretariat.
3.3 Who is responsible for filing the notification?
The responsibility for filing the merger control notification varies depending on the type of concentration.
In the case of a statutory merger, the notification must be made jointly by the undertakings concerned. Such parties incur joint and several liability in case of failure to notify.
Where control over an undertaking is acquired, responsibility for the merger control notification lies with the undertaking(s) acquiring (sole or joint) control.
Where a joint notification is required, the notifying undertakings must designate at least one common representative to the Swiss Competition Commission. Undertakings with a duty to notify or their representatives shall designate an address for services in Switzerland if they are domiciled abroad.
3.4 Are there any filing fees, and if so, what are they?
Phase I (preliminary examination) is subject to a fixed fee of CHF 5,000, including any copying or postal charges. Subject to a final notification to be cleared in Phase I, the fixed fee in principle also includes the assessment of whether the submitted draft notification is complete.
The fee for Phase II (examination) is calculated on a time-spent basis. The applicable hourly rates vary between CHF 100 and CHF 400, depending on the seniority of the case handlers involved and the urgency of the matter.
According to the practice of the Swiss Competition Commission, the calculation scheme for Phase II examinations could also apply to Phase I proceedings if the Phase I results in a clearance decision that is subject to conditions or obligations.
3.5 What information must be provided in the notification? What supporting documents must be provided?
According to the Ordinance on the Control of Concentrations of Undertakings and the standard notification form of the Swiss Competition Commission (COMCO), the merger control notification shall include the following information and materials on the undertakings concerned:
- Names, registered offices and a description of their business activities;
- A description of the contemplated concentration, including its objectives;
- Turnover data, or gross premium or gross income, as the case may be, both worldwide and for Switzerland;
- Information on the relevant markets affected by the concentration - that is, markets in which one of the undertakings participating in the concentration has a market share of more than 30% or markets in which two or more undertakings participating in the concentration have an aggregate market share exceeding 20% (‘affected markets');
- With regard to affected markets:
- The market shares for the preceding three years and, if known, for each of the three main competitors on these markets;
- An explanation of the basis used for calculating the market shares;
- Information regarding undertakings that have newly entered the markets in the preceding five years;
- Information regarding undertakings that might enter these markets within the next three years and, if possible, the costs that would arise from such market entry;
- Copies of the latest annual accounts and business reports of the undertakings concerned; and
- Copies of the relevant agreements, or offer documentation in case of a public offer, and copies of any reports, assessments and business plans made in connection with the contemplated concentration, to the extent that they contain information relevant to the competitive assessment.
The preparation of a complete filing depends on the complexity of the case and may take, as a rule of thumb, anywhere between two and 12 weeks. A filing can be made in any one of the official languages of Switzerland (German, French, Italian or, as a theoretical option, Rhaeto-Romanic, where specific conditions are met). Accompanying documents may also be submitted in English.
The undertakings concerned in concentrations and affected third parties shall generally provide the COMCO and the Secretariat with all information required for their investigations and produce the necessary documents. Failure to fulfil or incorrect fulfilment of the obligation to provide information is subject to fines of up to CHF 100,000 against the defaulting undertaking(s), or by fines of up to CHF 20,000 against the defaulting natural person(s). In both cases, among other things, the COMCO must have issued a binding decision on the duty to provide information, which has not been fulfilled or has not been fulfilled correctly by the addressee.
3.6 Is there a deadline for filing the notification?
In principle, no deadline for filing the notification exists. However, a contemplated concentration may not be closed prior to the clearance decision or, in the absence of any response from the Swiss Competition Commission (COMCO), prior to the expiry of the statutory deadlines. Hence, a merger control notification must be filed prior to completion of the contemplated concentration. Therefore, a merger control notification is typically filed after the relevant agreements have been concluded, but prior to completion.
In case of a public tender offer, the merger control notification must be filed immediately after publication of the tender offer and in any case before completion of the contemplated concentration, according to the published practice of the COMCO. The notification may also merely contain a credible statement of the intention to make a public tender offer.
The legal consequences where the responsible undertaking(s) fail(s) to notify a contemplated concentration that is subject to the compulsory merger control notification are outlined in question 3.8.
3.7 Can a transaction be notified prior to signing a definitive agreement?
According to the published practice of the Swiss Competition Commission (COMCO), the respective undertaking(s) may submit the merger control notification from the moment they decide to complete the contemplated concentration. Hence, the merger control notification can be filed as soon as the respective agreements have been concluded in whatever form (eg, a letter of intent or a share purchase agreement), closing generally being subject to condition precedents with regard to clearance of the contemplated concentration, among other things.
If a binding agreement has not yet been concluded and the concentration is merely intended, a notification is possible only if the undertakings show to the satisfaction of the COMCO that they are willing to conclude the relevant binding agreement. It is up to the undertaking(s) concerned to submit sufficient evidence to prove that the signing and closing of a contemplated concentration is plausible.
In case of a public tender offer, the notification may also merely contain a credible statement of the intention to make a public takeover offer. Undertakings may contact the Secretariat in order to discuss the admissible legal documents that are sufficient to constitute a notification.
3.8 Are the parties required to delay closing of the transaction until clearance is granted?
As a principle, a contemplated concentration may not be closed prior to the clearance decision or, in the absence of any response from the Swiss Competition Commission (COMCO), prior to the expiry of the statutory deadlines (standstill obligation). Hence, completion of the concentration in principle is suspended during Phase I and Phase II, as the case may be (see questions 2.7, 3.1 and 3.6).
Closing before final clearance is possible if the COMCO or its chamber for concentrations respectively (see question 1.3) grants provisional approval to do so upon submission of a reasoned request. If the COMCO commences Phase II, it should examine the opportunity of such provisional approval ex officio. The Swiss merger control regime requires that provisional approvals remain exceptional, to avoid creating a non-reversible situation in the market.
There are no formal conditions for provisional approval. The main criterion remains the degree of reversibility: the COMCO should ensure that it can effectively prohibit or grant conditional clearance without impairing market conditions. Provisional approval may cover the whole concentration or only parts of the markets concerned, and may be granted conditionally (ie, subject to conditions and obligations). The (rare) main use of the exception of a provisional approval is for the acquisition of distressed companies that otherwise would not remain a going concern.
In the banking sector, the Financial Market Supervisory Authority (FINMA) has competence to grant provisional approval if it considers that the contemplated concentration is necessary for the protection of creditors. FINMA is obliged by law to invite the COMCO to comment before granting provisional approval (see question 1.2).
If an undertaking fails to comply with the provisional ban on closing a notified concentration, the responsible undertaking(s) may face a fine of up to CHF 1 million. In addition, the responsible undertaking may be required to take measures to reinstate effective competition, whether by unwinding the concentration, by ceasing to exercise control or by any other appropriate action, such as the termination of personnel ties or contractual guarantees to competitors or counterparties. In addition, the responsible individuals may be held personally liable and fined up to CHF 20,000.
3.9 Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?
The mere submission of a merger control notification is not made public by the Swiss competition authorities. However, the decision to commence Phase II and the final decision of the Swiss Competition Commission (COMCO) or statement in case of unconditional clearance will be published in the Official Federal Journal and the Official Commercial Gazette, as well as in the journal Law and Policy on Competition and on the COMCO's website. However, with regard to such publications, the COMCO is bound not to disclose any business secrets of the undertakings concerned. The latter should specifically identify sensitive business information in the merger control notification and any accompanying documentation, and request the COMCO to keep all such information strictly confidential.
4 Review process
4.1 What is the review process and what is the timetable for that process?
The review process is carried out in the following (informal and formal) steps. In the first step, which customarily is the pre-notification phase, a draft filing is submitted to the Secretariat, which reviews the draft and assesses whether the filing is complete. This may take up to 10 working days, during which the Secretariat usually requests further information from the notifying undertaking(s). Upon submission of a complete merger control notification, Phase I as a second step is triggered.
During Phase I, the Swiss Competition Commission (COMCO) must inform the notifying undertaking(s) within one month of receiving the complete merger control notification whether it intends to initiate Phase II. If the COMCO makes no notification within this period, the contemplated concentration may be completed. The COMCO has no possibility to extend Phase I without initiating Phase II as a third step. Unless the notified concentration obviously raises no concerns, the Secretariat will carry out a market test by sending out questionnaires to competitors, suppliers and customers of the undertakings concerned. The answers received will usually have an important bearing on the position taken by the COMCO.
If the COMCO decides to enter into Phase II, this decision will be published. The COMCO must complete Phase II within four months. If the COMCO makes no notification within this period, the contemplated concentration may be completed. In practice, however, the COMCO will usually provide the undertakings concerned with a so-called ‘clearance note'. An extension of the four-month period (‘stop the clock') is possible only in the event of a delay for which the undertakings concerned are responsible or which may be attributed to them, and which has causally impeded the COMCO in properly assessing the contemplated concentration (causal nexus). The COMCO must formally decide on the deadline extension.
Usually, in a Phase II investigation, the parties are required by the Secretariat to submit, and may also voluntarily file, further documents and information to assist in the assessment of the notified concentration. In principle, the Secretariat also sends out additional questionnaires to customers, suppliers and competitors to expand on the market test and the respective analysis conducted during Phase I. In general, a close working relationship with the Secretariat is established during Phase II, particularly when it comes to discussions on possible remedies (ie, conditions or obligations). As a final step before the COMCO takes a decision, the undertakings concerned and third parties – including in particular competitors – are summoned for a formal hearing by the COMCO.
4.2 Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?
There are no formal ways to accelerate the timetable for review in either Phase I or Phase II. In practice, however, the one-month timeframe for Phase I may be reduced in less complex cases if, in particular, the draft filing is submitted to the Secretariat for review prior to formal notification, thus enabling the Secretariat and the Swiss Competition Commission (COMCO) to communicate their position shortly after formal and complete notification is made. However, given the division of work between the COMCO, its chamber for concentrations and the Secretariat, one must bear in mind that it is usually difficult to shorten the one-month Phase I timeframe, for practical reasons.
In practice, the four-month timeframe for Phase II can be shortened where it becomes sufficiently clear to the COMCO and the Secretariat early in the process that no grounds for intervention exist.
4.3 Is there a simplified review process? If so, in what circumstances will it apply?
There is no formal simplified review process. However, in particular for foreign-to-foreign mergers that do not significantly affect the Swiss market, but that meet the merger control notification requirements, a simplified notification procedure is available upon application. On a more general level, for any merger control notification, the Swiss Competition Commission and its Secretariat may, for valid reasons, release the notifying undertaking(s) from the obligation to provide certain information and documentation. In general, such simplifications are discussed prior to submission of the formal merger control notification in the pre-notification discussions with the Secretariat.
4.4 To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?
In 2013 Switzerland entered into a bilateral agreement with the European Union concerning cooperation on the application of their competition laws (the EU Cooperation Agreement). The EU Cooperation Agreement is qualified as a ‘second generation' cooperation agreement, as the scope of information exchange is broader, and information can be exchanged even against the will of the concerned undertakings and in some cases outside of a formal investigation. The EU Cooperation Agreement provides a framework for closer coordination of enforcement activities between the Swiss Competition Commission (COMCO) and the European Commission, although not with the competition authorities of individual EU member states.
With regard to merger control, the scope of the EU Cooperation Agreement includes, in particular:
- mutual notifications of merger control investigations;
- coordination of merger control enforcement activities, such as alignment of the conditions and obligations for clearance of a contemplated concentration; and
- the exchange of information obtained during the respective merger control proceedings.
Implementation of the EU Cooperation Agreement was accompanied by an amendment to the Swiss competition law regime whereby undertakings will be informed of, and have the right to comment on, decisions of the COMCO to share their information with the European Commission.
4.5 What information-gathering powers does the authority have during the review process?
On request, the undertakings concerned and affected third parties are obliged to provide the Swiss Competition Commission (COMCO) and the Secretariat with all information required to conduct their merger control investigations and produce the necessary documents. In this regard, the Secretariat conducts a market test by sending out questionnaires not only to the undertakings concerned, but also to customers, suppliers and competitors, to gather all information deemed necessary to assess the contemplated concentration. Failure to fulfil or incorrect fulfilment of the duty to provide information is subject to fines (see question 3.5).
4.6 Is there an opportunity for third parties to participate in the review process?
In principle, the Secretariat conducts a market test by sending out questionnaires to customers, suppliers and competitors, soliciting their opinion on a notified concentration (see question 4.1). However, these third parties have no legal standing (ie, no formal procedural rights), and the Swiss Competition Commission (COMCO) and its Secretariat are neither required to issue questionnaires nor bound by any answers submitted.
If the COMCO or the chamber for concentrations respectively decides to open Phase II, it will publish the basic terms of the notified concentration and provide third parties with the opportunity to state their position with respect to the contemplated concentration by a certain deadline. Third parties must submit their respective statements in writing. However, in the course of Phase II, the COMCO in principle may hold hearings that may also involve third parties, such as competitors and representatives of authorities in the industry concerned. Third-party hearings are in principle held in the presence of the undertakings concerned, subject to the protection of third parties' business secrets.
According to the Swiss Federal Act on Cartels and Other Restrictions of Competition as well as the relevant case law of the Swiss Federal Supreme Court, third parties are not entitled to any remedies against a decision of the COMCO to clear or prohibit a concentration, or to clear it subject to conditions and obligations (see question 6.2).
4.7 In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?
As a principle, closing of a concentration that is subject to compulsory merger control notification is suspended during Phase I and Phase II (standstill obligation), and failure to comply with the provisional ban on closing is subject to fines (see questions 3.8, 7.1 and 7.2). Hence, closing prior to final clearance is possible only if the Swiss Competition Commission (COMCO) exceptionally grants provisional approval to do so, in principle upon the submission of a reasoned request (see question 3.8).
The main criterion for provisional approval is the degree of reversibility, and the provisional approval may also be granted subject to conditions and obligations. Therefore, provisional approvals including local carve-outs are possible if the requirements for provisional approval are met. However, provisional approvals remain exceptional in practice, the COMCO preferring to maintain the standstill obligation.
4.8 What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?
The applicable substantive test under the Swiss merger control regime is the so-called ‘qualified creation or strengthening of dominant position' (‘qualified CSDP') test. In September 2014 the Swiss Parliament rejected a proposed revision of the Swiss Federal Act on Cartels and Other Restrictions of Competition that, among other things, would have introduced the ‘significant impediment to effective competition' (‘SIEC') test applied in the European Union and most of its member states.
Based on the applicable qualified CSDP test, a concentration will be prohibited or cleared only subject to conditions and/or obligations if it:
- would create or strengthen a dominant position that is liable to eliminate effective competition in the relevant market(s); and
- would not enhance competition in another market to an extent that outweighs the harmful effects resulting from the creation or strengthening of the dominant position in the relevant market(s).
The substantive test as such is not directly affected by special circumstances. However, the Swiss Competition Commission (COMCO) takes the failing firm defence into account as part of the causality test, since the contemplated concentration must be causal to the creation or strengthening of a dominant position.
According to the COMCO's practice, to successfully invoke the failing firm defence, the following conditions must be satisfied:
- One or more undertakings concerned would disappear from the market within a short time in the absence of the contemplated concentration (ie, without external support);
- The other undertaking(s) would absorb most or all of the market shares of the failing firm; and
- There is no alternative measure that would be less harmful to competition than the proposed concentration.
For compelling public reasons (eg, employment, regional development, environmental considerations), a concentration of undertakings that has been blocked by the COMCO may be authorised by the Swiss Federal Council at the request of the undertaking(s) concerned.
4.9 Does a different substantive test apply to joint ventures?
Under the Swiss merger control regime, the same test as outlined under question 4.8 applies to joint ventures.
4.10 What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?
The substantive test for clearance under the Swiss merger control regime is that of qualified market dominance (the qualified CSDP test; see question 4.8). Applying this test, the Swiss Competition Commission (COMCO) also investigates coordinated effects in case of oligopolies. In our view, it is inadmissible to assess unilateral effects under the qualified CSDP test. However, this is controversial. In practice, the COMCO takes such effects at least indirectly into account. In addition, it examines conglomerate effects and vertical foreclosure.
5.1 Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?
The clearance of a contemplated concentration may be subject to certain conditions or obligations designed to safeguard effective competition. Even more so, the principle of proportionality requires the Swiss Competition Commission to assess ex officio whether conditions or obligations that eliminate all of its material objections would be available to allow it to clear a concentration instead of blocking it. The Swiss merger control regime does not specify the types of conditions or obligations that may be attached. Hence, both structural remedies (eg, divestments) and behavioural undertakings are possible.
5.2 What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?
Remedies in the form of conditions and obligations may, in principle, be proposed at any time throughout the review process, including in Phase I and even in the pre-notification phase. However, proposals for remedies are rarely offered by the undertakings concerned in a Phase I investigation. Recent cases have shown that remedies are generally discussed in detail between the Secretariat or the Swiss Competition Commission (COMCO) respectively and the undertakings concerned upon specific request by the COMCO to outline possible conditions and other remedies.
In multi-jurisdictional merger control proceedings, it is important to coordinate the remedies proposal with all merger control authorities involved (ie, the European Commission).
5.3 To what extent have remedies been imposed in foreign-to-foreign transactions?
Remedies have been required in relatively few foreign-to-foreign transactions. However, particularly in parallel merger control proceedings with the European Commission, the Swiss Competition Commission has also recognised and accepted the remedies offered to the European Commission.
6.1 Can the parties appeal the authority's decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?
Decisions of the Swiss Competition Commission are subject to appeal to the Swiss Federal Administrative Court. Decisions of the Swiss Federal Administrative Court are in turn subject to review by the Swiss Federal Supreme Court. However, clearance without remedies is not considered a decision in that sense. According to a recent judgment of the Swiss Federal Supreme Court, the undertakings concerned may appeal decisions individually. Hence, a decision need not be appealed by both (or respectively, all) undertakings concerned in the contemplated concentration.
6.2 Can third parties appeal the authority's decision, and if so, in what circumstances?
Under the Swiss merger control regime and unlike in other jurisdictions, third parties have no right of appeal against any merger control decisions.
7 Penalties and sanctions
7.1 If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?
If a contemplated concentration that is subject to the merger control notification obligation is not filed, the undertaking(s) that was or were respectively required to notify the concentration may face a fine of up to CHF 1 million. The responsible undertaking(s) may also be required to take measures to reinstate effective competition, either by unwinding the concentration, by ceasing to exercise control or by any other appropriate action, such as termination of specific agreements, personnel ties or contractual guarantees to competitors or counterparties.
Furthermore, the responsible individuals may also be held personally liable and fined up to CHF 20,000. To date, the Swiss Competition Commission has imposed several fines on undertakings in default of their notification obligations. By contrast, the responsible individuals of such undertakings have not been fined thus far. The respective fines are calculated based on the following objective criteria:
- Intentional or negligent violation of the notification obligation;
- The importance of the undertakings concerned in the relevant market(s), measured by turnover realised in Switzerland;
- Whether, prima facie, the contemplated concentration represents a threat to competition. Such a threat is presumed if the aggregate market share of the undertakings concerned in the concentration is 20% or more or, if there is no market share addition, if the market share of one of the undertakings concerned amounts to 30% or more; and
- Whether the contemplated concentration adversely affects effective competition – that is, whether it creates or enhances a dominant position in affected markets that is liable to eliminate effective competition, without enhancing competition in another market in a way that outweighs the negative effects of the dominant market position.
7.2 If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?
If undertakings fail to comply with the provisional ban on closing a contemplated transaction after notification to the Swiss Competition Commission, they may face a fine of up to CHF 1 million. The responsible undertaking(s) may also be required to take measures to reinstate effective competition – either by unwinding the concentration, by ceasing to exercise control or by any other appropriate action, such as the termination of specific agreements, personnel ties or contractual guarantees to competitors or counterparties. In addition, the responsible individuals may be held personally liable and fined up to CHF 20,000.
7.3 How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?
Compliance with conditions and/or obligations may be monitored by the Swiss Competition Commission (COMCO) itself or the Secretariat, respectively, or by an appropriate monitoring trustee appointed by the COMCO, if necessary based on a proposal submitted by the undertakings concerned.
8 Trends and predictions
8.1 How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
In comparison with other jurisdictions, the turnover thresholds that trigger a merger control notification obligation in Switzerland are rather high (see question 2.6). Furthermore, if notification is required, the ‘qualified creation or strengthening of dominant position' (‘qualified CSDP') test sets high hurdles for regulatory intervention (see question 4.8). In consequence, the number of concentrations subject to a respective notification obligation is rather low. The same applies to concentrations that are assessed in Phase II, and even more so with regard to concentrations that eventually are prohibited or cleared only subject to conditions or obligations.
For the past decade, the number of concentrations that have been subject to Swiss merger control has fluctuated at around 30 transactions per year; except in 2016, when the number of merger control notifications dropped to 22 concentrations.
9 Tips and traps
9.1 What are your top tips for smooth merger clearance and what potential sticking points would you highlight?
In our view, it is advisable and beneficial to establish a good working relationship with the Swiss Competition Commission (COMCO) and the Secretariat, starting with the (informal) provision of information about an upcoming merger control notification and pre-notification discussions with the COMCO; continuing with submission of a comprehensive draft notification for the completeness assessment by the Secretariat; and subsequently throughout the whole merger control proceeding (Phase I and, as the case may be, Phase II).
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