Swiss Federal Administrative Court Brings Rules on Recommended Resale Prices in Line with EU Practice

Background

In December 2009, the Swiss Competition Commission (COMCO) sanctioned three producers of drugs for erectile dysfunction for issuing resale price recommendations. COMCO argued inter alia that the price recommendations amounted to unlawful concerted practices on resale prices because a large number of the pharmacies and doctors involved sold the products at the recommended prices.
COMCO also argued that the price recommendations of the three pharmaceutical companies (Bayer, Pfizer and Eli Lilly) resulted in the continuation of the price and margin levels of a former industry cartel that was prohibited by COMCO in June 2000.
A further element was that wholesalers and a company that offered data bases on pharmaceuticals products transmitted the recommended prices to the pharmacies and doctors. These companies were qualified as facilitators of the unlawful practices.
Many scholars criticised COMCO’s approach because it was in contrast to EU law where price recommendations are only unlawful if they amount to a minimum or fixed sale price as a result of pressure from, or incentives offered by, any of the parties involved. It also led to legal uncertainty as companies in Switzerland feared that the mere fact that a large part of the resellers adhered to the recommended prices could make the recommendations unlawful and subject to severe sanctions.

The decision of the FAC

The three producers, a pharmacy, two wholesalers and the company offering pharmaceutical data bases appealed against the decision. Already in 2013 the Federal Administrative Court (FAC) annulled COMCO’s decision with the reasoning that the Cartel Act is not applicable to the relevant market due to the restrictions contained in the regulatory framework and due to the fact that consumers that suffer from erectile dysfunction have feelings of shame which prevent them from comparing the prices offered by the pharmacies. However, the Supreme Court annulled this decisions and referred the case back to the FAC.
In its second decision on the same matter, the FAC has annulled COMCO’s decision once again. The FAC held:
  • The evidence brought forward by COMCO for the high rate of adherence was not robust enough.
  • The mere fact that a large number of pharmacies and doctors adhered to the price recommendations (without coercion or incentives) did not amount to a concerted practice in terms of Article 4(1) of the Cartel Act.
  • The price recommendations had the function of recommended maximum prices rather than minimum prices and that therefore no restriction of competition was established.
The judgment is to be welcomed as it brings Swiss law into line with international standards. Price recommendations are possible in Switzerland if the principles established under EU law are met.
The decisions are not final and binding yet as the Federal Department of Economic Affairs, Education and Research might appeal against the decisions before the Supreme Court.
Decisions of 19 December 2017: B-842/2015; B-843/2015; B-844/2015; B-845/2015; B-846/2015.
This blog post was first published on Thomson Reuters‘ Practical Law website. It is reproduced from Practical Law with the permission of the publishers. For further information visit http://www.practicallaw.com or call +44 (0)20 7542 6664.

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