In brief
On 29 November 2023, the Swiss government has enacted a new Ordinance on the Competition Law Treatment of Vertical Agreements in the Motor Vehicle Sector (referred to as the Motor Vehicle Ordinance). In December 2023, the Swiss Competition Commission (COMCO) released Explanatory Notes to accompany the new Ordinance. The new Ordinance and Explanatory Notes are scheduled to come into force on 1 January 2024, and are set to replace COMCO’s current Motor Vehicle Notice and Explanatory Notes. The content of the new Ordinance closely aligns with COMCO’s existing Notice, with the primary difference being its binding nature on the civil courts, in contrast to the non-binding status of the current Notice.
Contents
Background and scope
COMCO issued its Motor Vehicle Notice in 2002, which was in line with the European Union’s 2002 Motor Vehicle Block Exemption Regulation. This Notice, focusing on the automotive sector, outlines regulations pertaining to agreements between vehicle manufacturers and their authorized dealers, repairers, and spare part distributors. Subsequent revisions in 2015 and 2019 incorporated changes from the 2010 EU Motor Vehicle Block Exemption Regulation and integrated new developments in Swiss case law. Additionally, COMCO issued multiple versions of Explanatory Notes for interpreting the Motor Vehicle Notice.
In practical application, COMCO typically referred complaints from Swiss car dealers and garages to the civil courts. Due to the courts not being bound by a regulatory agency’s guidelines, Swiss civil case law has not consistently aligned with COMCO’s Motor Vehicle Notice. This inconsistency prompted the Swiss legislature to request the government to convert COMCO’s Motor Vehicle Notice into a Federal Ordinance. Unlike the Notice, the new Motor Vehicle Ordinance will be legally binding on all Swiss courts.
The Swiss Motor Vehicle Ordinance differs from the 2010 EU Motor Vehicle Block Exemption Regulation, which was extended for another five years until 2028. The Swiss Ordinance encompasses regulations for both primary markets (sale of new motor vehicles) and secondary markets (repair and maintenance services; sale of spare parts), whereas the EU Regulation applies to the secondary market only. In the EU’s primary markets, the rules of the EU Vertical Block Exemption Regulation are applicable.
Confirmation of the Swiss approach
The new Motor Vehicle Ordinance maintains the rules of the old Motor Vehicle Notice almost entirely, with changes being limited to modest updates reflecting technical developments. For instance, the new Ordinance now also addresses the market access for providers of vehicle-generated data and the access of independent market participants to technical information, tools for modern vehicle assistance systems, battery management systems, spare part numbers, and activation codes.
In contrast to EU law, the Swiss approach to vertical agreements does not rely on a system of block exemptions. Both the Swiss Verticals Notice and the new Motor Vehicle Ordinance identify “qualitatively serious restrictions of competition”. These include, but are not limited to, territorial restrictions concerning the distribution of motor vehicles and warranty services, behaviors preventing the separation of the distribution of new motor vehicles from repair and maintenance services, restrictions on distributing spare parts, limiting access to technical information, tools, and manuals, restrictions on multi-branding, and any termination of contracts without adhering to specific modalities. These restrictions are considered qualitatively serious under the Motor Vehicle Ordinance.
If qualitatively serious restrictions also meet the criteria for hardcore restrictions of competition according to Article 5(4) of the Swiss Cartel Act (i.e., if they qualify as resale price maintenance or territorial restrictions), they may be subject to potential fines. If not, these restrictions are subject to a prohibition order but are not fined. The qualitative and quantitative effects of these restrictions are evaluated on a case-by-case basis. A qualitatively serious restriction can be subject to prohibition even if its quantitative impact is minor.
Notably, under the Motor Vehicle Ordinance, qualitatively serious restrictions do not benefit from a safe harbor based on market shares. Usual justifications based on economic efficiency, such as the hold-up problem or the free-rider problem, are available, but the threshold for justification is high. Consequently, manufacturers and importers often completely avoid engaging in qualitatively serious restrictions for compliance reasons.
Impact and outlook
It is unclear whether the upgrade of the existing Swiss Motor Vehicle Notice to an Ordinance will achieve its political objectives and improve the legal position of car dealers and independent garages before Swiss civil courts. This is because many of the controversial aspects of COMCO’s stance on vertical agreements in the automotive sector were included in COMCO’s non-binding Explanatory Notes but not in its Motor Vehicle Notice.
Nevertheless, the new Ordinance may cause a resurgence of civil claims by Swiss car dealers and independent garages against manufacturers and importers. As many civil courts have not consistently followed COMCO’s Motor Vehicle Notice and Explanatory Notes in their rulings, lawsuits have become less frequent in recent years. The enactment of the new Swiss Motor Vehicle Ordinance may cause Swiss car dealers and garages to consider legal action against manufacturers and importers more often.
A major contentious issue in Swiss civil courts has been a dealer’s right to be admitted to a manufacturer’s selective distribution system as an authorized aftersales partner. While COMCO’s Explanatory Notes have generally supported a dealer’s right to be admitted as an authorized aftersales partner (subject to meeting all qualitative admission criteria), conflicting decisions have been made by Swiss civil courts on this matter. Most civil courts have ruled that there is no obligation for a non-dominant manufacturer to enter into a contract. The new COMCO Explanatory Notes to the Motor Vehicle Ordinance no longer advocate for a dealer’s right to be admitted to a manufacturer’s selective distribution system.
However, with the introduction of new Swiss rules on relative market power at the beginning of 2022 (Article 4(2bis) Swiss Cartel Act; as outlined in our Client Alert), the question of a potential contracting obligation is likely to be assessed under the provisions on relative market power, rather than under the Motor Vehicle Ordinance. Under these new rules, a manufacturer’s or importer’s refusal to admit or retain a dealer as an authorized aftersales partner or to supply original spare parts, tools, software, or technical information to an independent garage may be deemed an unlawful abuse of relative market power if the garage is dependent on the manufacturer due to the lack of sufficient and reasonable alternatives.
This being said, manufacturers and importers of motor vehicles conducting business in Switzerland must take the new Motor Vehicle Ordinance and Explanatory Notes into account. The adoption of the new Ordinance signifies that the Swiss legislator and government support COMCO’s long-established stance on restrictive practices in the automotive sector. Consequently, manufacturers and importers should anticipate that the distinct Swiss approach to competition law regulation in the automotive markets, particularly in the primary market, will likely continue. This “Swiss finish” includes strict rules on multi-brand distribution restrictions, sales to leasing companies, and minimum termination periods. These rules will persistently influence the ongoing structural changes in the Swiss automotive markets. Manufacturers and importers should analyze their Swiss distribution systems for motor vehicles, repair and maintenance services, and spare parts, ensuring compliance with the Swiss rules, given the notable differences from the EU rules in the automotive sector.
