In brief

A preliminary investigation by the Secretariat of the Swiss Competition Commission (“ComCo“) into information exchanges in the Swiss labor market has found indications of collusion on employee compensation and benefits among more than 200 large companies in various sectors. While the preliminary investigation was initially limited to the banking sector, it became apparent that information exchanges on wage-related topics also occurred in other sectors. Due to the large number of parties involved, the Swiss authority decided that developing best-practice guidelines would be more effective in remedying the situation than launching an in-depth investigation into the behavior of each company. Therefore, the Swiss authority closed the preliminary investigation without opening a formal investigation and without imposing any sanctions.

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On 23 August 2024, the Swiss authority published an extensive final report on the closing of its preliminary investigation. The still-to-be-developed best-practice guidelines are intended to provide all stakeholders with an overview of accepted and prohibited practices and the Swiss authority’s position on competition enforcement in the labor market.

Wide-ranging impermissible data exchange between employers

The investigation was sparked by a leniency application of a Swiss bank in August 2022, after which multiple other financial institutions followed suit. Initially, it was alleged that banks exchanged detailed information on salaries, other benefits, and employment conditions for entry-level positions (apprentices, interns, trainees, and university graduates). Such exchanges were facilitated by industry associations and networks of human resources professionals, which held regular meetings and conducted surveys.

Later, the scope of the investigation was widened to include exchanges regarding salaries and benefits in other sectors and of more senior employees. The Swiss authority found evidence that various companies from different industry sectors systematically gathered and shared comprehensive data on employee compensation in numerous regional, national, and international forums. In particular, the companies regularly exchanged data on salaries, wage development, bonuses, working hours, holidays, notice periods, home office arrangements, recruitment, fringe benefits, maternity and paternity leave, allowances for various costs (teaching material, electronic devices, meals, travel, child and childcare, school fees, relocation), company cars, parking, sabbaticals, subsidized staff accounts and mortgages, health checks, burnout prevention, daily sickness benefits, pension plans, anniversary bonuses, and other compensations and benefits.

Swiss competition law applies to labor market

The Swiss authority concluded that the labor market falls into the scope of the Cartel Act. As a consequence, any collusion between employers on salaries or other types of compensation or benefits and any no-poach agreements are covered by Swiss competition law and may qualify as anti-competitive agreement under the Swiss Cartel Act.

Some industry associations argued that apprenticeships and internships should be exempt from the scope of the Swiss Cartel Act due to their primary function of providing professional education rather than generating productive output of economic value. This was rejected by the Swiss authority. Although apprenticeships and internships have an educational focus, they are nonetheless based on commercial contracts that are governed by demand and supply, to which competition law applies.

The Swiss authority acknowledged narrow exceptions to this rule:

• Agreements between employees as well as collective labor agreements (“Gesamtarbeitsverträge“; “convention collective de travail“) do not fall within the scope of the Swiss Cartel Act. This means that unions of employees and other employee representations are free to negotiate and agree on wages, benefits and working conditions with individual employers or associations of employers. In line with the so-called “Albany exception” under EU competition law, Swiss competition law does not apply to any information exchange and agreements that are entered into in connection with collective bargaining between employer and employee associations and contribute directly to improving the employment and working conditions of employees. This includes any information exchange between employers that is necessary to prepare and conduct negotiations of collective labor agreements.
• The Swiss authority considered the peculiarities of the Swiss vocational education and training system (“Berufsbildung“; “formation professionelle“) and concluded that there is a limited exception for any information exchanges and agreements entered into by the members of national bodies formed under the Federal Vocational Training Act. As a result, the Swiss Cartel Act does not apply in particular to best practices and general commitments issued by the National Vocational Education Summit Meeting and the Swiss Tripartite Vocational Education Conference.

Investigation closed despite indications of wage-fixing

The Swiss authority found no indications of formal agreements but evidence of a widespread exchange of information about wages, general wage development, fringe benefits and employment conditions between employers across various industries. The exchanged information was deemed current and, in some cases, forward-looking price information. The data exchanged was detailed and individualized and not aggregated or anonymized. The exchanges took place regularly over a longer period of time.

The Swiss authority found indications that the exchange of information met all conditions of a concerted practice and therefore of an agreement affecting competition:

• A direct or indirect contact between the employers (i.e., an exchange of information),
• An actual alignment of the conduct of employers, and
• A causal link between contact and alignment.

While the Swiss authority presented detailed evidence of direct contact between employers, it examined the second and third conditions only summarily. The authority generally assumed that the employers’ setting of wages and benefits was affected by such regular and detailed exchange of information. It would have been up to the employers to show that the information exchange did not result in an alignment of wages and benefits.

The Swiss authority further confirmed earlier case law stating that the anti-competitive nature of an information exchange was to be examined in the context of an overall assessment, considering in particular the strategic relevance, level of aggregation and currency of the exchanged information as well as the reach and frequency of the exchange. Even an exchange of publicly available information is deemed anti-competitive if collecting and processing the information is time-consuming and costly. The Swiss authority concluded that the information exchange was suitable to remove the employers’ strategic uncertainty regarding their future behavior in the labor market. This conclusion is in line with a May 2024 Competition Policy Brief by the European Commission confirming that wage-fixing and no-poach agreements generally qualify as restrictions by object under Article 101(1) of the Treaty.

As regards the type of anti-competitive agreement, the Swiss authority confirmed that anti-competitive agreements on wages, benefits and employment conditions qualified as price-fixing and therefore a hardcore restriction according to Article 5(3) of the Swiss Cartel Act. Under Swiss competition law, price-fixing agreements are assumed to eliminate competition. Although, in this case, the assumption was rebutted based on an analysis of the competitive situation in the labor markets, price-fixing agreements are generally deemed to significantly restrict competition, which renders them subject to direct sanctions (i.e., significant fines) under the Swiss Cartel Act.

Remarkably, the Swiss authority did not examine whether the information exchange according to its ASCOPA practice merely constitutes an unlawful information exchange according to Article 5(1) (which is not subject to direct sanctions) or a price-fixing agreement according to Article 5 (3) of the Swiss Cartel Act (which is subject to direct sanctions). In ASCOPA, the Swiss ComCo found that an information exchange may not meet the conditions of a hard-core restriction and therefore not be subject to direct sanctions if there is a mere communication of price data or price elements but no evidence of price alignment (ComCo, decision dated 31 October 2011; confirmed by the Federal Administrative Tribunal, judgment dated 12 December 2022, B-141/2012). The line between an unlawful, but not directly sanctionable information exchange according to Article 5(1) and a directly sanctionable price-fixing according to Article 5(3) of the Swiss Cartel Act has been blurred in the past. Nevertheless, there are no indications that the Swiss authority intended to generally exclude the application of its ASCOPA practice to information exchanges on the labor market. For compliance purposes, however, clients should assume that the Swiss authority will generally consider an information exchange on wages, benefits or employment conditions a hardcore restriction and apply the conditions of Article 5(3) of the Swiss Cartel Act.

Due to the large number of parties involved across several industries, the Swiss authority concluded that it was inappropriate and inefficient to open and conduct a formal investigation against all involved companies. Therefore, it closed the preliminary investigation and published a final report on 23 August 2024.

The authority further announced general best practice guidelines on information exchanges would promote competition in the labor market much quicker and more effectively than a formal investigation. ComCo is currently drawing up best practice guidelines together with various stakeholders on the labor market.

Global competition law enforcement in labor market

Not only for the Swiss authority but for many competition authorities worldwide, enforcement against restrictive labor market agreements has become a priority. In particular, the US Federal Trade Commission (FTC) is seeking to ban nearly all employer-employee non-competes in the United States (recently this ban was blocked by a federal judge). The European competition authorities have also launched investigations into employer behavior. The global scrutiny of labor markets by competition authorities requires companies to rethink their established practices.

The following behavior in the labor market attracts scrutiny of various competition law agencies worldwide:

• Wage-fixing agreements: Wage-fixing agreements, in which employers agree to fix salaries, wages or other types of compensation or benefits, are typically treated similarly or identically to price-fixing cartels. Under Swiss competition law, wage-fixing agreements are considered hardcore price-fixing agreements that are directly sanctionable.
• No-poach agreements and non-solicitation: If employers agree not to hire, poach, or entice away employees from each other, such agreements can be regarded as non-compete agreements between employers in the competition for talent. There are different types of no-poach agreements, e.g., no-hire agreements, in which employers agree not to hire actively or passively employees of other employers, or non-solicit agreements, in which employers only agree not to actively approach the other employer’s employees with a job offer. A no-poach agreement can be justified, if it is made in connection with a wider commercial arrangement and if there is some legitimate interest to be protected (e.g., non-solicitation of employees in connection with an M&A transaction, outsourcing, a joint venture, or some other customer/supplier relationship), provided such no-poach agreement is directly related, necessary, and proportionate to a transaction that would not otherwise occur. No-poach agreements between different employers without any legitimate justification (also called “naked no-poach agreements”) may be qualified as impermissible anti-competitive agreements by competition authorities.
• Information exchange/benchmarking of salary/benefits/employment conditions: As the Swiss investigation into the labor market shows, information exchange between employers (even from different sectors and industries) about current or forward-looking granular information on salaries and benefits that is not in the public domain can be considered as anti-competitive conduct. Given that benchmarking initiatives are common practice and often pro-competitive, it is critical to put in place measures to ensure competition law compliance of the benchmarking exercise. The competition law compliance risk can be mitigated if only aggregated and anonymized information or non-strategically relevant, non-confidential, or historical data is exchanged.
• Employer-employee non-competes: Under Swiss competition law, non-compete obligations of an employee in an employment agreement concluded between an employer and an employee are not subject to the Swiss Cartel Act and are governed by the provisions of the Swiss Code of Obligations. However, in the US, employer-employee non-compete obligations are under scrutiny by the competition authorities.

Labor market-related anti-competitive conduct is on the radar of many competition authorities. It is important to extend competition law compliance efforts to labor market related practices and to sensitize the HR department to the problem. Companies should avoid wage-fixing agreements and exercise appropriate caution before concluding no-poach and non-solicitation agreements or engaging in information exchange on salaries, fringe benefits, or employment conditions.