Availability of civil claims
Scope for private enforcement actions in Switzerland
Private enforcement actions for damages resulting from infringements of Swiss competition law can be brought by individuals or companies. Claimants must show that they are or have been obstructed from entering or competing in a particular market due to an unlawful restraint of competition. This obstruction might be as a result of the operation of an unlawful agreement (Article 5 Cartel Act) or the unlawful practices of a dominant enterprise (Article 7 Cartel Act).
According to the prevailing opinion, ultimate consumers (often referred to as indirect purchasers) do not have standing to sue in respect of infringements of Swiss competition law as they do not themselves participate in the market to offer goods or services and are, therefore, presumed not to be hindered by such infringements. This approach has attracted considerable criticism and the Swiss government proposed to change the Cartel Act so as to expressly grant consumers standing to bring claims. However, as this proposal formed part of a broader project containing a number of controversial changes to substantive law provisions of the Cartel Act, it was ultimately rejected in September 2014. Consequently, it is unlikely that consumer claims will become more important in the foreseeable future.
Occasionally, Swiss courts and arbitral tribunals also have to deal with private law complaints based on alleged infringements of EU competition law or other foreign competition laws. In this situation, both Swiss courts and arbitral tribunals are in principle expected to determine the applicability of the relevant foreign provisions and the consequences of the alleged infringement on the private claims before them. Provided that the jurisdiction of a court in Switzerland has been established, such court is in principle competent to assess the case in its entirety and to award damages accordingly, even if some of the losses may have occurred abroad.
Applicable limitation periods
Private enforcement claims will normally qualify as tort claims but may also be raised in relation to breach of contract claims. Under the current law, tort claims become statute-barred within one year from the date on which the claimant is deemed to have sufficient knowledge of the cause of action and resulting losses in order to bring a lawsuit in court. 1 For this purpose, the claimant has to have actual knowledge of the basis of the claim and the entity against whom he may have a claim. However, the claimant need not be in a position to indicate the exact amount of losses suffered for the limitation period to be triggered. Claims will in any case become statute-barred, regardless of the claimant’s state of knowledge within 10 years of the tortious conduct having come to an end (Art. 60 of the Code of Obligations). For the purposes of this rule, competition law infringements running continuously over a protracted period of time will generally be viewed as a single tort, with the consequence that the 10 year statute of limitation only begins to run once the infringement has come to an end.
Under the current law, the statute of limitation is not suspended or extended while an investigation by the Competition Commission or foreign cartel authorities into an alleged infringement is being carried out. Consequently, private claims can become statute-barred before the completion of the administrative investigation(s) unless the claimant can show that he did not have sufficient knowledge of the unlawful restraint to initiate court proceedings before the investigation was concluded. The Swiss government, in early 2012, proposed to modify this position, suggesting that the statute of limitation should be suspended during any investigation by the Competition Commission. In September 2014, this proposal was, however, rejected in parliament, together with other controversial proposals for a broader reform of substantive law provisions of the Cartel Act.
Among cartel members, the illegality of agreements made in violation of competition law can always be invoked as a defense to an action for breach of that illegal contract without being limited by the expiry of a statute of limitation period.
Appeals
Private enforcement claims are, as a matter of Swiss federal law, heard by a single cantonal court, i.e., the higher cantonal court. The decisions of these courts can be appealed to the Swiss Federal Supreme Court, but such review is limited to the application of the law by the cantonal court and to any obvious mistakes in the determination of the relevant facts. Such an appeal can easily take up to two years.
Availability of class actions for infringement of competition law and/or damages in Switzerland
Swiss law does not provide for class action proceedings. It is, however, possible to bundle individual claims arising from the same factual circumstances by way of consolidation and joinder of parties.
It is also possible to assign individual claims to one person who can then file a single claim for damages. However, unlike a class action, the assigned claims continue to exist as individual claims, i.e., to the extent that they depend on different factual circumstances or legal arguments, these will have to be established separately before the court. We are not aware of this vehicle having been used in practice to bring a main claim for damages resulting from infringements of competition.
In summer 2013, the Swiss government presented a report on the possible introduction of collective redress mechanism to address perceived shortcomings in law enforcement in different areas. So far, it is unclear whether, and to what extent, specific mechanisms will ultimately be introduced into Swiss law as a result of this discussion.
Conduct of proceedings and costs
Burden of proof
The claimant is required to prove the infringement of competition law, the damage suffered and that, but for the infringement, the damage would not have been suffered by the claimant. To the extent that the unlawfulness of a restrictive agreement is presumed in the Cartel Act (for example, a price-fixing arrangement is presumed to be unlawful – Article 5 paragraphs 3 and 4), claimants need only establish the existence and type of agreement in question. Further, while courts are not formally bound by a finding of the Competition Commission that there has been an infringement, it is difficult to imagine that they would deviate from such a finding if a claim is based upon it. In cases of Europe-wide infringements, claimants may also be able to invoke decisions by the European Commission to establish issues of knowledge or causation, or, if the same conduct is illegal under both Swiss and European law, possibly even the illegality of the alleged infringement.
If there is no pre-existing finding of infringement, Swiss courts must obtain a legal opinion from the Competition Commission prior to determining if a competition law infringement has occurred. These legal opinions are not formally binding upon the Swiss courts. In addition, their practical value is limited as opinions are typically provided based on abstract legal questions submitted by the court, at a time when the relevant facts have not yet been fully established in the civil proceedings.
To obtain damages, claimants must in principle satisfy the “but for” test to show that the losses suffered by them were caused by an unlawful competition law infringement. It has, however, been argued by legal commentators that it should be sufficient to establish the causal nexus between the infringement and the resulting losses on the basis of a preponderance of evidence. Furthermore, damages can be awarded on the basis of an estimate by the Swiss courts if there are clear indications, though no strict proof, that losses have been suffered as a result of the infringement. In one case, losses were established based on a comparison between different geographic markets (Commercial Court of Aargau, RPW 2003, 451, 475). It is not clear whether this claimant-friendly approach will be followed by other Swiss courts, in particular because attempts to rely on geographic comparisons have been rejected in other areas of law, such as unfair competition and intellectual property law. Nevertheless, Swiss courts will probably take into consideration that strict proof of causation may be extremely difficult for a claimant to establish.
Joint and several liability of cartel participants
Cartel members can be jointly and severally liable for damages in circumstances where they act as joint tortfeasors in accordance with Art. 50 of the Code of Obligations, or if they contribute through separate competition law infringements to the creation of the same damage, as provided in Art. 51 of the Swiss Code of Obligations. In both cases, each of the defendants is in principle liable for 100% of the damage, while the individual liability of each is only determined afterwards in separate proceedings for contribution as between defendants. In view of such a claim for contribution, a first defendant may seek to join others to a pending claim to avoid having to re-litigate issues relevant for all of them, such as the existence of an unlawful infringement.
Documents and evidence that can be used by claimants (for example, investigation evidence) and legal privilege
Under the Federal Civil Procedure Act, documents, witness testimony, expert testimony and the testimony of parties can be submitted as evidence. There is, however, no general duty of disclosure as between the parties, and applications for disclosure in Swiss civil proceedings are handled restrictively. Generally, disclosure will only be granted if the party applying for it can demonstrate that it requires a specific document in the other party’s possession.
Practicing lawyers registered in one of the cantonal registers are subject to a professional duty of secrecy and may refuse to testify as a witness in a case on which they are advising, or to produce privileged documents. This is a comprehensive legal privilege which applies irrespective of where the documents in question are located, and when they were created. However, no similar privilege exists to protect advice provided by in-house counsel under Swiss law. Documents prepared by or held in the possession of in-house counsel can therefore be used by the Swiss Competition Commission in administrative proceedings or requested by opposing parties in a private action.
Parties bringing follow-on damages actions may rely on factual findings of investigations by the Competition Commission. However, they will only have access to investigation documents if they were also involved in the investigation as parties. Access to statements made and documents submitted by leniency applicants will generally be denied, as these documents are subject to secrecy. To the extent that the case has been the subject of an EU investigation, potential claimants may apply for access to the files and records of the European Commission and, if produced, use these in the Swiss courts.
Pre-action disclosure
Switzerland does not provide for pre-action discovery of documents. Prior to the commencement of an action, a party can only obtain information from its opponent based on existing substantive information rights (for example, a contractual right to information or as a shareholder in a company). The Cartel Act does not grant any additional rights to access information.
Average length of time from issue of claim to judgment in Switzerland
The duration of proceedings depends on the procedural and substantive complexity of the case and on the workload of the court. It is unlikely that a first instance decision could be obtained in less than two years, but proceedings might also take much longer. If appealed to the Federal Supreme Court, a case may well take up to four or five years.
Average cost from issue of claim to judgment in Switzerland
There is no average cost for bringing proceedings in respect of a Swiss competition law infringement. The costs will depend on the value and the complexity of the case and whether it is subject to appeal.
The costs of the proceedings as well as legal fees are borne by the losing party, but only to the extent they are based on the statutory fee schedule. The amounts of legal costs and fees are determined on the basis of the value in dispute but may be increased or decreased depending on the complexity of the individual case. Due to this approach, and due to the costs of litigation, even a party that succeeds on all points will generally only be reimbursed for part of the expenses incurred to litigate a complex competition law case.
Swiss courts typically require the claimant to make a payment in advance towards the costs of the proceedings. The amount of this security is fixed based on a provisional assessment of the value in dispute and of the complexity of the case. The security can be provided by means of a cash payment to the court or by means of a bank guarantee.
Are alternative methods of dispute resolution available for private competition infringement actions?
Mediation and arbitration are available in Switzerland and many international contracts provide for arbitration in Switzerland. Competition law disputes can in principle be submitted to arbitration, and arbitral tribunals are required to apply Swiss or European competition law if these laws are relevant to the outcome of the case.
In the event that competition law is not, or not correctly, applied by an arbitral tribunal, it is extremely difficult to obtain an annulment of the resulting award as the incorrect application of European competition law does not found a challenge on public policy grounds in Switzerland.
Third-party/alternative funding
Lawyers subject to Swiss bar rules are not allowed to work exclusively on the basis of contingency fees. However, contingency fees are admissible as part of a remuneration scheme, provided that the regular (mostly hourly) fee is at least sufficient to cover the basic costs of representation.
Additionally, it is possible to enter into an arrangement under which a third party finances the litigation in exchange for a percentage of any proceeds. It is also possible to assign claims to a third party in their entirety.
We are not aware of instances where such assignment has been used in the context of private enforcement actions.
Relief
Availability of damages and quantification
The amount of damages that claimants may recover is determined in accordance with the ordinary principles of Swiss contract and tort law. Claimants are only entitled to compensation for actual losses incurred.
The passing-on defense may be raised by defendants, arguing that an effective and complete transfer of cartel prices to subsequent purchasers extinguishes losses suffered by the direct purchaser. While the availability of the passing-on defense is widely advocated among legal commentators, it is difficult to reconcile with the – until now prevailing – view that consumers do not have the necessary standing in Switzerland to bring damages claims for competition law infringements. Applied strictly, this would mean that cartel prices effectively transferred to consumers could not lead to any damages claims because the direct purchaser does not have any losses, while consumers lack the necessary standing to sue for losses sustained by them. This outcome has attracted widespread criticism. However, as the government proposal to expressly grant consumers standing to sue was rejected in 2014, the situation is unlikely to change in the near future (see section 1 above).
Punitive and exemplary damages
Swiss law does not allow for an award of punitive or exemplary damages. However, parties affected by competition law infringements can demand restitution of the profits realized by the infringer under the Cartel Act. While damages claims purport to compensate the claimant for losses suffered due to a competition law infringement, the restitutionary remedy is targeted at the return of ill-gotten gains. As such, it may in particular come into play where the claimant’s losses cannot be established with sufficient certainty.
Availability of interim or final injunctions in respect of an alleged competition law infringement?
In principle, it is possible to obtain a preliminary injunction so as to prevent one party from continuing to engage in competition law infringements. For this purpose, the applicant must provide prima facie evidence of the infringement and, in addition, demonstrate that he is likely to suffer irreparable harm if it continues. Unlike in ordinary proceedings, the courts are not required to obtain a prior legal opinion from the Competition Commission in such cases.
Emerging Trends
Private competition claims have attracted quite some interest from legal commentators in Switzerland, but their practical importance has remained limited. This is due mainly to the fact that the losses suffered as a result of competition law infringements are often relatively small, that consumers do, according to the prevailing view, not have the necessary standing to sue and that enforcement by the Competition Commission is perceived as a cheaper and more efficient way of sanctioning competition law infringements. Considering that proposals to facilitate private enforcement claims were rejected by the Swiss Parliament in 2014 because they formed part of a broader, controversial reform project, it is rather unlikely that the Swiss legislator will make another attempt to facilitate private competition claims in the near future.
Competition law infringements are, however, frequently raised as defenses in contractual disputes. There have also been cases in which Swiss parties have been affected by foreign proceedings, including by US class action settlements. These developments raise procedural issues, namely with regard to the recognition of foreign judgments and settlements in Switzerland, but questions of Swiss competition law generally only play a minor role in their resolution.
1 A proposal was made in 2013 to extend the limitation period to three years, but this reform is not yet in force.