Protecting Market Participants or Upholding Competition: Switzerland’s First Examination of Relative Market Power

For the first time, Switzerland’s Competition Commission (Weko) has examined whether a company is abusing its relative market power. The decision shows that it is not always possible to expect miracles from new instruments. Switzerland is well-known for its high prices for goods and services, which are higher than in neighboring countries. In response to this issue, parliament passed a change to the antitrust law a few years ago, aiming to prevent foreign companies from “ripping off” their customers in Switzerland by charging excessive prices.

The provisions on so-called relative market power have been in effect since the beginning of 2022, representing an innovation in competition policy. The rules no longer focus on protecting competition but rather protecting individual market participants. Companies can turn to Weko if they believe they are being disadvantaged by a supplier or buyer. A company is considered to have relative market power if its business partner is “dependent” on it, meaning they have no reasonable alternative. The Weko must determine whether this dependency exists quantitatively in each case.

One application case involves Swiss surcharges, where powerful foreign suppliers demand possibly excessive prices from their customers in Switzerland. However, there has also been discussion within Switzerland about whether two major retailers, Migros and Coop, may have relative market power compared to their suppliers and are abusing this position. The Comko has now made its first decision on the question of relative market power regarding Galexis, a wholesaler that belongs to the Galenica Group and purchases medicines and healthcare products from companies in Switzerland and abroad before selling them in Switzerland.

Galexis was annoyed with Fresenius Kabi, a leading manufacturer of sip and tube feeding formula used primarily to feed patients in hospitals. Fresenius had refused to allow Galexis to purchase these products at favorable conditions abroad. Weko had to determine whether Fresenius had relative market power compared to Galexis and was possibly abusing this position. The competition authorities have now denied both allegations made against Fresenius Kabi by Galexis for refusing favorable terms for importing the products into Switzerland due to its dominant market position within the country’s healthcare sector. Firstly, Weko found that Galexis was not dependent on Fresenius Kabi due to limited options available for switching suppliers or not selling the product at all without significant losses in sales and profits. Secondly, Weko did not find any abuse by Fresenius Kabi as there were only slight differences between foreign delivery conditions of these products versus those available in Switzerland.

In conclusion, while the new rules on relative market power represent an innovation in competition policy aimed at protecting individual market participants rather than competition itself