High Swiss prices anger consumers

Some goods in Switzerland cost twice as much as they do in neighbouring Germany Keystone

A new study shows that the cost of many items in Switzerland is significantly higher than in neighbouring European countries.

The research, carried out by the University of Zürich, showed that goods such as domestic appliances and electronic equipment were often 30 to 50 per cent more expensive in Switzerland than in Germany. A Sony digital camera, for example, cost 1,770 Euros in Germany, but 2,350 Euros in Switzerland.

Researcher Felix Prümmer, who worked on the study, said nearly all of the items he surveyed cost significantly more in Switzerland.

“The research revealed that in various goods there is always a significant difference between Swiss and German prices,” Prümmer told swissinfo. “In some cases items cost two or even three times as much.”

Prices no surprise

The Swiss Foundation for Consumer Protection said it was not surprised by the price differences, since its own research also showed that prices were higher in Switzerland.

Nevertheless Jacqueline Bachmann, who is director of the foundation, said she was shocked by the scale of the discrepancies.

“In some cases the prices differ by as much as 200 per cent,” Bachmann told swissinfo. “That is really awful.”

Salary costs not to blame

Traditionally Switzerland has had a reputation for being a highly priced and highly paid country, but Bachmann maintains that Swiss salary levels are not to blame for the current price differences.

“In fact German workers are now paid more per hour than Swiss workers,” explained Bachmann. “Furthermore their working week is shorter, and their social costs higher. A study by the University of St Gallen discovered that if salary costs alone determined prices, then they should actually be around 10 per cent lower in Switzerland than they are in Germany.”

Instead both Bachmann and Prümmer blame high Swiss prices on the cosy arrangements that are made between multinational manufacturers and Swiss importers and distributors.

“The multinationals have exclusive distribution in Switzerland,” explained Prümmer. “They fix a high price with the distributors for the Swiss market, and they actively prevent parallel imports, which would allow Swiss retailers to find a cheaper supplier elsewhere.”

Impossible within the European Union

It is an arrangement that would be impossible if Switzerland were a member of the European Union, where the European Commission can bring its competition regulations to bear on cartels and unfair trading practices.

“The European Commission has made several rulings which say that parallel imports are permissible and indeed desirable,” said Prümmer, “but because Commission regulations don’t apply in Switzerland, Swiss consumers can’t benefit from that protection.”

Ironically Jacqueline Bachmann believes that the introduction of the Euro is making the Swiss much more conscious of their own inflated prices.

“The Swiss regularly go over their borders to shop,” said Bachmann, “and whether they go to Germany, France, Italy, or Austria everything is priced in Euros now, so it is much easier to make the comparison and see that things are much more expensive here.”

Competition Commission reacts

The row over high prices has brought reaction from Switzerland’s Competition Commission, which on Thursday issued a press release stating the Commission’s intention to crack down on so-called vertical agreements, which help to prevent parallel imports by requiring car retailers, for example, to buy spare parts from agreed distributors at fixed prices.

Roger Zäch, who is vice-president of the Commission, said the move was an important step towards allowing fairer trading through parallel imports and thus lowering prices in Switzerland.

“We will now be applying the law which allows us to adjudicate these vertical agreements,” Zäch told swissinfo, “And this is important because it is really the first time we have decided to act on this.”

Zäch pointed out that it was not only the consumers who were suffering because of the price fixing.

“Think of all the manufacturers in Switzerland who are dependant on supplies from other countries,” he explained. “They have to pay these fixed prices too, and that is really disastrous for our competitiveness as a country; it places us in a very unfair position.”

New cartel laws needed

The Swiss Foundation for Consumer Protection has welcomed the Competition Commission’s move as “a step in the right direction”; but what Jacqueline Bachmann really wants is a complete revision of Switzerland’s law on cartels.

“In other countries, all over the world, companies which fix prices are fined, they are given very big fines in fact”, said Bachmann. “But here in Switzerland they are not fined; we just want the same law as the rest of the world.

“Introducing the fines would encourage parallel imports”; Bachmann continued, “and that is what we need. Swiss retailers should be able to buy their supplies wherever they want.”

But Bachmann is concerned that the new cartel law, which could come before parliament this year, will run into opposition from Switzerland’s part-time politicians, many of whom are businessmen and women when they are not voting in parliament.

“There is clearly a conflict of interest here,” she said, “some politicians are working for big import and distribution companies, so it will be hard for them to vote in favour of laws which might restrict their business practices.”

“But,” she continued, “we simply must have a new law on cartels; because the law we have at the moment is toothless.”

By Imogen Foulkes