Parliament votes to crack down on price fixers

Swiss consumers pay about 30 per cent more for their goods than their European neighbours swissinfo.ch

The Swiss parliament has voted in favour of changing the law to make it easier to crack down on cartels and better promote effective competition.

The House of Representatives voted 109 to 59 for the proposed legislation, with the Senate later following suit by a vote of 104 to 64 in favour.

The legislation will give the Competition Commission greater power to fine companies the first time they are found guilty of price fixing. Firms found to be abusing their dominant market position can be fined up to ten per cent of their annual turnover for a maximum of three years.

The Swiss economics minister, Pascal Couchepin, was quick to point out though that the maximum fine will not be enforced in all cases. He told parliament that it would be calculated based on the severity of the price hike and the length of time it had been happening.

Furthermore any company which “blows the whistle” on being part of a cartel engaged in price fixing will not itself be fined as much as other companies within that cartel.

Consumer groups

The legislation was put forward by consumer groups and the Competition Commission in a bid to reduce the difference in the price of goods between Switzerland and its European neigbours. The price disparity can sometimes reach as much as 30 per cent.

They accuse importers, distributors and retailers who do business in Switzerland of attempting to limit competition and artificially raise prices by making cartel-like agreements among themselves.

Swiss parliamentarian Lucrezia Meier-Schatz is a member of the commission which discussed the proposed legislation.

“What we want is to get more competition in this country,” Meier-Schatz told swissinfo, “in order to boost innovation.”

Closed market

Simonetta Sommaruga, president of the Swiss foundation for consumer protection, says prices in Switzerland are among the highest in Europe.

“Swiss consumers really have a bad deal not just because we have cartels, but also because we have a very closed market,” she says.

“Foreign companies know that because the Swiss market is closed, there is no competition at all, which means they can charge whatever price they like, and that is really disgusting,” she adds.

Sommaruga cites the example of Swiss car dealers who are only permitted to buy German cars through one importer and who cannot cut costs either by buying directly from the manufacturer in Germany or by shopping around for an alternative, cheaper importer.

“There is a whole chain of people who profit from this – not just the car manufacturers, but also Swiss retailers.”

Parallel imports

Another factor keeping Swiss prices high is a ban on parallel imports – branded goods that were manufactured abroad to be sold at a lower price in Switzerland.

One of the most prominent cases was the sale in Switzerland of imported Kodak films below the price set by the company.

But a landmark 1999 ruling by the Swiss federal court upheld the parallel import ban, which led to a rise in the price of Kodak film.

Consumer groups calling for a change in the law suffered a blow on Wednesday, when the House of Represenatives voted by a narrow majority against a complete lifting of the ban on parallel imports. But Thursday’s vote in favour of taking a harder line against cartels should provide some comfort.

Shopping around

Also under discussion was the possible introduction of a so-called “leniency programme”, touted by backers of the new legislation as an effective means of luring companies to abandon cartels.

The programme gives companies the chance to pay a reduced fine if they are the first to break the cartel and inform the commission of its existence.

“This is a system already in operation in the European Union and the United States, and it has proved to be very effective,” says Meier-Schatz.

Cartel crackdown

Sommaruga adds that a radical shake-up of the Competition Commission itself is also needed.

“It needs to be more independent,” she says, calling on those members of the commission with business interests to step down from their posts.

“I think the commission should be headed by people who have no economic interests.”

Consumer groups also point to what they describe as a “conflict of interest” within the Swiss federal parliament.

Many Swiss politicians run their own companies or have business interests outside of parliament.

“It’s not a secret, for example, that the pharmaceutical industry has a strong lobbying force within our parliament, but we have to fight against this because we do have a problem that consumers are paying much more for medicine [than their European counterparts],” says Sommaruga.

Business and politics

Meier-Schatz admits that the dual function of the parliamentarian with outside business interests means progress in amending legislation is likely to be slow.

“Politicians are also business people, and with this particular proposal the conflict of interest is obvious,” she admits.

Sommaruga recognises the limitations of the Swiss political system, but says that if “we can move some way towards more competition and less cartels, Swiss consumers will win.”

“Of course we need to go much further than this, but at the moment we have to be happy with a step-by-step approach.”

swissinfo, Ramsey Zarifeh

In brief

Parliamentarians have voted in favour of changing the law which would lead to a clampdown on cartels.

The new legislation will give the Federal Competition Commission more power to fine companies found to be involved in the practice of price fixing.

Current legislation allows the commission to impose sanctions on a company only after it has twice been reprimanded for being part of a cartel.