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Swiss Federal Supreme Court narrows the scope of the agency privilege

Swiss Federal Supreme Court narrows the scope of the agency privilege

The Federal Supreme Court published its judgment regarding Les Editions Flammarion SA in the book market case and excludes the application of the agency privilege to exclusivity clauses partitioning the Swiss market.

Published: 16 May 2022

AUTHORS
Managing Partner
Partner, Head of Competition
Published: 16 May 2022
AUTHORS

Benoît Merkt

Managing Partner

Sevan Antreasyan

Partner

Marcel Meinhardt

Partner, Head of Competition

Astrid Waser

Partner

EXPERTISE Competition and Regulated Markets

Investigation of the French-language book market

Following an investigation opened by the Competition Commission ("Comco") in 2007, Les Editions Flammarion SA ("Flammarion") was sanctioned in 2013 along with 12 other distributors and diffusers. The Comco held that the nature of the commercial relationship between Flammarion and its partner for distributing French-language books on the Swiss market should be qualified as a distribution agreement, subject to sanction, and not as an agency contract, which was confirmed by the Federal Administrative Court in its decision of 30 October 2019.

On 31 March 2022, the Federal Supreme Court published its decision 2C_44/2020 confirming the sanction imposed on Flammarion for obstructing parallel imports under Art. 5 para. 4 CartA.

The qualification of the agency contract or competition agreements within the meaning of Art. 2 para. 1 and 4 para. 1 CartA

In its appeal, Flammarion referred in particular to the content of the European Guidelines on Vertical Restraints (OJ C 130/1 of 19 May 2010), according to which, in the case of an agency relationship, limitations on the territory, customers or price or conditions on or to which the agent may sell the goods or services concerned are not subject to competition rules, the Comco also applying such "agency privilege" to Swiss law by analogy with European law. Therefore, according to Flammarion, the relationship between Flammarion and its agent did not constitute an agreement within the meaning of Art. 4 para. 1 CartA.

The Federal Supreme Court summarized the characteristics of the economic relationship between Flammarion and its contractual partner, recognizing in fine that there were elements in favor of a qualification as an agency agreement, confirming in particular that the agent never became the owner of the books diffused by Flammarion and did not bear commercial risk. However, the Federal Supreme Court did not finally ruled on the qualification of the commercial relationship, considering it unnecessary to conclude that the practices were unlawful.

Agency privilege does not apply to exclusivity clauses partitioning the Swiss market

Setting aside the reasoning of the Federal Administrative Court and the practice of the Comco so far, and relying in particular on two European decisions on the application of the European Guidelines on Vertical Restraints (Decision C-279/06 of 11 September 2008, CEPSA Estaciones de Servicio SA v LV Tobar e Hijos SL, Rec. 2008 I-6681 and decision C-217/05 of 14 December 2006, Confederación Española de Empresarios de Estaciones de Servicio v. Compañia de Petróleos, Rec. 2006 I-11987), the Federal Supreme Court considers that, although limitations on territories, customers or prices in agency agreements are in principle exempt from the application of competition rules under European law, the classification of an agreement as an agency contract never constitutes a complete blank cheque under European competition law. While at first the Federal Supreme Court seems to recognize that the agent's privilege applies in Switzerland, it finally specifies that the contractual provisions in an agency agreement must still comply with competition rules, for example as regards exclusivity and single branding clauses.

In this context, it is not necessary to determine whether the agreement should be qualified as an agency agreement, as the Federal Supreme Court considers that an exclusivity regime partitioning the market cannot benefit from the agency privilege anyway.

According to the Federal Supreme Court, even though the exclusivity regime incriminated in the case at hand does not impose any obligations on the agent, such regime organizes the commercial relationship of the two undertakings by limiting the conditions under which the Flammarion group could sell in Switzerland the works it publishes and/or distributes, thus impacts supply channels for certain books in French and partitions the market.

The Federal Court therefore confirms the unlawfulness of the exclusivity regime set up by Flammarion.

Conclusion

In contradiction with the practice of the Comco so far, agency relationships may be subject to the same rules as other competition agreements under CartA, in particular with regard to exclusivity and single branding clauses.

Seven other distributors and diffusers appealed to the Federal Supreme Court against the decisions of the Federal Administrative Court with respect to the French-language book market case. After the decision concerning the distributor Dargaud (Suisse) SA, which was publicly released at the beginning of the year, six other decisions are still expected to be released in this case.

Please do not hesitate to contact us in case of any questions.

Legal Note: The information contained in this Update is of general nature and does not constitute legal advice. In case of particular queries, please contact us for specific advice.

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CONTACTS

Benoît Merkt

Managing Partner, Geneva

benoit.merkt@lenzstaehelin.com

Tel: +41 58 450 70 00

Sevan Antreasyan

Partner, Geneva

sevan.antreasyan@lenzstaehelin.com

Tel: +41 58 450 70 00

Marcel Meinhardt

Partner, Head of Competition, Zurich

marcel.meinhardt@lenzstaehelin.com

Tel: +41 58 450 80 00

Astrid Waser

Partner, Zurich

astrid.waser@lenzstaehelin.com

Tel: +41 58 450 80 00