Economic Analysis in Vertical Agreements Prof. Dr. Patrick L. Krauskopf | Dr. Fabio Babey AGON PARTNERS Center for Competition and Commercial Law (ZHAW) March 18 th 2016, Kiew

Economic Analysis in Vertical Agreements 18th March 2016Economic Analysis in Vertical Agreements2 AGENDA 1. Vertical Agreements 2. Automotive Sector in Switzerland 3. Summary

1. Vertical Agreements

Vertical Agreements 18th March 2016Economic Analysis in Vertical Agreements4 Vertical Agreements Pro-Competitive- Effects Anti-Competitive-Effects i.e. eliminating free-rider phenomenom, double marginalization,… i.e. raising rival’s costs, market foreclosure,…

Vertical Agreements Assessment in Switzerland 18th March 2016Economic Analysis in Vertical Agreements5 Unlawful Legal Significant restriction of competition?  Qualitative criteria AND  Quantitative criteria? Rebuttal of presumption: Existing External OR internal competition? Justification by reasons of efficiency? no yes Presumption of elimination of competition Qualified content? (price fixing, allocation of territories) yes no yes no

2. Automotive Sector in Switzerland

Automotive Sector in Switzerland 18th March 2016Economic Analysis in Vertical Agreements7 Primary Market (Sales) Monopolistic market Entry barriers Technically demanding  This leads to (limited) pricing power Secondary Market (After Sales) Complementary goods Producers and Garages No entry barriers  This should lead to a competitive market No automotive manufacturers in Switzerland

Motor Vehicle «Swiss BER» Example: 18th March 2016Economic Analysis in Vertical Agreements8 Art. 16 Distribution of Several Brands The following clauses are as a rule a material restriction of competition and not justified: Direct or indirect obligations that require the members of a distribution system not to sell motor vehicles or spare parts from competing motor vehicle suppliers nor to provide repair and maintenance services for motor vehicles from competing motor vehicle suppliers.

Motor Vehicle «Swiss BER» Example: 18th March 2016Economic Analysis in Vertical Agreements9 Art. 14 Sales in the Context of a Selective Distribution System The following clauses are as a rule material restrictions of competition and not justified: a)Restriction of the possibility for end users in Switzerland, members of a selective distribution system in Switzerland or sellers in Switzerland who are commissioned by an end user in Switzerland to order motor vehicles without restriction from an authorized dealer in Switzerland or a dealer active in the EEA.

Motor Vehicle «Swiss BER» Stimulating competition in Swiss car industry with lasting effect: Garages under increased pressure of competition Pressure on margin 18th March 2016Economic Analysis in Vertical Agreements10 Establishment of the multi-branding

Motor Vehicle Notice … and last but not least: 18th March 2016Economic Analysis in Vertical Agreements11 Welfare gains: Consumer welfare: + CHF 507 Mio. in Efficiency gains: Dealer act more efficient and resource-conserving Market structure: Widened trade channels for vehicles

Summary Vertical Agreements | Pro-competitive and anti-competitive effects Impacts | Reasonable policy impacts market structure, efficiency and welfare Motor Vehicle «Swiss BER» | Ensuring a balance between producer/importer, dealer and garage 18th March 2016Economic Analysis in Vertical Agreements12 3. Summary

Summary Vertical Agreements | Pro-competitive and anti-competitive effects; Effect based approach; Economic analysis Policy Impacts | Reasonable policy impacts; Market structure important; Efficiency and welfare Motor Vehicle «Swiss BER» | Ensuring balance between producer/importer, dealers and garages; Guarantee competition 18th March 2016Economic Analysis in Vertical Agreements13

ZHAW | AGON Partners Dr. iur. Patrick L Krauskopf, LL.M. Dr. iur. Fabio Babey Telefon +41 (0) Telefax +41 (0) Mobil +41 (0) Thank you very much for your attention!