On 21 October 2013, the Swiss competition authority (WEKO) decided to close its antitrust probe into the distribution of cosmetic products through beauty institutes. In the course of its investigation, the competition authority identified a number of vertical restraints in the distribution agreements concluded between the manufacturers of the cosmetic products and the beauty institutes charged with their distribution, including:
- territorial protection clauses
- price recommendations
- online trade restrictions.
Applying an effects-based test, WEKO found that the restrictions above only amounted to minor competition restrictions, as, despite their potentially serious nature, they did not have any significant effect on competition in the Swiss cosmetics distribution market.
The parties to the proceedings amended the problematic clauses
In reaching this conclusion, the Swiss competition commission took into account the following factors:
- the companies under investigation had very low market shares
- the relevant market is highly concentrated
- international price differences were rather modest.
It also took note of the fact that the companies under investigation had voluntarily modified the offending clauses, for example expressly declaring that the price recommendations are not binding and informing their distributors accordingly.
Effects of the decision
Without reading too much into the decision, it suggests that smaller cosmetics manufacturers may stand a chance of at least settling cases where offending provisions are removed from contracts and steps are taken to explicitly draw this to the attention of distributors.