Published: 7 June 2025
Updated: 14 June 2025
What Makes Manufacturers Liable for Non-Binding Resale Price Recommendations?
The most recent Federal Supreme Court ruling involving the erectile dysfunction drugs case (2C_442/2023 of 14 April 2025) provided additional guidance on how liability for issuing non-binding resale price recommendations will be assessed under the Swiss Cartel Act. The manufacturers did not use pressure, threats, or other incentives to influence retailers regarding the price recommendations, and the recommendations were non-binding. While discussing the fine of around 2.8 million CHF, one of the manufacturers argued that this showed it had played only a minor role in the infringement found by COMCO.
However, the Court did not accept this view, stating that while the manufacturer published non-binding price recommendations without exerting influence on the behavior of retail outlets, issuing the price recommendation itself constituted the central element of the unlawful concerted practice. Therefore, while compliance by outlets was used to establish a concerted practice and classify the recommended resale prices as the imposition of minimum prices, it is the issuing of the recommended resale prices themselves that constitutes the core of the unlawful practice. In essence, any manufacturer issuing the resale price recommendation bears the risk of fines if those recommendations are followed by retailers.
What was the case about?
In brief, Eli Lilly, Bayer, and Pfizer issued non-binding recommended resale prices for Cialis, Levitra, and Viagra through a pharmaceutical database used by approximately 5,000 pharmacies and doctors. Despite the absence of direct pressure, threats, or incentives, the Federal Supreme Court confirmed COMCO’s finding of a concerted practice based on the follow-up rates by the outlets: 89.3% compliance among pharmacies (52% strict compliance, 37.3% partial compliance) and 81.7% among doctors (75.5% strict compliance, 6.2% partial compliance). The Court established that coordination occurred when manufacturers communicated resale price recommendations in a database reaching cashiers and therefore knowing retailers would see them, retailers tacitly accepted this communication, and the resulting market behavior demonstrated causality through abnormally homogeneous pricing in a non-transparent market with diverse cost structures among hundreds of independent outlets. We have discussed the case at length in Section 4.3.1.2 of Competition Law in Switzerland.
Assessment Framework for Recommended Resale Prices under the Swiss Cartel Act
Under the Swiss Cartel Act, price recommendations occupy a particularly sensitive position in competition law analysis. Unilateral and non-binding price recommendations by suppliers risk being qualified as resale price maintenance agreements under Article 5(4) CartA in three specific circumstances. First, when recommendations are accompanied by communications revealing an agreement to treat them as fixed or minimum resale prices. Second, when recommendations become binding through supplier pressure, threats, or commercial incentives that effectively force distributors into compliance. Third, and most significantly, when there is no evidence of agreement, coercion or economic incentives, but distributors widely follow the recommended prices.
It is the treatment of this third situation that sets Swiss competition law apart, as the critical factor distinguishing lawful recommendations from unlawful price-fixing lies in the follow-up rate and market behavior of distributors and retailers. Swiss courts have indicated that a market follow-up rate exceeding 50% of retailers may be sufficient to establish a concerted practice, though the Federal Supreme Court emphasizes that a “global assessment” is necessary rather than relying solely on compliance rates. However, once price recommendations qualify as agreements or concerted practices under Article 4(1) CartA, they fall under the presumption of Article 5(4) CartA, exposing undertakings to automatic fines.
How to Assess the Risk of Recommended Resale Prices in Switzerland?
Following this case, the risk assessment boils down to a simple question for companies: to issue or not to issue recommended resale prices. It is ultimately this core element that determines manufacturer’s liability in terms of fines. Price recommendations are issued to be followed, and therefore, the extent to which retailers follow them is outside the manufacturer’s control, as long as the manufacturer does not exert pressure, threats, or use economic incentives that push retailers to follow the recommended price level.
The Court’s emphasis on the manufacturer’s decision to issue resale price recommendations diminishes, in our view, the importance of the circumstance in this case that the price recommendations reached outlet cashiers through a database. The issuance of recommended resale prices is considered a risk that manufacturers must take into account in and of itself.
The risk assessment and the compliance efforts around recommended resale prices are difficult to implement (read more in my previous post on what the court said about compliance programs in the same case). The risk assessment for manufacturers will depend on several factors: market shares, risk appetite, the level of price competition in the market between distributors and retailers, etc. However, a manufacturer that has no appetite or tolerance for fines would rather avoid issuing non-binding price recommendations altogether, regardless of whatever efficiencies they might bring to their distribution system. This is the chilling effect of high fines under Articles 5(4) and 49a of the Cartel Act.