Neo Advertising loses to the City of Bern

In Bern, the City awarded the concession for public displays and city plans to the company Neo Advertising following a call for tenders. This contract, which began on January 1, 2020 for a period of eight years, allows Neo Advertising to operate approximately 1,800 traditional and backlit display surfaces, as well as cultural, political and official displays.

The origin of the dispute
Neo Advertising has requested a reduction in royalties in 2020 and 2021 due to the drop in the value of advertising space and turnover caused by health restrictions. These would have led to a drop in the flow of passers-by and commuters. The “value” of advertising space has therefore decreased. Additionally, demand has declined because brands have reduced their spending on advertising. As a result, the company suffered a loss of several million at the Swiss level, which would have been even higher without the hardship subsidy from the canton of Geneva.

This is what pushed Neo Advertising to review the amount of the concession with the City of Bern. The latter refused to enter into the matter, arguing that such losses are part of the company’s normal risks, and the Berne administrative court confirmed this position. The only legal avenue is to appeal the decision to the Federal Court.

The risk is for the company
Paying the full concession fees in 2020 and 2021 would constitute a disproportionate case of hardship, the company argued. The Bernese administrative court saw things differently. Certainly, the company’s economic situation has been significantly affected by the pandemic and its consequences.

But some economic losses are part of the business risk that the concessionaire must assume. In return, it is not required to pay higher concession fees to the City of Bern if it achieves greater profits than expected.

To mitigate the consequences of the pandemic, the State has made specific instruments available such as partial unemployment, Covid-19 credits and hardship subsidies.

So the risk is entirely the responsibility of the company? No, but in this specific case, the Bern administrative court ruled that the losses caused by the pandemic were part of the normal risks that the company had to assume as a concessionaire. The argument is that market fluctuations, like the economic effects of the pandemic, are inherent to business activities. The company is not required to pay higher royalties in the event of profits, nor can it request reductions in the event of losses.

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