ZURICH — Swatch Group, the world’s biggest watchmaker by revenues, is poised to secure a long-sought deal to cut sales of key components to other brands in what would be a serious setback to rivals like LVMH Moët Hennessy Louis Vuitton and Compagnie Financière Richemont SA.

This story first appeared in the March 7, 2013 issue of WWD.  Subscribe Today.

The deal was revealed by Swatch’s top lawyer at the group’s annual news conference, but he did not provide details. Patrik Ducrey of Switzerland’s Competition Commission confirmed to WWD a settlement had been reached, subject to approval by the full commission.

The deal, which has been widely rumored, would almost certainly let Swatch cut supplies of completed watch movements — the mechanical hearts of a watch — and of essential regulating mechanisms, which include high-tech hairsprings.

Swatch’s ETA subsidiary is Switzerland’s dominant movement maker, supplying not only many Swatch Group brands, but also numerous third parties. Nivarox, another subsidiary, has an even tighter stranglehold on regulating mechanisms.

Swatch has wanted to reduce supplies for years. Nick Hayek, chief executive officer, has contended the easy availability of his group’s components has made rivals disinclined to invest in their own production capacity, and allowed them to divert spending to marketing and store networks instead.

Swatch’s market dominance has prevented it from acting unilaterally, fearing antitrust action. Movements are produced by some other manufacturers, such as independently owned Sellita, but supplies are limited. Mass production of regulating mechanisms is a near Nivarox monopoly.

So Swatch has turned to the competition authorities for permission to reduce sales.

In an initial ruling, the commission allowed a first round of reductions for 2012, which it then extended to this year. A definitive ruling for future years had been expected before the summer holidays, but no confirmation about that timing had emerged until Wednesday.

Industry analysts expect the commission to allow Swatch to progressively cut supplies over a multiyear period. A similar decision was reached a decade ago, when Swatch sought permission to stop supplying movements in kit form to outsiders — a practice that has now ceased.

The impact of the latest reductions has been felt across the industry, as almost every Swiss watch brand uses Swatch Group components to some degree. Some brands, such as privately owned Rolex, Patek Philippe and Parmigiani, have achieved very high rates of independence, while others are major customers — though few advertise the fact.

How much brands outside the Swatch Group will be affected will depend partly on their relationship with Hayek. Richemont, the world’s second biggest luxury goods group by sales after LVMH and a major watchmaker, has stable and close links. By contrast, Hayek has been disparaging about LVMH’s brands, which include TAG Heuer, one of Switzerland’s biggest watchmakers by revenues.

Hayek has said he no longer wants Swatch to be the industry’s “supermarket” and wants the group to keep more parts for its own brands, which include Omega, Longines and Tissot.

Swatch’s plans have already stimulated investment by other brands in component capacity and accelerated consolidation, as many big brands have bought specialist suppliers to promote integration.