PARIS — Swatch Group AG has won a green light to gradually reduce deliveries of components to rival watchmakers.

This story first appeared in the October 28, 2013 issue of WWD. Subscribe Today.

Switzerland’s competition regulator said it accepted an agreement struck between its Secretariat and the world’s largest watchmaker that will see Swatch continue to deliver mechanical movements until Dec. 31, 2019, albeit in lower quantities.

Friday’s decision trumps a surprise ruling by the Swiss Federal Competition Commission, or Comco, in July rejecting a previous deal concluded between the Secretariat and Swatch Group in March.

Comco calculated an average amount of movements based on the years 2009 through 2011 and said Swatch Group must deliver 75 percent of those quantities next year and in 2015; 65 percent in 2016 and 2017, and 55 percent in 2018 and 2019.


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It said all clients must be treated equally, and inserted a clause protecting small- and medium-size firms.

The revised agreement does not go as far as Swatch Group would have liked, as it provides for a more gradual decrease in the supply of mechanical movements than previously foreseen and excludes assortments.

The Comco said it considers it “premature” for Nivarox, the Swatch Group division that produces oscillating and escapement parts, to phase out deliveries of assortments because of a lack of alternative suppliers on the market.

Swatch Group declared itself satisfied with the decision nonetheless, calling it “a positive, albeit tentative, first step toward finally making it clear to all the brands and groups in the Swiss watch industry that they have to invest in their own mechanical movements and assume the associated industrial risk themselves.”

Swatch Group chief executive officer Nick Hayek has stated repeatedly his intention to wean other brands from their dependence on Nivarox and ETA, the Swatch Group subsidiary that supplies watch movements to most of the industry, in order to stimulate research and development.

“This is not a luxury but a step necessary for the long-term success of the Swiss watch industry,” said the Biel, Switzerland-based company, whose 19 brands run the gamut from luxury Breguet timepieces to affordable plastic Swatch watches.

Rivals like LVMH Moët Hennessy Louis Vuitton and Compagnie Financière Richemont SA have been snapping up suppliers of movements, cases and dials to secure greater independence, but they remain mostly dependent on third parties for the assortments,  which are technically complex to manufacture.

Comco launched a probe in June 2011 into whether shutting off supply to third parties would constitute an abuse of Swatch Group’s dominant position, in violation of competition law.

Rene Weber, analyst at Vontobel, said the regulatory body had tried to find an agreement that would satisfy all parties concerned.

“It’s the typical Swiss way,” he remarked, adding that the decision would likely come as a relief to many companies, since Nivarox has a 95 percent market share, and it might be another five years before alternative suppliers, such as Sellita, come on stream.

“We have two, three companies who are working on this, but none of them is really in a position to do that already in a way that it could be an alternative to the Swatch Group assortment,” Weber said.

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