Movement war: Swatch awaits decision on limiting movement supply

Posted 5 months, 1 week ago

The battle for the future of Swiss watch industry is now at a critical round. What many of the manufacturers fear is that the Swatch Group, that has been the main supplier of mechanical movements to the industry, could critically reduce their supply starting from 2012.

“In no other industry do you have one company supply all critical parts to the people who then compete directly with it”, said Nick Hayek, Swatch’s chief executive. Obviously, this sounds reasonable, but what are the consequences of cutting the supplies? If you think about it for a moment you’ll realize that a number of independent watchmakers and smaller manufacturers, who do not have large enough capacities to produce their own movements, will be forced out of business.

The decision may endanger even the larger players such as Frederique Constant. This famous Swiss brand began to develop its first manufacture caliber in 2001. However, they estimate that full independence from third-party suppliers cannot be ensured before 2015.

In most of the economies of the developed world, when monopolistic stakeholders decide to cut supply antitrust authorities are entering the game to protect all of the parties involved. However, in the case of Swiss industry, this didn’t happen. The Swiss Competition Commission known as the Comico has granted the Swatch Group an ability to immediately reduce supplies by 30%, though a final decision is still pending. The reason behind this decision is the fact that the third-party companies have become compulsively dependent on Swatch for movements. If Swatch wins this round, the company will be allowed to cut movement supplies to 85% of 2010 levels, and for the regulating mechanisms to 95%.

Swiss ETA movement

As I write this, nine companies are challenging the approval by the Comco and three judges at Switzerland’s Federal Administrative Court are preparing to decide whether Swatch Group should be allowed to cut the supplies. The final decision is expected by the end of December 2011, but even then the dissatisfied party would be able to launch an appeal to Switzerland’s Federal court, which the highest tribunal – we’re not even close to the final resolution.

Author: Marina Milojević
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