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Swatch Group ordered to slow cuts of supplies

July 16, 2013

Zurich--The Swiss competition authority, Weko, has ruled that it is too early for Swatch Group to cut supplies of Nivarox assortments to third-party companies, a ruling that is a victory for smaller watchmakers anxious about procuring all the parts needed to build watches.

In its ruling, Weko agreed that Swatch Group should be allowed to gradually reduce deliveries of finished movements, beginning with another 10 percent reduction in 2014.

However, Swatch Group is restricted in cutting deliveries of assortments, the parts that drive the movement: the hairspring, balance wheel, anchor and anchor wheel.

A Weko spokesman told Reuters that the commission’s decision was based on the fact that other watchmakers did not have enough sourcing alternatives for assortments, an argument that the companies that have been fighting against the reduction have lodged since the beginning.

The Swatch Group supply saga stretches back to June 2011 when Swatch Group asked Weko to begin an investigation into allowing it to reduce supplies of watch movement and movement parts in June 2011. The Biel/Bienne-based watch company felt that it was spending too much time and money on developing movements while other companies that manufacture rival brands were pouring their money into marketing.

Weko had put in place provisional measures allowing Swatch Group to reduce supplies of finished movements made by ETA and assortments by a small percentage in 2012 and 2013. The end of the 2013 provisional measures means that Swatch Group has to negotiate a new deal with the competition authority on reductions by the end of the year.

An analyst told Reuters that the ruling essentially means that the terms of the supply phase-out period are extended.