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Brand Profiles

Swatch to continue supplying movements until 2019

By Michelle Graff

October 28, 2013

Bern, Switzerland--A Swiss competition body has ruled that Swatch Group must continue supplying third-party watchmakers with at least some finished movements through Dec. 31, 2019.

Comco, which has been investigating Swatch Group’s request to halt supplies of mechanical watch movements and movement parts since the Swiss watch giant inquired about a possible reduction in  June 2011, announced the decision on its website Friday.

According to a translated version of the release, the reduction in supply from Swatch Group’s ETA SA Manufacture Horlogère Suisse (ETA) will take place gradually over the next six years. It will use the average number of movements delivered in the years 2009 to 2011 as the base level for the reductions.

The supply will drop to 75 percent of this level in 2014/2015, 65 percent in 2016/2017 and 55 percent in 2018/2019.

After 2019, Swatch Group will not have to supply any finished movements, “if the market develops as foreseeable today,” a Comco spokesperson confirmed.

Comco ruled that Swatch Group and ETA must treat all of their customers equally and noted that it reserves the right to review Swatch Group/ETA’s obligation deliveries if the market moves in an unexpected way.

Swatch Group said that Friday’s decision was a “positive, albeit tentative 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.”
 
Jon Cox, an analyst with European brokerage and banking firm Kepler Cheuvreux in Zurich, said it is the smaller watchmakers that will be most impacted by the reduction in movement supplies from Swatch Group. “They lack resources to develop movements in-house and will have to pay more for them on the open market,” he said, noting that this likely will lead to further consolidations among brands.

In July, Comco agreed that Swatch Group could cut the number of finished movements it supplies to other watchmakers from 85 percent to 75 percent of 2010 levels beginning in 2014, but sent the company back to the drawing board to come up with a new plan for reducing deliveries beyond that.

At that time Comco said that Swatch Group is restricted in cutting deliveries of assortment kits, comprised of the parts that power its movements: the hairspring, balance wheel, anchor and anchor wheel. Other watchmakers, Comco said, do not yet have enough sourcing alternatives for these parts.

In the decision issued Friday, Comco ruled that Swatch Group has to continue providing assortments at 2011 levels, which was a higher level of supply than 2012 and 2013.