Swatch Group has come out swinging at a decision by Switzerland’s Competition Commission (COMCO) to prohibit its subsidiary ETA from supplying mechanical movements to other watchmakers in 2020.
The ruling supersedes a settlement between Swatch Group and COMCO in 2013 that set out a staged reduction in supply of ETA movements to other brands to around half the 2013 volume by this year.
That settlement, which Swatch Group says it followed to the letter, expires at the end of this year and the company argues it would then be released from its obligations.
Instead, COMCO appears to have ruled for a cliff edge end to sale of ETA movements to large third party watchmakers.
A lengthy statement from Swatch Group, published on its website yesterday and, says the provisional measures adopted by COMCO are incomprehensible, unacceptable and underpinned by a false premise that limiting production and sales for ETA will lead to more competition in the Swiss movement market.
It points out that the reduction in output by ETA since 2013 has fundamentally altered the landscape that its competitor Sellita is now the biggest player.
“ETA is no longer the market leader in this sector. Due to the settlement reached in 2013 and the will of Swatch Group, production volumes and capacities have been reduced year after year. Other players significantly increased their own production levels and, as in the case of Sellita, far exceeded those of ETA. In 2019, Sellita produced and supplied one million mechanical movements (roughly twice as many as ETA), making it the new market leader in this sector,” Swatch Group says.
“It is absurd and unacceptable, given the new situation, that COMCO is now completely prohibiting ETA from supplying its customers with movements. The provisional measures have no legitimacy. The prerequisites for a delivery ban have not been met,” the statement continues.
Swatch Group statement displays little of the measure and restraint normally associated with the Swiss watch industry. The gloves are off when it asserts: “With its decision, COMCO is interfering in economic policy and is restructuring the entire Swiss watchmaking industry. In doing so, it is exceeding and violating its authority. In view of the negative financial repercussions that these decisions will entail, Swatch Group reserves the right to claim damages.”
Swatch Group’s share price was not dramatically affected when the COMCO ruling was published this week, but has almost halved since summer last year when shares were trading at CHF 487. Today they are priced at CHF 269.
There does appear to be some way for the saga to run. Swatch Group points out that COMCO has included a provision for ETA to continue selling to small and medium enterprises. Large customers like Tudor and Breitling look likely to be affected, although both have been investing heavily in their own movement production in recent years.
Swatch Group also suggests that COMCO’s ruling, which is expected to be made public today, is not final. “The Commission is unlikely to take a final decision on this sensitive matter of mechanical movements until sometime in 2020. At this stage, COMCO has not yet announced any timetable,” Swatch Group’s statement says. “Uncertainty will prevail for many months and investments will be slowed down,” it adds.