Swiss Regulator Permits Swatch to Cut Movement Sales

ETA Watch MovementsZurich—Swatch Group, the biggest watch and component maker in Switzerland, got a partial reprieve last week on regulations forcing it to sell movements to third parties from the country’s competition regulator.

Under the latest ruling by Comco, the Swiss antitrust regulator, Swatch will be allowed in 2014 to reduce shipments of watch movements to other watch producers in Switzerland to 75% of the level in 2010.

Comco said Friday it will renegotiate a preliminary agreement with Swatch that would have ended sales of all movements and other watch parts by 2025, saying it now sees scaling back supplies of component sets as premature.

Swatch Group is required to supply watch movements to other Swiss watchmakers because it holds a dominant share of the business. Its ETA movement division, for example, is estimated to produce about two-thirds of all mechanical movements used in Switzerland. Swatch’s operating profit from components jumped 37% last year, which helped a 23% increase in the company’s earnings.

Swatch Group, meanwhile, said it was disappointed that Comco didn’t end its role as an industry supplier.

“The lack of interest of the players in the Swiss watch industry to create novelties or to become more independent from Swatch Group is amazing,” said Nick Hayek, chief executive at Swatch Group. “We regret that Comco has not taken a definite decision.”

In 2011, Comco gave Swatch Group provisional backing to begin reducing deliveries to competitors in an effort to get other companies to find new sources or invest in their own component makers like Richemont and LVMH have done.

Comco has indicated it wants to see how the market for movements and components develops before agreeing to reductions.

“This may just be a postponement of complete deregulation,” Allegra Perry, an analyst at Cantor Fitzgerald, told investors on Friday.

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com

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