In a surprising turn of events, the Swiss competition regulator, ComCo, has recalled its previous decision to allow the Swatch Group to reduce the supplies of movement components to the watchmakers that are not a part of the consortium. These movement parts also known as assortments include components such as balance wheel, escape wheel and balance spring. The reason behind the decision was the assessment that the reduction would be “premature” due to the evident dependence of other timekeeper manufacturers to the parts made by various subsidiaries of the Swatch Group. On the other hand, ComCo has once again confirmed the previously agreed dynamics of reduction of complete movements supply to third parties.
An Agreement that has Shaken the Industry
The decision by ComCo is just the latest development in a story that has shaken the entire Swiss watch industry. The Swatch Group is the owner of ETA who has been the undisputed leader in the production of movements for decades and whose calibers have been used in a large number of watchmaking brands, regardless of their size. However, the situation changed about two years ago when the leadership of the Swatch Group decided to take measures which will ultimately put a stop to the practice of supplying brands outside the group with both movements and movement components. Naturally, this decision caused a lot of commotion, since many watchmakers felt they were being forced out of the business. The Swatch Group issued an official request to the Swiss competition regulating agency ComCo (short for The Competition Commission) to assess the situation. By the end of the year, an agreement was reached which allowed the group to gradually reduce the supply of movements and its components. The original decision was to allow the Swatch Group to completely cut off their supplies of movements by 2021 and of movement components by 2025. This sort of agreement allowed the consortium to reduce its sales of movements to 85 percent when compared to the number of movements sold in 2010. The reduction will be even more evident by the end of the next year when it is supposed to drop another 10 percent and to reach just three quarters of the quantities sold to outside partners in 2010.
Movement Component Cuts Still Premature
When it came to movement components however, ComCo had a differing ruling which was caused by the still present dependence of the industry on the parts which are made by the companies that are part of the Swatch Group. For example, one of its subsidiaries, Nivarox-FAR, produces as much as 90 percent of hairsprings that are currently used on the market. In the official statement issued on July 12 in three official languages of Switzerland, ComCo has nullified the previous agreement reached between the members of this government agency and the Swatch Group and recommended a renegotiation when it comes to the assortment supply to third parties: “As essential components of mechanical movements, the Competition Commision considers that a reduction in deliveries of assortments would be premature, given the current situation in the market and the uncertain development in this area.” ComCo statement also notes that this agency wants to see how the market will behave before agreeing to cuts in supply of assortments. During the last three years and until the new ComCo ruling, movement part deliveries were less by 5 percent when compared to the ones recorded in 2010, before the implementation of the Swatch-ComCo agreement. It is now expected that in 2014, the level of deliveries will return to the level recorded in 2010.