In order to concentrate on making timepieces with higher profit margins and to ensure enough supplies for its own brands, including Longines, Omega, Tissot and Breguet, the Swatch Group is planning to reduce the sales of mechanisms and other inner parts to competitors, starting from January 1, 2012. Eventually, the Swatch Group could even end the sale, which would, according to same Swiss watchmakers, put smaller companies out of business. “Our withdrawal will strengthen the quality and competitiveness of the Swiss watch sector”, claims the Swatch Group.
Nine watch companies are challenging the Swatch Group’s right to implement its decision, in court, predicting the dark future for several brands that would not be able to keep the lucrative “Swiss made” label without access to ETA’s components. (The Swatch Group is the owner of the largest manufacturer of Swiss watch movements, ETA.)
They even claim that the entire Swiss watch industry could be jeopardized by the Swatch Group’s decision, comparing the possible scenario with the 1970’s and the Japanese quartz watch revolution that almost led to the collapse of Swiss companies.
Peter Stas, the Dutch co-owner of Frédérique Constant, an independent watch company inGenevathat is one of the plaintiffs noted that it would have been nearly impossible for him to start the business, 23 years ago, without access to ETA’s products. “A lot of companies will cease to exist while Swatch, the monopoly operator, will simply get stronger,” said Mr. Stas.
However, Swatch’s move was already approved bySwitzerland’s competition authority, in June, this year. This institution allowed the Swatch to decrease the deliveries of mechanical movements to the third parties, to 85 percent of the 2010 level, starting with 2012. An antitrust investigation and a final ruling on whether the Swiss giant could stop supplies altogether have been pended, expecting to be ruled in the second half of 2012.
The company which is, according to its last year’s revenue of about 6.95 billion US dollars, the world’s largest watchmaker, claims that it does not try to strangle its rivals. Instead, they will need to raise theirs investments in manufacturing, which will consequently strengthen the entire industry. “In no other industry do you have one company supply all the critical parts to the people who then compete directly with it”, said Nick Hayek, Swatch’s chief executive, earlier this year.
