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Swatch has won the right to further limit the distribution of its parts
Swatch has won the right to further limit the distribution of its parts

Swatch Group continues restrictions

Swiss watch giant comes to initial agreement with antitrust authority on the restricted distribution of its watch parts.
More than a year after initiating an investigation to find a mutually agreeable solution to its watch parts distribution concerns, Swiss watch company Swatch Group is one step closer to having complete control.

The world’s largest watchmaker enlisted the services of the Swiss Competition Commission COMCO to conduct the investigation in June last 2011, seeking to find a way to allow the group to step back from its role as a movements and components supplier.

Reports coming out of Switzerland last week indicated the watch giant and COMCO have reached a tentative agreement that will see Swatch Group reduce its ETA movement supplies by 70 per cent over the next six years, while its level of Nivarox assortments will also be drastically reduced over the next decade.

Swatch Group had already cut back its distribution of watch parts over the past two years, with ETA movements down 15 per cent and Nivarox down five per cent. These reductions were in line with interim measures put in place by COMCO while it investigates the antitrust implications of the dominant presence in the marketplace, Swatch, deciding to cease supplying third parties with parts.

Other watchmakers now have until the end of August to comment on the decision, with those comments potentially leading to further negotiations.

Competitor Frederique Constant was one of the first outside parties to wade into the debate, and released a statement yesterday regarding the decision.

“Normally, when a monopolistic stakeholder decides to cut supply, antitrust authorities protect smaller players, giving them time to organize themselves,” the statement read. “However, in this case, the Comco [the Swiss antitrust governing authority] immediately awarded the Swatch Group an ability to reduce deliveries up to 30 per cent.”

Frederique Constant co-founder, Peter Stas, said the decision was a bombshell in the Swiss watchmaking industry.

“Certainly, a number of smaller manufacturers will be forced out of business”, Stas said.

According to the statement, Frederique Constant had been working on its own calibre development for 11 years, but the company felt it needed another five years before it would be able to produce the full range of parts it needed to be fully independent.

Swatch chief executive Nick Hayek has previously been quoted as saying that in no other industry does one company supply all critical parts to people who then compete directly with it, which is why Swatch is pushing for greater control of who it sells its parts to.

A number of independent watchmakers in Australia are already feeling the squeeze however, with one group, Savethetime.org, banding together earlier this year to petition the Australian Competition and Consumer Commission to oppose the move.

Swatch Group had not responded to questions from Jeweller at the time of publication.

A final decision in the case is expected by the end of next year.

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