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Mark Watson, former general manager, Swatch Australia
Mark Watson, former general manager, Swatch Australia

Ex-boss accuses Swatch of price fixing

In what could become an explosive court case, the former general manager of Swatch Australia has accused his old company of price fixing and is now suing the Swatch Group in the County Court for loss and damages. 
Swatch Australia's former general manager, Mark Watson, who was forced to leave Swatch’s head office in Glen Iris last November, said he was dismissed because he refused to enforce Swatch’s preferred retail price on retail stockists, preventing them from offering discounts on Swatch products to consumers. In doing so, he would have been breaking the law.

The purported price fixing is done to maintain Swatch’s image of exclusivity across its premium brands including Omega, Breguet, Tiffany & Co, Longines, Rado and Tissot.

Kevin Rollenhagen, member of Swatch’s Extended Management Board, based at the Hong Kong office, terminated Watson and denied the company broke the law: “Swatch Group did not involve itself in any violations of the Trade Practices Act,” he told Jeweller. “I think this will be very clear (when we go to trial).

“I wouldn’t say I’m worried (about the trial) because the reason Mark was terminated was clearly spelt-out in the termination letter to him. He was terminated for reasons to do with his performance of the management of the company. There were no other reasons.”

Rollenhagen said this would become evident during the hearing: “Mark has made (Swatch Group’s alleged price-fixing policy) an issue in the court case but, as this was not the reason he was terminated, I think this will become apparent when we’re on trial before the judge.”

Watson told Jeweller that he became concerned about Swatch’s practices when he commenced his employment with the company in August 2003. He said that the head office in Switzerland was seemingly unaware at the time of the legal implications in Australia of its price fixing policies: “They’d never been told how serious the legislation (Trade Practices Act) is in this country,” Watson said.

In 2005, Watson was so concerned about the company’s approach to retail price maintenance that he briefed a law firm to visit the office and run a seminar for Swatch staff.

When asked if he was aware this took place, Rollenhagen said, “That’s the first I ever heard of it and I haven’t had a chance to check if that actually took place or not.”

Watson said the pressure from overseas to try and maintain or fix the retail prices was so strong, he had decided to take action: “I thought, ‘I’m not having this’,” he said. “I was very, very concerned. We were engaging in conversations, which were illegal every day. An example would be when retailer X would ring one of our salespeople and say, ‘I just want you to know that retailer Y is discounting.’ If this salesperson even has that conversation with the retailer, they’re breaking the law, because that’s tantamount to price fixing.”

Watson said the behaviour of the sales staff did change following the law firm seminar: “Staff became acutely aware of the risk to themselves and the company because there’s also personal risk on the employees,” he said. “Then we became a little more compliant.”

According to Watson, this didn’t stop the pressure from head office so he formally reported to Switzerland about how the activities may well contravene the Trade Practices Act (TPA).

He said they didn’t take it seriously, despite it being documented to them.

According to Watson, when he highlighted the TPA to his Swiss boss, Yann Gamard, Gamard thumped the table and shouted, “The law in Australia is stupid.”

“They like to have puppet-like figures around the world,” Watson said, claiming he was sacked because he was seen as troublesome despite his success at Swatch.

“They’ve got the best range in the world, no question, but their corporate position is one of being above the law, and being wealthy enough to have this very arrogant attitude towards things and people that get in their way,” Watson told The Sunday Age, which published the initial story in early November.

According The Sunday Age, Swatch retailers have claimed that retail price maintenance is a common practice for Swatch. One such retailer claimed Swatch was selling him watches at higher wholesale prices as punishment for having discounted the watches previously.

Watson confirmed to Jeweller that his international bosses continually demanded he prevent Swatch retailers from discounting. He was instructed to charge stockists a higher wholesale price next time – in order to slash their margins to prevent further discounting – or stop supplying them completely.

Watson says there is evidence to show that retailers were withheld supply as a result of not adhering to Swatch’s pricing. The TPA aims to prevent such policies, because “fixing, controlling or maintaining” prices constitutes a “substantial lessening of competition”.

Resellers are entitled to advertise and sell products at whatever price they see fit regardless of any benefit or threat by the supplier.

When asked Watson how retailers would react to Swatch’s no-discount policy, he said the reactions were mixed: “Some retailers almost complied, some knew the law acutely and did not change, and some were extremely worried about the power of the Swatch Group.

“Some stockists were very reliant on the Swatch Group brands because without the brands, they really haven’t got much of a business, so they kind of lived in fear. Retailers were also frightened of closing the sale and using a discount to get that sale.”

But head office still had ways to uncover discounting practices in Australia.

“They saw Australia as a discount market because every time the overseas representatives would come, they either saw discounts everywhere or they saw 30 per cent off in Myer, or they would mystery shop and get 30 per cent off on Omega. The pressure on local brand managers from the Swiss parent company was enormous.”

The problem became far more acute when an Omega flagship store was opened on Castlereagh Street, Sydney.

The boutique had a zero discount policy and, according to Watson, brand image building was the primary objective over sales.

Although the store had a grand presence on the renowned jewellery strip, it often lost sales to other retailers who were discounting Swatch brands in their stores.

“We would have a bad month in the boutique, and the store manager would be asked by Omega why this was,” Watson said. “The store manager would say, ‘The surrounding retailers are discounting and we’re not allowed to match that’. I was subsequently told to stop the retailers from discounting because the boutique was not selling anything.”

Swatch Group is fighting Watson’s claim and the case was due to go to a hearing on November 23 but it has been adjourned until February 1 next year. 

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