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Swatch Group
Swatch Group

Swatch in trouble

It now appears that Swatch is in trouble with the ACCC after the watchdog launched an investigation into price-fixing allegations.
While the Australian Competition and Consumer Commission (ACCC) will not confirm that it has begun an investigation into allegations that Swatch Group Australia has been involved in price fixing, Jeweller has become aware of an internal staff meeting at Swatch’s Australian head office.

Sources close to the group say that Swatch Australia managing director Megan Parker met with senior staff on Monday April 12 to inform them that the ACCC had formally contacted the company.

A spokesperson for the ACCC, Ms Lin Enright, said the ACCC has a policy of neither confirming nor denying when an investigation is underway.

“No announcements are made until the institution of a case, or if there’s a result such as an administrative settlement or Court imposed settlement,” Enright said.

However, a former Swatch employee has confirmed that they have been contacted by the ACCC to provide a statement, and at least one major retailer had heard from within Swatch that the ACCC had been in contact with the group in Melbourne.

Jeweller has been in contact with a number of Swatch former employees and one has made similar allegations to those first heard from Mark Watson, the former general manager of Swatch Australia, who accused his old company of price fixing in 2009.

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.

Watson is now suing the Swatch Group for loss and damages and his Statement of Claim in the County Court alleges that price fixing was done to maintain Swatch’s image of exclusivity across its premium brands including Omega, Breguet, Tiffany & Co, Longines, Rado and Tissot.

The emergence of claims from another former Swatch employee has thrown light back onto the Swatch Group.

“Switzerland were very much against discounting of the product and were very vocal about us stopping it (the discounting),” the former employee said on conditions of anonymity.  

In claims that could only be described as explosive, and seem to confirm many of Watson’s assertions in his Statement of Claim, the former employee added, “They were so vocal that, at times, they wanted photographs of (retailers) discount signage, and when staff from Switzerland came to Australia, we got the retailers to take all the signage down and price stickers off the watches.”

According to the former employee, when Swiss managers visited Australia, local sales staff were required to call-on retailers and remove any discount price stickers from watches because the Swiss continually asked for photographs of discounting and anything else that was supplied.

“Those photographs were held at the Swiss head office and we would receive emails with directions about what to do.

”At the end of the day, we were basically instructed to manipulate the system in order to be able to get rid of the retailers who were discounting and compromising the prestige of the brand,” the former employee continued.

The former employee explained to Jeweller that manipulating the system meant decreasing retailer margins, restricting supply of new models, not delivering and making it very difficult on trading terms.

In complete contrast to these allegations, another former staff member said no price fixing took place at the time they were employed at Swatch: “There was absolutely no price fixing whatsoever or anything that even smelled of it.”

The former Swatch employee was adamant that price fixing was not even discussed and did not exist, adding, “The ACCC can talk to me if they like. When I was there (at Swatch) we concentrated on opening accounts, not closing them.”

The allegations of price fixing by the leading Swiss watch brand first came to attention when Watson issued legal proceedings for wrongful dismissal and his Statement of Claim alleged that various Swatch overseas executives complained to him about discounting in Australia.

Specifically, the claim states that these same executives directed and/or required Watson to make it known to all Swatch retailers at various times between 2005 and June 2008 that Swatch would not supply retailers unless they agreed not to sell watches below their recommended retail prices and/or the Swatch store prices.

Kevin Rollenhagen, a member of Swatch’s Hong-Kong-based Extended Management Board, 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 last December.

“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.”

The Trade Practices Act (TPA) does not allow resale price maintenance unless there is a benefit to the public: “A supplier must not directly or indirectly fix a price below which resellers may not sell or advertise their products or services, for example, by threatening to cut off supplies or actually cutting them off,” an ACCC document states.

Such activity would be in breach of the TPA, which aims to prevent businesses “fixing, controlling or maintaining” prices, because it constitutes a “substantial lessening of competition”.

Although the two former Swatch employees paint very different pictures of the company’s activities, a major aspect of the investigation will be the periods each former staff member was employed at Swatch. Of additional interest will be whether the staff worked in different areas or on different brands that may have had alternative instructions from the Swiss head office.

While any investigation by the ACCC is a separate matter to Watson’s case in the Victorian County Court – which is scheduled to begin 19 July – Watson has previously confirmed a lengthy and detailed interview with the ACCC took place. 

“I am not sure what will happen from here (with the ACCC) but they have taken an active interest in the matter,” Watson said at the time. He was not available for comment on this story.

Jeweller contacted Rollenhagen via email to ask if Swatch Group is still rigorously defending the action by Watson. He was also asked to comment on the rumours that some current senior Swatch staff in Australia were concerned about their own legal representation should the ACCC interview them, given that employees can be held personally liable for breaches of the TPA.

When contacted, Swatch Australia managing director Megan Parker refused to answer any questions on the matter and, at the time of publication, Rollenhagen had not replied to the email. 

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