Bloomberg News

Swiss Court Backs Swatch Move to Cut Supply to Third Parties

December 20, 2011

(Updates with analyst’s comment in third paragraph.)

Dec. 19 (Bloomberg) -- Swatch Group AG, the world’s biggest watchmaker, fought off a legal challenge from nine competitors to a decision that it be allowed to scale back deliveries of watch movements to rival companies next year.

The Swiss Federal Administrative Court last week upheld a judgment by the country’s competition regulator, Comco, allowing Swatch to reduce supplies of movements to third parties, Joanne Siegenthaler, a spokeswoman for the court, said today by telephone. Competitors including Frederique Constant SA had challenged the regulator’s decision.

The news “is certainly positive for Swatch,” Jon Cox, an analyst at Kepler Capital Markets in Zurich, said by telephone. “It means Swatch will win more market share next year.”

Comco in June said Swatch could cut deliveries of movements to other watchmakers in 2012 to 85 percent of the 2010 level. Swatch has been required to supply movements to third parties because of its dominant position. The Biel, Switzerland-based company is estimated by analysts to make about two-thirds of all the movements used in Swiss watches through its ETA unit and has been asking Comco to let it decide to whom it sells movements.

The reduction is a provisional measure while the regulator carries out an investigation into the matter.

Comco’s decision in June also allowed Swatch to trim supplies of movements to other movement makers by 30 percent and of components by 5 percent.

The companies that sought to reverse the Comco decision may appeal to the Federal Supreme Court after the final judgments, including the reasons, are published in the first half of 2012, according to Siegenthaler.

--Editors: Paul Jarvis, Tom Mulier.

To contact the editor responsible for this story: Dermot Doherty at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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