Bloomberg News

Swatch May Be Allowed to Reduce Supplies, Business Montres Says

July 13, 2012

Swatch Group AG (UHR) may be allowed in 2014 and 2015 to cut supplies to third parties of movements, or a watch’s internal mechanism, to 70 percent of the quantity delivered in 2010, an industry website reported, citing a Swiss regulator.

A proposal from Switzerland’s competition authority, Comco, would enable the volume delivered by Swatch’s ETA unit to be reduced to 50 percent and then 30 percent in subsequent years, according to a document posted July 9 on the Business Montres website.

Comco said in May that it extended provisional measures for a year, allowing Swatch to lower supplies to third parties, to give the regulator more time to complete an investigation into the matter. The biggest maker of Swiss watches last year won provisional backing from Comco to cut deliveries to competitors, forcing many companies to find other suppliers or invest in their own capacity. Swatch has been required to supply movements to third parties because of its dominant position.

Comco has prepared a draft proposal covering the supply of watch parts by Swatch to third parties, Patrik Ducrey, a spokesman for the competition body, said today by phone. He declined to provide details or verify the content of the document posted on the Business Montres website.

“It is a proposal that has been agreed upon” with Biel, Switzerland-based Swatch, he said. “The proposal is now under consultation with the companies concerned” until the end of August.

Under the draft proposal, another Swatch unit, Nivarox, could reduce deliveries in 2014 and 2015 to third parties for components that form part of a movement to 90 percent of 2010 levels and could gradually reduce supplies to 30 percent in 2022 and 2023, according to the document.

Beatrice Howald, a spokeswoman for Swatch, couldn’t be reached immediately by e-mail for comment.

Swatch’s ETA unit is estimated by analysts to make about two-thirds of the mechanical movements used in Swiss watches. Swatch has said some ETA movements being sold to wholesalers end up in fake watches.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.


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