The Competition Commission (Comco) issued a press release stating that on 6 June 2011 the Commission opened an investigation against the Swatch Group. The investigation will determine whether the end of supplies of certain watch components necessary for the manufacture of mechanical movements announced by the Swatch Group violates cartel law. The Swatch Group, aware of the problem that has arisen from this project, has contacted the competition authorities. The Comco ordered precautionary measures for the duration of the investigation, based on a conciliation with the Swatch Group. This was to prevent competition from being permanently impeded in the relevant markets.
As is well known, the Swatch Group plans to completely discontinue supplies of mechanical movements and assortments (components such as escapements but also entire movements in the form of supplies, i.e. disassembled and not assembled) to third-party customers. This would put a large part of the Swiss watchmaking industry in great difficulty and is also the driving force behind the start of many manufacturers' production of their own original movements (see what TAG Heuer and Breitling have done, for example).
The investigation opened by the Comco should make it possible to determine whether this behaviour constitutes an abuse of a dominant position and an infringement from the point of view of competition law. In particular, it will have to be established whether there are alternative sources of supply to the Swatch Group and in what time perspective these alternatives can be implemented. The Swatch Group has shown its readiness to find an amicable solution through a gradual reduction of supplies.
With regard to the precautionary measures ordered by Comco, these provide that, initially, the Swatch Group will supply third-party customers in full. Instead, in 2012, the Swatch Group will be able to reduce deliveries of mechanical movements to 85% and deliveries of assortments to 95% by the quantity supplied in 2010.
The investigation opened in September 2009 against ETA SA Manufacture Horlogère Suisse, a subsidiary of the Swatch Group, and concerning mechanical movements may be largely affected by the outcome of this new investigation. The ongoing proceedings against ETA SA Manufacture Horlogère Suisse are therefore provisionally suspended.
In all fairness, it must be said that since the beginning of this process of suspending supplies, the Swatch Group had taken a soft approach with its historical customers, with agreements that included a gradual suspension of supplies. Comco's decision will now further slow down the process, pending a decision on whether it is lawful or not.
