Report into Swatch Component Supplies Delayed until Next Year

   By John Revill 
 

ZURICH--Swiss competition authorities have put back to next year the publication of a report which will allow Swatch Group AG (UHR.VX) to reduce its supply of key components to other watch makers.

The authority's recommendations, which were originally planned to be released this year, are now under consultation with other watch makers, said Vice Director Patrik Ducrey.

Because Swatch Group, the world's largest watch maker, has a dominant market position, supplying up to 80% of the Swiss watch industry's movements--the internal mechanism of a watch--it cannot unilaterally halt the supply without infringing the Swiss Cartel Act.

The dominance is a legacy of Swatch's history of the time it helped to restructure the domestic watch industry.

Last year the Biel-based company asked the Swiss competition authorities to look into the situation with the aim of being allowed to reduce its supply, because it wants to keep more of its production for its own watches and had grown tired of other companies spending money on marketing rather than manufacturing.

Among the customers for Swatch's components are Swiss-based luxury group Compagnie Financiere Richemont SA (CFR.VX) and French group LVMH Moet Hennessey Louis Vuitton (MC.FR), which owns several Swiss watchmakers, as well as smaller, independent watch makers.

Provisional measures which allow Swatch Group to reduce the supply up to 85% of watch movements and 95% of other components at their 2010 levels during 2012, had already been previously extended into 2013 by the commission.

The delay to the report wasn't unexpected, said analysts.

"With the extension of the measures into 2013 there was no urgency anymore," said Rene Weber at Bank Vontobel.

Under draft proposals, Swatch Group will be able to reduce the supply of movements to watch makers to 50% of their 2010 levels by 2016, 30% by 2018 and zero by 2020.

Supply of assortments--components such escape wheels produced by Swatch's Nivarox division--could be reduced from to 80% of their 2010 levels by 2016 and 50% by 2020, according to the draft proposals.

Mr. Weber said the extension of the report could mean this further reduction in parts supply would occur more slowly.

A spokeswoman for Swatch Group declined to comment on the delays to the competition commission's recommendations.

"Nothing has changed. It is business as usual," she said.

Write to John Revill at [e-mail]

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