Swatch, ETA agree to provide watch parts until 2008

A decision by the Swatch Group, the world’s largest watch and movement maker, to stop selling key watch parts to other Swiss companies has been overturned by the Swiss Competition Commission, say Swiss media reports.

It ruled in November that plans of Swatch’s ETA subsidiary—the world’s largest producer of ebauches (unassembled, unfinished mechanical movements)—to make these exclusively for the Swatch Group after 2006 violates Swiss cartel law.

The commission also said the Swatch Group—in a compromise following the ruling—has agreed to let ETA continue supplying ebauches until 2008 and gradually reduce its supply by 2010. That should give small Swiss watchmakers and subcontractors which assemble finished movements enough time to adapt and find new producers, said the regulatory panel.

The commission’s ruling capped a two-year investigation, that began when ETA SA announced in the summer of 2002 that it would cease supplying the movement blanks to subcontractors by 2006, and make them only for the Swatch Group, its parent firm. The other companies appealed to the commission.

Nicolas Hayek, the head of the Swatch Group, argued that ETA has been overwhelmed by an “explosion of orders”—which have increased five-fold in recent years—and also that some ETA ebauches were somehow winding up in counterfeit watches. “There’s not a day goes by that a counterfeit of a prestigious watch isn’t found to use an ebauche by ETA,” he complained to the Swiss press at the time. So, ETA’s decision would also put pressure on counterfeiters.

However, in its November ruling, the commission noted that not only does ETA dominate the market, but there are no alternative producers for other companies to turn to. If ETA stopped deliveries, the commission said, it would have threatened the future of many small Swiss watchmakers.