UPDATE: Swiss Watch Makers Face EU Scrutiny
August 05 2011 - 11:48AM
Dow Jones News
Swiss watch manufacturers are facing regulatory scrutiny in the
European Union amid an industry-wide investigation that aims to
establish whether luxury watch makers such as Compagnie Financiere
Richemont SA (CFR.VX) are refusing to supply spare parts to
independent repairers.
The European Commission probe, which follows an antitrust
investigation in Switzerland on the future supply of watch
components, comes after a years-long legal battle between watch
manufacturers and the European Confederation of Watch & Clock
Repairer's Associations, or CEAHR, that claims some watch makers,
especially from Switzerland, refuse shipment of spare parts.
"It's difficult for us to get any spare parts from firms such as
Richemont, especially for luxury brands such as Jaeger-LeCoultre"
said Martin Taylor, general manager at the British Horological
Institute, which is a member of CEAHR. "While we are very happy
with Rolex, it's mixed with Swatch [Group SA (UHR.VX)]. We have no
problems to get spare parts for Omega but we experience a lot of
difficulties with luxury brands such as Breguet."
On its website, CEAHR claims that the practice of the main Swiss
brands is hurting watch repairers and customers. It said that "free
competition no longer exists" and that this supply practice entails
the risk that customers may overpay and suffer delays when urged to
send watches to the original manufacturer.
Swatch confirmed the probe, saying "it concerns almost the
entire watch industry" and said it was "confident" about the
outcome of the investigation. Richemont declined to comment, while
Rolex couldn't be immediately reached. The European Commission,
which had turned down an earlier request from CEAHR, declined to
identify the companies involved in the investigation.
Swiss watch makers, although hurt by the strong Swiss franc, are
experiencing an unprecedented boom, especially in regions such as
Asia, where demand for luxury brands has been strong over the past
few quarters. The lucrative business has also attracted many new
participants to the market, which has irked traditional players,
whose efforts were instrumental in turning the ailing sector around
in the 1980s.
Because of the huge demand, Swatch, which is the world's largest
producer of mechanical parts, has asked the Swiss Competition
Commission, or WEKO, to launch an investigation into whether the
company can reduce the supply of watch components to
competitors.
Swatch's strong position in the components area is a legacy of
the time it helped to restructure the Swiss watch industry, when it
was one of the rare companies to invest in this sector. It has
urged other watch makers to launch their own component units as its
manufacturing unit, ETA SA Manufacture Horlogere Suisse, is
struggling to meet Swatch's own demand.
Switzerland's WEKO said its own investigation is ongoing and
isn't linked to the EU antitrust investigation. When WEKO launched
its investigation in June, it had asked Swatch to continue
supplying parts to competitors this year. But as part of WEKO's
additional measures that accompany its investigation, the
commission is allowing Swatch to partially reduce the supply of
watch parts in 2012. Neither WEKO nor the European Commission said
when they expect to close their investigations.
-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47;
goran.mijuk@dowjones.com
(Alessandro Torello in Brussels contributed to this
article.)
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