By John Revill
ZURICH--Swatch Group AG (UHR.VX), the world's biggest
watchmaker, has reached a draft agreement with the Swiss
competition authorities which could allow it to dramatically reduce
the amount of components it supplies to other Swiss
watchmakers.
The company, which owns brands such as Omega, Breguet and
Tissot, could be allowed to reduce the supply of parts by up to 70%
by 2018, newspaper NZZ Am Sonntag reports.
The move could mean a new round of consolidation in Swiss watch
making and the end of several independent watchmakers who cannot
afford to undertake their own production or cannot find other
sources of supply.
Because Swatch has a dominant market position, supplying up to
80% of the Swiss watch industry's movements, 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 Swiss 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.
Among the customers for Swatch's components are Swiss-based
luxury group Compagnie Financiere Richemont SA (CFR.VX) and LVMH
Moet Hennessey Louis Vuitton (MC.FR), as well as smaller,
independent watchmakers.
Under provisional steps already agreed, Swatch has already been
allowed to reduce the supply of up to 85% of watch movements and
95% of other components at their 2010 levels in 2013 as well as
2012.
But under the draft agreement with the Swiss competition
commission, Swatch will be allowed to reduce the level of movements
to 70% of their 2010 levels by 2014-15; 50% by 2016-17 and 30% in
2018-19.
The levels of other components Swatch must supply will be
gradually reduced to 30% of 2010 levels by 2023.
Other watchmakers have voiced alarm by the move, which they say
will not give them time to find other supplies.
One told the newspaper that their costs could double if they had
to go to other suppliers.
"We have now asked for comments from other watchmakers who have
until the end of August to make their views known," Patrik Ducrey,
vice director of the Swiss competition commission told Dow Jones
Newswires on Sunday.
Several comments had already been received, although he declined
to reveal what the watchmakers said.
This could lead to another round of negotiations, with Swatch
Group, he added, with a final outcome expected by the end of the
year.
A spokeswoman for Swatch was not immediately available for
comment.
-Write to John Revill at john.revill@dowjones.com