Swatch reaches agreement over watch movements

GRENCHEN - Swatch Group has reached an undisclosed agreement with Swiss competition officials over its planned reduction in the supply of watch movements to third parties, the company's chief lawyer said on Wednesday.

The world's largest watchmaker has said it no longer wants to be the industry's "supermarket" and wants to keep more parts for its own brands, which include Omega and Longines.

Swatch asked Swiss antitrust authority Weko to work out rules allowing it to cut and eventually stop deliveries to others without skewing the competitive landscape. Weko has allowed Swatch to reduce deliveries in 2012 and 2013 and is expected to announce before July how the company can entirely phase out deliveries.

"We have reached an agreement ... the next step is to take it to the entire Weko commission which we expect sometime towards the end of March," Swatch lawyer Hanspeter Rentsch said at a press conference, without giving details of the agreement.

Weko spokesman Patrik Ducrey confirmed an agreement had been reached, which is still subject to approval by the competition commission. Final approval is expected before the summer holidays, he said, which typically start in July.

The decision by Swatch to stop supplying others has left rival brands grappling with supply shortages and searching for alternative quality suppliers that they can buy, in order to preserve the coveted "Swiss Made" label.

Among the brands most affected are the ones owned by the world's biggest luxury group LVMH: Tag Heuer, Hublot and Zenith. LVMH only diversified into watches in 1999 so its production facilities are less developed than peers.

Richemont, the No.2 luxury group which owns some of the world's most prestigious high-end watch brands, and independent big names Rolex and Patek Philippe, have more parts facilities and have also strengthened them by taking over some suppliers. They nevertheless rely on Swatch for some parts.

Independent watchmaker Parmigiani, which is owned by the Sandoz family foundation, split off its production unit Vaucher in 2003 to allow it to also make movements for third parties while still supplying Parmigiani.

Handbag maker Hermes bought a 25 percent stake in Vaucher in 2006 for 25 million Swiss francs ($26.92 million) to secure movements for its watch unit.