[Update 12/19 to include facts from Weko’s official press release, which you can find here (German)]

First reported by major Swiss news outlets and now Reuters, the Swiss Competition Commission (Comco, also referred to by German acronym Weko) will ban Swatch Group’s sales of subsidiary ETA’s mechanical movements to most watchmakers in 2020 while Comco contemplates a final resolution to the long-running saga between the Swiss antitrust regulator and Swatch Group.

Comco’s ban makes an exception for small and mid-sized companies (defined as companies with less than 250 employees) which are customers of ETA. This addresses a core concern of the market that these small businesses would be largely shut out of sourcing mechanical movements if ETA were facing an outright sales ban. A total ban would have likely affected these companies most, as larger conglomerates like Richemont-owned Cartier and Chopard or Rolex-owned Tudor would have more immediate component alternatives. We’ve already seen this happen once, just last week with the release of Ming Watch’s 17.06 Slate. The watch sold out in minutes, prompting outrage form collectors who couldn’t get their hands on one. This then caused Ming to release a statement explaining the limited production of the watch, pointing especially to “supply constraints, particularly when it comes to ETA movements,” and 18-24 month supply chain lead times. Ming went on to explain its production numbers for this model were essential locked in mid-2018 due to limited access to ETA movements. For Ming, and many other young brands, this is the reality: with no manufacturing capabilities and limited capital, they’re reliant on third-party manufacturers to supply the key components of their products.

“Is there really going to be a shortage of watch movements? I’m not sure. There’s also a grey market and brands have built inventories,” Weko director Patrik Ducrey said to Reuters.

A Swatch spokesman said to Reuters that ETA sold most of its movements to big customers and it expected it would not be able to deliver any next year as a result of WEKO’s action.

According to Comco, the ban is based on the belief that if ETA were allowed to continue selling movements through 2020, it would have a continued negative impact on the movement manufacturing sector of the watch industry.

Just yesterday, Swatch Group released a statement threatening to pursue “damages” against Comco if a ban on ETA sales were put in place. That statement itself came after news began to leak that Comco was considering a ban on the sales of ETA movements in 2020.

As we’ve covered throughout the week on this developing story, this is just the latest turn in a dispute between Swatch Group and Comco that began in 2002, when Swatch Group announced that it wanted to stop selling movement components to competitors of its in-house brands like Tissot and Omega. Back then, Comco took the position of forcing the continued sale of such components, as there were no real alternatives on the market.

Ironically, this ban now reverses the position both parties took in 2002, with Swatch Group wanting to stay in the presumably profitable movement supply business and Comco worried Swatch Group’s continued domination of that sector is untenable for competition in the industry.

This year was set to mark the end of a deal reached between Swatch Group and Comco at the end of 2013 which called for the gradual reduction of the conglomerate’s supplying of ETA movements to third parties until the end of 2019. Under the deal, Swatch Group was allowed to reduce the level of movements it supplied to its third-party customers fractionally every year through 2019. It was the result of a long-standing investigation and bitter back-and-forth between Swatch Group and the Competition Commission, dating back all the way to that original 2002 dispute. The idea was that this deal worked for both the market and for Swatch Group: allowing Swatch Group to reduce supply to third parties would facilitate other market entrants (e.g. Sellita), with the commitment ending in 2019 giving Swatch Group and Hayek the carrot of flexibility to choose its customers in the future.

Meanwhile, Swatch Group is frustrated with not only the outcome of Comco’s most recent decision, but also the timing.



"Weko was asleep," said Hayek in an interview with Swiss newspaper AWP. Since mid-2018, Swatch has informed Weko no less than six times of the urgent timing. To announce a precautionary measure only twelve days before the end of the year is "absurd".

Swatch Group points out that because the lead time for movement orders is nine to twelve months, and because of the uncertainty, ETA did not take any orders in 2019.



Comco’s late decision also has the Swiss Watch Association (FH) worried. The industry trade association is concerned with the lack of “Swiss Made” movements on the market, expressing worry that there may not be enough Swiss mechanical movements to meet supply without ETA. As we’ve reported here, Swiss watch exports are up about two percent through 10 months of 2019, though unit sales are down more than 10 percent.

Swatch Group stock was down about 2% on the news.

Update: Comco released an official statement (which you can read in French, German, or Italian, and is thus roughly translated here), on December 19. Weko explained that in 2013, the regulation agreed to by Swatch Group was “based on emerging developments in the market and competitive conditions.” However, it went on to state:

WEKO reserves the right to make a new decision if the market conditions develop differently than expected. As there were indications for this, WEKO opened a so-called reconsideration procedure in November 2018. However, a decision before the end of 2019 is not possible. Therefore, WEKO will take precautionary measures up to the time of the decision, but at the latest until December 31, 2020. The ETA's obligations resulting from the [mutual agreement between WEKO and Swatch] remain formal; the deliveries are temporarily suspended for factual reasons. This ensures that the outcome of the reconsideration process remains open. The decision is expected in summer 2020.

So, it’s official: Swatch Group is temporarily suspended from selling ETA movements to third parties in 2020 for unspecified “factual reasons”, with a final decision on this ongoing matter expected by summer 2020.