A Swiss newspaper is reporting that Swatch Group subsidiary ETA will be banned from supplying its mechanical watch units in 2020. Swiss newspaper Grencher Tablatt is reporting that a decision will be handed down by Switzerland’s Competition Commission (Weka) this week, without yet identifying what triggered the potentially far-reaching decision.

It’s a potentially huge blow to Swatch Group and the watch industry as a whole, as Grencher Tablatt points out that ETA sold more than half a million mechanical movements this past year. ETA is a wholly-owned subsidiary of Swatch Group that produces movements for Swatch’s stable of in-house brands. Many other watch brands have also come to rely on ETA’s movements to power their watches.

The newspaper quoted Swatch Group boss Nick Hayek as extremely critical of the decision: "The competition commission does not have the task of organizing the market. But if ETA is not allowed to deliver, it does not lead to more, but to less competition."

Swatch Group and the Competition Commission have long been at odds: the two reached a deal at the end of 2013 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 2002 when Hayek announced that ETA would stop supplying ebauches (partial watch movements) outside the Swatch Group. 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.

Ever since, Swatch Group has balked at the Competition Commission forcing it to sell its ETA movements to companies that Swatch views as its competitors (Tudor, Breitling, and hundreds of other brands), even threatening “massive price hikes” in 2016. It was surely looking forward to 2020, when the 2013 mandate from the Competition Commission expired and it could operate freely in the market.

The Swiss newspaper goes on to mention that, in September 2018, the Competiton Commission commissioned a study to see if the market for movements had opened up as the 2013 deal had intended it to. While the newspaper stops short of explicitly saying so (at least, it did in the crude German-to-English translation I read), it seems to imply that the findings of this report are what lead to the ban.

This news comes at an interesting time. Brands across the industry had already been planning for a post-ETA world, but this is a striking and seemingly sudden turn of events. In fact, I already planned on writing an article about this topic after seeing Ming Watch’s post essentially blaming ETA for its inability to meet demand for its watches after its latest release sold out in minutes.

Stay tuned as we wait for an official ruling from Weka later this week.