By Silke Koltrowitz
ZURICH (Reuters) – Swatch Group <UHR.S> will be free to supply mechanical watch movements wherever it wants, but won’t be allowed to abuse its dominant market position by undercutting rivals’ prices, Swiss competition watchdog WEKO said on Wednesday.
The decision resolves a year-long tussle between the world’s biggest watchmaker and its main competitor in mechanical watch movements, Sellita.
Alternative suppliers for mechanical watch movements – the tiny mechanisms that make timepieces tick without a battery – had emerged since 2013, WEKO said in a statement, but Swatch Group’s movement unit ETA was dominant because of its production capacity.
Swatch Group said it had taken note of the decision.
Sellita head Miguel Garcia said it was important that ETA was still seen as dominating the market as that meant it had to abide by competition laws.
Shares in Swatch Group rose 6.5% by 1500 GMT, outperforming the broader sector <.SXQP>.
Under a deal struck in 2013, Swatch Group slowly phased out movement deliveries and would have been free to supply anyone it wanted from 2020, but WEKO was unable to finish its complex investigation in time. In December, it effectively barred ETA from delivering movements this year.
Asked about concerns Swatch Group might use its freedom to flood the market with movements and hurt competition – especially after the COVID crisis led to overcapacity – WEKO said the industry had years to prepare for this and Swatch would not be allowed to abuse its position.
Swatch Group will still have to supply the central components of each mechanical watch movement, known as assortments, to the entire industry due to its monopoly position.
Following complaints, WEKO said it could decide to start a new enquiry on assortments.
Kepler Cheuvreux analyst Jon Cox said the market liberalisation would allow Swatch Group to improve capacity utilisation and profitability by selling movements to third parties or using them for its own brands depending on demand.
Swatch Group on Tuesday posted a 46% decline in sales and its first ever net loss for the first half of 2020.
(Reporting by Silke Koltrowitz; Editing by Michael Shields, Louise Heavens and Barbara Lewis)