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Swatch ticked off with Swiss anti-trust agency parts ban

By Silke Koltrowitz
FILE PHOTO: Watches are displayed in a window of a store of Swiss manufacturer Swatch in Zurich

By Silke Koltrowitz

ZURICH (Reuters) - Swatch will be blocked from selling some parts to watchmakers, ranging from Richemont's Cartier to Chopard and Breitling, from next year in an escalation of a row between the world's biggest watchmaker and Switzerland's competition regulator.

While anti-trust agency WEKO stopped short of an outright sales ban, it said on Thursday it had barred deliveries of so-called movements, the components which keep expensive mechanical timepieces ticking, to Swatch customers from January.

"Companies that thought they would get movements from Swatch Group next year now have to scramble to find replacements," Kepler Cheuvreux analyst Jon Cox said.

The anti-trust action could compound the problems facing Swiss watchmakers, with competition from smartwatches rising and demand in the key market of Hong Kong, slowing.

"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 told Reuters.

WEKO's ban is aimed at preventing Swatch from flooding the market with parts ahead of a final decision on the competitive landscape and Swatch's obligations in mid-2020.

The agency made an exception for small and mid-sized companies which are customers of ETA, which is one of the biggest suppliers of watch movements and owned by the group best known for its colourful plastic watches.

A Swatch spokesman said 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.

Shares in Swatch were down 1.8% by 1020 GMT.


TICKED OFF

Swatch gained its dominant position in movements when it was forged by the 1983 merger of the two main watchmakers to survive an influx of cheap battery-powered quartz watches from Asia.

A deal struck in 2013 at Swatch's request had it phase out movement deliveries by the end of 2019 and it would have been free to supply whomever it wanted from 2020.

But WEKO feared ETA could have tried to win back customers from alternative movement suppliers Sellita, Soprod, STP or Ronda, a document accompanying its decision showed.

Swatch viewed these concerns as unfounded, the document which was seen by Reuters, said.

Sellita did not respond to requests for comment and Richemont declined to comment.

Even if WEKO succeeds in breaking Swatch's dominant position in watch movements, the battle is likely to switch to Swatch's monopoly on "assortments", the centrepiece of each mechanical watch movement.

Swatch is obliged to deliver those to all its competitors, but the WEKO document states that Sellita complained in June that Swatch had not supplied it the desired assortments.


(Editing by John Miller, Michael Shields and Alexander Smith)