This weekend, a few significant Swiss distributions reported that COMCO (the Swiss Competition Commission) was going to declare that ETA, one of the significant Swiss makers of watch types, ébauches and parts, would be compelled to stop deliveries of developments to outsider producers and watch marks starting at 2020. The Swatch Group responded strongly to this choice in the current assertion . Today, December nineteenth, 2019 COMCO finally communicates a choice – which isn’t final yet just a 1-year agreement: ETA’s obligation to convey is maintained in 2020… This is another progression in the ETA versus COMCO saga that began more than 15 years ago. The following scene is normal in summer 2020
A 15-year Saga
The long-lasting COMCO/Swatch Group case began in the mid 2000s. At that point, not very many watch brands and companies were manufacturing what we currently call “in-house” developments. Swatch Group with its development producer ETA – yet in addition Frédéric Piguet, Nouvelle Lemania and Nivarox, a company manufacturing regulating organs for mechanical developments – had a dominant position creating a huge competitive advantage within the Swiss watch industry. ETA had, back in the days, an expected 75% piece of the pie regarding development manufacturing.
As the Swiss watch industry was flying high, ensuring a consistent inventory was vital. In 2002, Nicolas G. Hayek declared that ETA would stop delivering ébauches (development spaces) starting at 2006. Following an investigation by COMCO, Swatch Group had to continue deliveries of developments until the finish of 2010.
All this drove numerous competitors to accelerate their vertical integration. In any case, when in 2009, Nicolas G. Hayek repeated, warning the competition that he needed Swatch Group to stop supplying ébauches (the unassembled base development and its parts) and to lessen deliveries of developments. Swatch Group would, in this manner, center around its own brands, to the impediment of competitors. In 2011, the watchmaking force to be reckoned with was by and by investigated by COMCO. A settlement was signed in 2013, creating a stock obligation towards outsider customers with a bit by bit decrease until the finish of 2019.
In 2016, Swatch Group requested to enhance the agreement. The stockpile amount agreed upon hosted not been bought by third-get-together customers however ETA was obliged to maintain a creation limit of around 1.5 million developments. Along these lines, Swatch Group mentioned from COMCO that ETA ought to be permitted to offer and offer the non-bought amounts to the entirety of its outsider customers – which was rejected.
A long-anticipated choice, however not a final one
As we were approaching the finish of this settlement, the industry was eager to hear what might be COMCO’s position on this ETA case. The early agreement was that Swatch Group would now be allowed to convey customers at its own tact. All things considered, this end of the week (December 2019), gossipy tidbits were giving another situation, with COMCO going to declare that ETA would be compelled to stop deliveries to outer clients.
Today COMCO has authoritatively communicated its choice, which isn’t a final advance in the saga, yet just a 1-year prolongation. Indeed, the agreement that obliges ETA to convey developments and parts to outsiders is stretched out for an extra year, until December 31st, 2020. COMCO, in any case, expresses that it will continue investigations and that a final choice will be made in summer 2020.
THE CONSEQUENCES OF STOPPING ETA deliveries
Stopping deliveries will have a significant effect on the Swiss watch industry. To begin with, on Swatch Group. From one perspective, driving ETA out of the market will profit the Swatch Group’s brands with improved assistance and deliveries. Then again, this will inevitably affect the responsibility at ETA’s creation offices, just as deals of the company (regardless of whether the effect of the Swatch Group turnover will be marginal). No compelling reason to say that ETA is a big manager in the industry.
Secondly, for brands encasing ETA developments, this will make supply challenges. The Swatch Group’s position is clearly not as dominant as it used to be in the 2000s, yet it is as yet significant. We’ve as of late seen enormous industrial investments and a larger number of watch makers are presently producing their own developments internally. In any case, ETA has produced an expected 500,000 developments in 2019 for outsider brands. Also, not very many companies can create developments at a similar value/quality proportion as ETA – the company’s developments (2824, 2892, Unitas and 7750 mainly) are presently amortized and delivered in such large amounts that ETA can convey great quality at competitive prices.
Regarding different choices, Sellita is the main option in this segment. The company makes clones of ETA developments (SW200, SW300 and SW500, individually clones of the 2824, 2892 and 7750), known for their high quality and dependability. With an expected creation of 1 million developments each year, Sellita will most likely not be in a situation to retain the amounts not conveyed by ETA in the present moment – even with the augmentation of its creation site in La Chaux-de-Fonds.
Other players don’t appear to offer better possibilities, regardless of whether we have seen increasingly more STP developments of late (Swiss Technology Production, a development producer constrained by the Fossil Group). There’s additionally Soprod, likewise producing ETA clones, however on a more limited size. This leaves space for Seiko, Citizen (Miyota) and other Asian makers, despite the fact that Swiss Made remains a strong argument for extravagance watch brands. Also, this makes Sellita a considerably more dominant player and a much really interesting target for obtaining by larger groups – given that Miguel Garcia would be prepared to sell his business.
What to make of all this…
Even though the effect of this choice on the solidified records of the Swatch Group will be minimal (not on ETA, though), cutting deliveries implies a ton for the whole industry. ETA doesn’t have a dominant position any longer and competitors (even large ones, for the situation of Sellita) exist available, which settles on the choice surprising.
This leaves us with an inquiry: to whom does the COMCO choice advantage? Stay tuned for the following scene of this 15-year-long saga…