Potential Fall-Out From COMCO Investigation against ETA?
Depending on how closely you follow the luxury watch industry you may have read last week that the Swiss Competition Commission (COMCO) has initiated an investigation into ETA Manufacture Horlogere SA, owned by the Swatch Group. If you missed the Press Release you can read it here.
What’s The Story?
It’s pretty much common knowledge that a number of brands across the luxury watch industry utilize ETA movements in their timepieces. However, what is perhaps not so commonly known, and was briefly highlighted in the Swatch Group’s Press Release last week, is that as a result of the economic downturn, a number of clients have either cancelled or dramatically reduced their orders thus having a negative impact on ETA.
Arguably this is all part and parcel of doing business, however, the Swatch Group’s frustration stems from the fact that in 2004, ETA announced it would no longer provide raw movements to clients outside of the Swatch Group partly as a result of the above issues. The resulting outrage that ensued in response to this announcement eventually led the decision to being disputed in court. Consequently ETA agreed to continue supplying non-Swatch Group watch brands through until the end of 2010.
Understandably the company has been further frustrated now by the announcement of the investigation by COMCO. Especially as it builds on existing pressures from COMCO as a response to third party complaints, which if ETA had gotten their way back in 2004 would be irrelevant. In true Swiss style, however, they remain diplomatic noting that the timing of the investigation is “unfortunate” given everything else that has been going on as a result of the financial crisis.
The Likely Outcome?
This is not the first time that the COMCO has investigated a company of the Swatch Group and probably won’t be the last. This is an unfortunate consequence of being one of the bigger fish in the pond. However, the company is confident that the results of this investigation will again be positive for ETA (as they were in an investigation in 2003 that was resolved by an agreement between ETA and COMCO). As such it seems unlikely that we will see any major changes or dramatic findings coming out of this investigation, however, it remains nonetheless necessary.
The Final Word
If ETA are ever allowed to close their doors on the supply of raw movements to clients outside of the Swatch Group I would think that three things might logically happen. Firstly, a number of brands would join the already burgeoning Swatch Group stable, several would go bankrupt and finally and perhaps most importantly, a number of brands would be forced to rediscover the fine art of true watch-making, including developing and making their own in-house movements!
Now would that really be such a bad thing?
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You forget to mention the old rule of demand and supply. Companies will still demand movements even if ETA stop supplying. I guess new supplies will come from developing markets, such as China. The perceived quality of these movements are lower now, but with time and re-branding things could maybe change.