Swatch can reduce component supplies in 2012

A Swiss court has rejected the appeal of watchmakers seeking to put a stop to Swatch’s reduction of mechanical watch movements and movement parts slated to begin next year.

Federal Administrative Court spokeswoman Joanne Siegenthaler said on Monday that the nine companies that filed the appeal were informed on Dec. 15 that a panel of three judges denied their appeal. The court did not give the companies any information about why the appeal was denied.

The judgment will be published in it entirety in early 2012 and, after that, the companies will have a limited time to appeal the ruling to the Federal Supreme Court, she said.

Swatch Group declined to comment on the decision, which many in the industry fear will cause supply problems and drive up prices.

Watchmaker Frederique Constant, one of the nine companies involved in the appeal that has been very outspoken about the movements issue--an issue about which many of the industry’s largest companies have declined to speak publicly--supplied a statement indicating that the decision could spell the end for smaller, independent watchmakers.

“Certainly, a number of smaller manufacturers will be forced out of business,” company co-founder Peter Stas said.

He said Frederique Constant is fortunate in that it started developing in-house movement in 2001. Still, “despite this early start” the company said it needs another five years before it can produce the critical assortment, the watch oscillating system.

The company said it aims to have two suppliers for all its components but that won’t happen until 2015.

Post-ruling, Stas told Reuters that the company “will be under pressure from January because of the income cut as we will receive fewer components and, at the same time, will have to invest in our production.”

Miguel Gracia, president and CEO of movement manufacturer Sellita Watch Co. SA, who also has been outspoken on the Swatch issue, did not respond to request for comment on the ruling on Tuesday.

Though rumors have abounded for years that Swatch Group was looking to reduce its role as the watch industry’s movements supplier, the company made it official in June, when it said that it had asked the Swiss Competition Commission (Comco/Weko) to begin an investigation into allowing Swatch to reduce compulsory supplies of movements and movement components to third-party companies.

The commission, which still has yet to make a final decision on the future of watch supply from the Swatch Group, put interim rules into effect that allow Swatch Group to begin reducing supplies of mechanical ETA movements to 85 percent of 2010 levels and of Nivarox assortments to 95 percent in 2012.

The nine companies then appealed these interim measures to the Federal Administrative Court.

-National Jeweler