October 25, 2013 / 7:11 AM / 6 years ago

UPDATE 1-Swatch gets go-ahead to cut supplies to rivals

(Adds quotes, details and background)

ZURICH, Oct 25 (Reuters) - Swatch, the world’s biggest watchmaker, has been given the go-ahead gradually to reduce component deliveries to rivals in a move which could cause supply shortages for some players in the industry.

The deal between Swiss competition authority Weko and Swatch, which has a quasi-monopoly on movements — the internal mechanism of a watch — and components, was expected.

Under the agreement, Swatch will cut 2014/15 deliveries of mechanical movements produced by its ETA unit to rival watchmakers to 75 percent of the average quantities delivered in 2009-2011, Weko said in a statement.

Swatch can then gradually cut them further, delivering 65 percent of sales volume in 2016/17 and 55 percent in 2018/2019.

The accord includes a clause to cushion the blow to small and mid-sized businesses in cases of severe hardship, Weko said.

It reiterated that it was too soon to phase out deliveries of the important regulating parts that make a watch tick, so-called “assortiments”, made by Swatch’s Nivarox unit, given the few sourcing alternatives for these parts.

This is likely to offer some reassurance to rivals like Richemont and LVMH, as well as smaller watchmakers which have been struggling to find alternative suppliers for the assortiments.

Weko had initially blocked Swatch plans to cut third-party deliveries in July, but said it was not against a reduction in delivery in principle.

Swatch had asked Weko in 2011 to start an investigation into how it could phase out deliveries, forcing rivals to build their own production capacities and causing a wave of acquisitions of suppliers. (Reporting by Alice Baghdjian; Editing by David Cowell)

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