The Australian Competition and Consumer Commission (ACCC) could have more than a passing interest in the upcoming legal proceedings involving Swatch Australia and its former general manager, Mark Watson.
Watson has accused his old company of price fixing, and is suing in the County Court for loss and damages after he was forced to leave Swatch’s head office in Glen Iris last November.
He claims he was dismissed because he refused to enforce Swatch’s preferred retail price on retail stockists, which would prevent them from offering discounts on Swatch products to consumers. In doing so, he would have been breaking the law.
Whilst the official comment from ACCC spokesperson, Lin Enright was, “The ACCC has a policy that it neither confirms, nor denies, the existence of any investigations, so I cannot offer you any comment (on the Swatch matter)”, it is believed that ACCC staff have interviewed at least one party.
Jeweller has obtained official courts records from both sides and the allegations of price fixing by Swatch are explicitly detailed.
The hearing, which was scheduled to begin on 23 November, was adjourned until 1 February next year to allow further evidence to be gathered.
In the Second Further Amended Statement of Claim, Watson alleged that retailers who advertised Swatch watches at lower than the recommended retail price and lower than what Swatch Australia’s own retail stores were selling them for, were told they would no longer be supplied.
Watson’s Statement of Claim alleged that various Swatch overseas executives, including Kevin Rollenhagen, member of Swatch's Extended Management Board, Yann Gamard, member of Board of Directors and the international Brand Managers, complained to him about discounting in Australia.
Specifically, the Claim states that at various times between 2005 and June 2008, Gamard directed and/or required Watson to make it known to all Swatch retailers that Swatch would not supply those retailers unless the retailers agreed not to sell the watches below the retail price for those watches; and/or the store price for those watches.
If such activity did occur it would be in breach of the Trade Practices Act which aims to prevent such policies because "fixing, controlling or maintaining" prices constitutes a "substantial lessening of competition".
Watson said there was evidence to show that retailers were withheld supply as a result of not adhering to Swatch’s pricing.
In Court documents Watson also says, “In one such meeting on or about 19 January 2006, Mr Gamard stated the Plaintiff (Watson) had to use whatever means possible to stop the retailers discounting the Defendant’s (Swatch’s) brands, that Head Office considered Australia to be a discount market and that it was the Plaintiff’s (Watson’s) responsibility to put an end to discounting by retailers, and to “close them down” (ie: close their accounts) if necessary.
“Mr Gamard also said in response to concerns expressed by the Plaintiff (Watson) about the lawfulness of such practices, … that ‘the law in Australia is stupid’.”
The price fixing allegations are extremely detailed throughout the 24-page Statement of Claim, but Rollenhagen previously commented, "Mark has made (Swatch Group’s alleged price-fixing policy) an issue in the court case but as this was not the reason he was terminated, I think this is what will become apparent when we’re on trial before the judge."
Regardless of the outcome of the case, there can be no doubt that the ACCC will be most interested in the allegations of Swatch’s price fixing. Indeed, according to Court documents, the price fixing took place at the highest levels at Swatch.
“On 13 and 14 June 2007, Mr Stephen Urquhart (President of Omega) and Mr Nicholas Hayek (Chief Executive Officer of Swatch Group Limited) directed and/or required the Plaintiff (Watson) to withhold the supply of Omega watches to Hour Glass, a retailer of those watches,” Watson’s Claim alleges.
It added the following particulars: “During the day on 13 June 2007, which was the opening (held in Martin Place) of the Castlereagh Street, Sydney Omega Store, when in response to a comment from a customer that he had just been offered a 25% discount on the Omega store price of a watch at Hour Glass, located around the corner (on King Street), Mr Urquhart told the Plaintiff to “close them [Hour Glass]” (ie: close their account). On 14 June 2007, Mr Urquhart told the Plaintiff that he had since spoken to Mr Hayek about Hour Glass and that he (Wastson) should “close the account”.”
Watson further alleged, “In one case, Mr Rollenhagen directed the Plaintiff (Watson) to reduce the margin for Omega watches for Omega retailers in Australia from 42% to 30% across the board (ie: increase the wholesale price of the Omega watches so that the difference between the wholesale price and the retail price was 30% (instead of 42%).”
Swatch’s Further Amended Defence – filed by Solicitors Baker & McKenzie on November 12 – denied all allegations. Watson was, “Terminated for reasons to do with his performance of the management of the company. There were no other reasons," Rollenhagen said.
Swatch’s various brands, including Omega, Breguet, Tiffany & Co, Longines, Rado and Tissot were sold to many retailers including, Myer, David Jones, Zamel’s, Watches of Switzerland, Angus and Coote, Saleras, JR Duty Free, Monards, Thomas Jewellers, Hoskings, CPK Duty Free, Hour Glass, Hardy Brothers, Wallace Bishop, Gregory Brothers, Anton Jewellery, Shums and Nuance.
It is also alleged by Watson that at various times between 2005 and June 2008, there were attempts to induce, or attempt to induce, various retailers not to sell the watches below the retail price for those watches; and/or the (Swatch) store price for those watches.
“The inducements or attempted inducements included threatening to withhold or restrict/limit the supply of watches to those retailers, or actually withholding or restricting/limiting the supply of watches to those retailers. They also included increasing or attempting to increase the wholesale price of the watches to reduce the margins of the retailers, so that they would be induced to charge at least the retail price for the watches,” Watson’s claim stated.
Watson told Jeweller, "We would have a bad month in the boutique, and the store manager would be asked by Omega why this was. The store manager would say, ‘The surrounding retailers are discounting and we’re not allowed to match that’. I was subsequently told to stop the retailers from discounting because the boutique wasn’t selling anything."
The Trade Practices Act does not allow resale price maintenance unless there is a benefit to the public: “A supplier must not directly or indirectly fix a price below which resellers may not sell or advertise their products or services, for example, by threatening to cut off supplies or actually cutting them off,” it stated.
More reading
Ex-boss accuses Swatch of price-fixing - 1 December 2009
ACCC interviews former Swatch boss - 18 January 2010
More "drama" with Swatch case - 18 January 2010
Swatch in trouble - 27 April 2010
ACCC interviews Swatch retailers - 22 June 2010
Swatch court case kicks off - 20 July 2010
Swatch wins court battle with ex-manager - 31 August 2010