graman 2 Posted July 21, 2010 From the Melbourne Age July20, 2010 THE Swatch Group - the world's biggest watch company - has been accused in a Melbourne court of pressuring its former Australian general manager to engage in price-fixing. The County Court yesterday heard that senior representatives of the Swiss-based company used subtle, direct, oral and written requests to undertake the activity, which is illegal in Australia. It was alleged that the company ''hates'' discounting and had established a four-stage regime to pressure its Australian retailers. Advertisement: Story continues below Swatch's former managing director, Keith Watson, of Canterbury, has sued it for damages based on claims of breach of contract, failing to pay for notice and bonuses and the distress caused from the directions. Michael McDonald, SC, for Swatch, told the court that Mr Watson's claim against Swatch of misleading conduct under the Trade Practices Act was ''seriously flawed''. He also said that in 2003, the year he joined Swatch, Mr Watson had sought a payout from Louis Vuitton in the US for alleged misleading and deceptive conduct. And Mr McDonald submitted Swatch had lawfully terminated Mr Watson's contract. In his opening yesterday to the civil trial, Stuart Wood, for Mr Watson, told Judge Maree Kennedy that his client worked for Swatch for more than five years and had performed well. Mr Wood said that from when he started until his termination Mr Watson was ''requested by various representatives of the company to engage in price-fixing''. Mr Watson was told by a range of company representatives, who allegedly included Raynald Aeschlimanin, Claude Jannin and Chris Leiggenner, that there was too much discounting in the Australian market and that Swatch ''hates'' it, he said. Mr Wood claimed that at a brand managers' meeting in Switzerland in 2004, Omega brand manager Kevin Rollenhagen and others were told to ''starve retailers of margins to prevent discounting''. It was alleged Mr Rollenhagen explained how retailers in Hong Kong were pressured in a ''staged process'' that began with a warning, were then threatened with a margin cut followed by a threat to close the account before that was done. Mr Wood said in 2005 and 2006, the complaints to Mr Watson became ''very direct'', including once when his superior, Yann Gamard, smashed his fist on a table and yelled: ''The law in Australia is stupid. It's your responsibility to fix it.'' It was alleged there was a ''constant battle'' between Mr Gamard and Mr Watson about his refusal to stop discounting. Mr Wood said Mr Gamard's replacement tried to direct Mr Watson to have him ''squeeze the margins offered to retailers for the purpose of maintaining the price''. The case continues. Share this post Link to post Share on other sites
graman 2 Posted July 21, 2010 From Jeweller Magazine It now appears that Swatch is in trouble with the ACCC after the watchdog launched an investigation into price-fixing allegations. While the Australian Competition and Consumer Commission (ACCC) will not confirm that it has begun an investigation into allegations that Swatch Group Australia has been involved in price fixing, Jeweller has become aware of an internal staff meeting at Swatch’s Australian head office. Sources close to the group say that Swatch Australia managing director Megan Parker met with senior staff on Monday April 12 to inform them that the ACCC had formally contacted the company. A spokesperson for the ACCC, Ms Lin Enright, said the ACCC has a policy of neither confirming nor denying when an investigation is underway. “No announcements are made until the institution of a case, or if there’s a result such as an administrative settlement or Court imposed settlement,†Enright said. However, a former Swatch employee has confirmed that they have been contacted by the ACCC to provide a statement, and at least one major retailer had heard from within Swatch that the ACCC had been in contact with the group in Melbourne. Jeweller has been in contact with a number of Swatch former employees and one has made similar allegations to those first heard from Mark Watson, the former general manager of Swatch Australia, who accused his old company of price fixing in 2009. Watson, who was forced to leave Swatch’s head office in Glen Iris last November, said he was dismissed because he refused to enforce Swatch’s preferred retail price on retail stockists, preventing them from offering discounts on Swatch products to consumers. In doing so, he would have been breaking the law. Watson is now suing the Swatch Group for loss and damages and his Statement of Claim in the County Court alleges that price fixing was done to maintain Swatch’s image of exclusivity across its premium brands including Omega, Breguet, Tiffany & Co, Longines, Rado and Tissot. The emergence of claims from another former Swatch employee has thrown light back onto the Swatch Group. “Switzerland were very much against discounting of the product and were very vocal about us stopping it (the discounting),†the former employee said on conditions of anonymity. In claims that could only be described as explosive, and seem to confirm many of Watson’s assertions in his Statement of Claim, the former employee added, “They were so vocal that, at times, they wanted photographs of (retailers) discount signage, and when staff from Switzerland came to Australia, we got the retailers to take all the signage down and price stickers off the watches.†According to the former employee, when Swiss managers visited Australia, local sales staff were required to call-on retailers and remove any discount price stickers from watches because the Swiss continually asked for photographs of discounting and anything else that was supplied. “Those photographs were held at the Swiss head office and we would receive emails with directions about what to do. â€At the end of the day, we were basically instructed to manipulate the system in order to be able to get rid of the retailers who were discounting and compromising the prestige of the brand,†the former employee continued. The former employee explained to Jeweller that manipulating the system meant decreasing retailer margins, restricting supply of new models, not delivering and making it very difficult on trading terms. In complete contrast to these allegations, another former staff member said no price fixing took place at the time they were employed at Swatch: “There was absolutely no price fixing whatsoever or anything that even smelled of it.†The former Swatch employee was adamant that price fixing was not even discussed and did not exist, adding, “The ACCC can talk to me if they like. When I was there (at Swatch) we concentrated on opening accounts, not closing them.†The allegations of price fixing by the leading Swiss watch brand first came to attention when Watson issued legal proceedings for wrongful dismissal and his Statement of Claim alleged that various Swatch overseas executives complained to him about discounting in Australia. Specifically, the claim states that these same executives directed and/or required Watson to make it known to all Swatch retailers at various times between 2005 and June 2008 that Swatch would not supply retailers unless they agreed not to sell watches below their recommended retail prices and/or the Swatch store prices. Kevin Rollenhagen, a member of Swatch’s Hong-Kong-based Extended Management Board, terminated Watson and denied the company broke the law: “Swatch Group did not involve itself in any violations of the Trade Practices Act,†he told Jeweller last December. “I wouldn’t say I’m worried (about the trial) because the reason Mark was terminated was clearly spelt-out in the termination letter to him. He was terminated for reasons to do with his performance of the management of the company. There were no other reasons.†Rollenhagen said this would become evident during the hearing: “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 will become apparent when we’re on trial before the judge.†The Trade Practices Act (TPA) 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,†an ACCC document states. Such activity would be in breach of the TPA, which aims to prevent businesses “fixing, controlling or maintaining†prices, because it constitutes a “substantial lessening of competitionâ€. Although the two former Swatch employees paint very different pictures of the company’s activities, a major aspect of the investigation will be the periods each former staff member was employed at Swatch. Of additional interest will be whether the staff worked in different areas or on different brands that may have had alternative instructions from the Swiss head office. While any investigation by the ACCC is a separate matter to Watson’s case in the Victorian County Court – which is scheduled to begin 19 July – Watson has previously confirmed a lengthy and detailed interview with the ACCC took place. “I am not sure what will happen from here (with the ACCC) but they have taken an active interest in the matter,†Watson said at the time. He was not available for comment on this story. Jeweller contacted Rollenhagen via email to ask if Swatch Group is still rigorously defending the action by Watson. He was also asked to comment on the rumours that some current senior Swatch staff in Australia were concerned about their own legal representation should the ACCC interview them, given that employees can be held personally liable for breaches of the TPA. When contacted, Swatch Australia managing director Megan Parker refused to answer any questions on the matter and, at the time of publication, Rollenhagen had not replied to the email. Share this post Link to post Share on other sites
graman 2 Posted July 21, 2010 ACCC watches Swatch court case A court case involving watchmaker, Swatch, could have explosive ramifications on the jewellery industry. Now adjourned until next year, the ACCC could also investigate allegations of price fixing. 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)â€, 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. Mark Watson, former general manager, Swatch Australia 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 accountâ€.†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. Share this post Link to post Share on other sites
AustinTech 0 Posted July 21, 2010 WHat company likes discounting? What's wrong with pressuring retailers to NOT discount? I don't consider that price-fixing at all. Share this post Link to post Share on other sites
graman 2 Posted July 21, 2010 I suppose... If you have no margin, you have no profit If you have no margin, you won't discount in order to move your stock. If you can't sell, particularly in a depressed market, then you end up with dead stock that won't move, especially when the new lines come out. Enter ebay and the grey market..... Also I think, it keeps reinforcing Omega's new drive for exclusivity..... Share this post Link to post Share on other sites
AustinTech 0 Posted July 21, 2010 I think Omega is going to alienate many of their fans if they try to raise prices to the level of Rolex. I know I won't be able to afford them at that price level. Share this post Link to post Share on other sites
graman 2 Posted July 21, 2010 They've already done it here....prices are huge, and spares are ridiculous. Spares up something like 400% Share this post Link to post Share on other sites
trailboss99 996 Posted July 21, 2010 Nothing surprising there, Swatch are a bunch of pricks when it comes to this sort of thing. It's price fixing here if the retailer is pressured into not doing it AT. We have very strong consumer protection laws in OZ. Watches are already very expensive here, 35% + above US retail after correction for exchange rates. Col. Share this post Link to post Share on other sites
KBH 7 Posted July 21, 2010 WHat company likes discounting? What's wrong with pressuring retailers to NOT discount? I don't consider that price-fixing at all. It's called free market economics and besides, it's obviously illegal in Australia. What would you consider "price fixing"? Economics 101, the supply and demand curve: The lower the price, the more you sell. Lots of companies love discounting. Share this post Link to post Share on other sites
AustinTech 0 Posted July 21, 2010 WHat company likes discounting? What's wrong with pressuring retailers to NOT discount? I don't consider that price-fixing at all. It's called free market economics and besides, it's obviously illegal in Australia. What would you consider "price fixing"? Economics 101, the supply and demand curve: The lower the price, the more you sell. Lots of companies love discounting. In a "free market" the seller has the right to name his price, and stick to it. If it doesn't sell, then it doesn't sell. I realize Swatch isn't the "seller" but they have a contractual agreement with the AD's that basically make the AD's a sales agent of Swatch and subject to Swatch's pricing whims. No companies love discounting. They discount out of necessity, yes, to increase sales. But they'd all love to move the inventory at the asking price, they just can't. Swatch is different. They (say they) value exclusivity over sales volume. They are taking a long term look at their business instead of just trying to meet quarterly sales targets. Rolex does the same. I consider price fixing a situation where the public has no other options (monopoly) but to pay what the company is charging, or go without that product or service. Like a power company raising rates for no reason. It can also happen with two or more companies colluding and setting prices high just because they can. That's happened in the airline industry with certain flight routes. Share this post Link to post Share on other sites
KBH 7 Posted July 21, 2010 One main flaw in your thinking AT. Swatch group isn't discounting. And "they are moving inventory at the asking price". Price fixing is controlling the inventory after it leaves your hands. Have you ever been in retail management? Manufacturers fall all over each other with co-op advertising, rebates, and volume pricing to get the retail side to put their items on sale. Share this post Link to post Share on other sites
