European Commission investigates luxury watch repairers following General Court ruling

On 5 August 2011 the European Commission opened formal proceedings to investigate an alleged refusal by several luxury watch manufacturers to supply spare parts to independent repairers. Such refusal may be in breach of Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”), which covers restrictive agreements and abuse of a dominant market position, respectively.

The opening of proceedings follows a General Court judgment, which annulled the Commission’s 2008 decision to reject a complaint lodged by the European Confederation of Watch & Clock Repairers’ Associations (“CEAHR”).  In 2004, the CEAHR lodged a complaint against several luxury watch manufacturers, alleging the existence of an agreement or a concerted practice between those manufacturers and the abuse of a dominant position that resulted from their refusal to continue to supply spare parts to repairers that did not belong to their selective systems for repair and maintenance. Previously, luxury watches had traditionally been repaired by independent multi-brand repairers.  CEAHR contended that since there were no alternative sources for most of these spare parts, such practice threatened to drive independent repairers out of business.

On 10 July 2008 the Commission rejected the complaint for lack of community interest based on four main considerations, including: (1) the market or market segment affected by the complaint was of limited size and economic importance, (2) the information available did not give the Commission reason to conclude that an anti-competitive agreement or concerted practice existed, (3) the absence of a dominant market position since repair and maintenance did not appear to constitute separate after-markets that were distinct from the primary market for luxury watches; and (4) the allocation of further resources to investigate the complaint would have been disproportionate as national competition authorities and courts, having jurisdiction to apply EU competition rules, appeared to be well placed to deal with such alleged infringements.

The General Court annulled the Commission’s decision to reject CEAHR’s complaint, because the lack of Community interest to pursue the investigation was not sufficiently motivated and/or contradictory. Accordingly, the Commission will now further investigate the allegations in conformance with the General Court ruling. [Gabriele Accardo]