The Swiss watch cartel and statute

After the crisis of the early 1920s, and as other countries raised duties on finished watches, foreign buyers imported Swiss movements in loose parts and assembled them abroad. This chablonnage, which the Federal Council defined as the export of ébauches and movement parts, fed foreign makers and pushed prices down.^1, 3, 5

The makers organised by level of production: the watch manufacturers in the FH in 1924, the ébauche makers in Ebauches SA in 1926, and the parts makers in the UBAH in 1927.^1, 6

On 1 December 1928 the three bodies signed conventions to hold minimum prices and stop the export of ébauches and loose movements. The FH says parts could still go to France, Germany, Poland and Japan.^1, 6

Ébauche makers outside the conventions kept exporting. In 1931 the industry formed ASUAG to buy control of the makers of ébauches, balances, hairsprings and escapement parts; under a federal decree of 26 September 1931 the Confederation took 6 million francs of its capital, named five of thirty directors and lent 7.5 million francs free of interest.^1, 7

Because ASUAG alone could not stop the outsiders, a Federal Council decree of 12 March 1934 made permits necessary to export chablons, ébauches and parts, and to open, enlarge or transform any watch firm.^1, 3, 6

A decree of 13 March 1936 let the economics department make the industry’s minimum prices binding on every watch firm and required permits to export watches and movements. On 1 April 1936 the private agreements were merged into one “Convention collective de l’industrie horlogère”.^1, 3

The measures were gathered in a decree of 29 December 1937 and renewed through the Second World War, the last time for three years on 23 December 1948; they rested on the emergency powers for economic defence of 1933. With exports and prices now controlled by law, ASUAG was able to buy the last independent makers of ébauches and regulating parts in the winter of 1940–41, the Confederation paying 900,000 of the 3.3 million francs.¹

The collective convention rested on what the Federal Council called syndical reciprocity: FH members bought their ébauches and parts from Ebauches SA and UBAH members, who sold to them alone; FH members made no ébauches for sale and Ebauches SA made no watches. The cheaper Roskopf, or pin-lever, watch stayed outside the convention.¹

The new economic articles of the constitution required a federal decree open to referendum. The decree of 22 June 1951, the “statut légal de l’horlogerie”, kept export and manufacturing permits from 1952 but gave up price-fixing by the state.^1, 3

Every new watch firm needed a permit. Boillat and Garufo write that the consultative commission that advised on permits from 1946 was most restrictive on new firms, to limit competition, and on changes of branch, to keep the industry divided into specialised firms.⁸

In 1960 the Federal Council wrote that the cartel and the federal measures had helped the industry out of the crisis of the 1930s but were not the main cause of its postwar growth, and that the rules still bore the mark of the crisis years and held back competition and initiative.¹

The controls reached machines. Donzé writes that the cartel had controlled the export of watchmaking machines since 1934 and that its agency Machor refused machines ordered by Hattori and Citizen in the early 1950s, keeping the ban until 1965; the Japan Clock & Watch Association says Japan replaced its worn machinery around 1950 with precise machines from Switzerland. The dispute is set out under Japan builds a watch industry.^9, 10

The Federal Council chose to open up even the ébauche and regulating-parts trades, against the FH’s wish to keep manufacturing permits there; it called the privileged position of ASUAG the central question of the reform.¹

The revised statute of 23 June 1961 was approved by 66.7 per cent of voters on 3 December 1961. From 1 January 1962 it set a technical control of exported watches by sampling, let the Federal Council require export permits for movements, ébauches, parts, tools, plans and watch machines, and kept manufacturing permits until 31 December 1965.^2, 3, 11

The 1961 statute ran until 31 December 1971, apart from its transitional articles. The FH says the regime was abandoned completely in the early 1970s, and the Historical Dictionary of Switzerland says the technical control became a quality control under the “Swiss made” rules from 1972.^2, 3, 6

On 23 December 1971 the Federal Council issued the ordinance on the use of the name “Swiss” for watches, in force from 1 January 1972. It defined a Swiss movement by where it was assembled and inspected and by the Swiss share, at least half, of the value of its parts; the rule that a Swiss watch must also be cased in Switzerland was added in 1992. Its later history is told under Origin labels.^12, 13

Trade policy took over from the permits. A supplementary watch agreement with the European Economic Community, signed on 20 July 1972 and in force from 1 January 1973, cites the 1971 ordinance, lets ébauches made in the Community count toward the Swiss share under certification, and records the end of the rationalisation premiums paid by Ebauches SA and ASUAG.¹⁴

The Historical Dictionary of Switzerland says ASUAG moved into finished watches as the rules loosened, buying Rado (1968), Mido (1971), Certina (1972) and Longines (1972), and that the cartel had neglected electronic watches. The statute expired as the quartz crisis began; that story continues in Crisis, consolidation and the groups.^15, 16