Swatch Ends Tiffany Watch Deal, Sides Seeking Legal Action

(IDEX Online News) – Swatch Group is terminating its cooperation contracts with Tiffany & Co, stating that the step “became necessary following Tiffany & Co’s systematic efforts to block and delay development of the business.” Tiffany responded that Swatch is unwilling to honor the terms of their agreement.

In December 2007, the two companies signed a 20-year agreement to develop, produce and distribute worldwide Tiffany & Co. brand watches.

According to the agreement, Swatch was to form a new, wholly owned company - Tiffany Watch Co. Ltd. - and Tiffany will have one out of five seats on the board of directors, and seats on both the product design and marketing committees.

The Tiffany & Co watches will be distributed through the Swatch distribution network, Swatch retail facilities and third party distributors as well as through Tiffany stores.

In addition, Swatch affiliates will have the right to establish and operate Tiffany & Co. watch stores in certain markets outside the U.S. The watch stores may also offer a targeted selection of Tiffany & Co. jewelry.

On Monday, Swatch announced the termination of the agreement, stating that it press claims for damages against Tiffany & Co. in compensation for the loss of planned long-term future business.

Tiffany responded, saying it has become increasingly clear that Swatch is unwilling to honor the terms of our agreement, make the necessary commitments and work cooperatively to develop the business for Tiffany & Co. watches in the luxury space.

“Despite assurances to contrary made in 2007, Swatch has failed to provide appropriate distribution for TIFFANY & CO. brand watches, with the result that our current business forecasts do not include any meaningful increase in watch sales or royalty income,” Tiffany stated.

“Tiffany has honored its obligations under the agreement, and insisted that Swatch honor its own obligations, particularly its obligation to respect Tiffany's rights regarding brand-management and product design. Tiffany & Co. is confident that its position will be vindicated in the pending arbitral proceedings in relation to this matter and Swatch's misconduct.”