Some Swiss watchmakers are ticked over new rules

Switzerland's regulations governing the Swiss made label have watchmakers wound up

Switzerland’s watch industry is wound up over two tiny words affixed just below the six o’clock mark on many watch dials: Swiss Made.

In January, as part of broader regulations meant to beef up Swiss designations at home and abroad, the government put into effect new rules that require watches to include more Swiss-made components to qualify as Swiss Made. Some in the industry criticized the rules, which were initiated by the Swiss watch federation and backed by big companies like Swatch Group , as too costly. But others, including H. Moser & Cie., say the requirements are still too lenient. 

The independent luxury watchmaker, whose timepieces sell for an average of 25,000 Swiss francs ($24,770), decided to eliminate “Swiss Made” from its watches in protest. Chief Executive Edouard Meylan explained that even with the new rules, the designation has become so devalued that deleting it actually emphasizes Moser’s Swissness. 

“I cannot be behind a label I don’t believe in,” he said last month at Baselworld, the annual watch fair in northern Switzerland. 

Moser watches are almost 100% Swiss—well above the new mandate for at least 60%. Watches must also be technically developed, assembled and inspected in Switzerland to be called Swiss Made. 

Previous rules required the value of a watch movement to be at least 50% Swiss to qualify, but that meant as little as 15% to 30% of the total value of a Swiss Made watch might actually have been Swiss. While there isn’t an official count of watches that carry the Swiss Made label, the Swiss watch federation represents about 250 brands.

“Consumers were and still are willing to pay more for Swiss Made watches,” said Felix Addor, deputy director general at the Swiss Federal Institute of Intellectual Property. “At the same time, they have expectations which were not being fulfilled by the old rules and regulations.”

Because labor costs are so high in Switzerland, retouching components assembled abroad can get some watchmakers past the Swiss-made thresholds even if much of the watch is produced abroad, Mr. Meylan said. “People have been cheating customers for many years,” he said.

Under the regulations, corporate violators face fines of up to 1.08 million francs and five years in prison for owners. The government doesn’t proactively police watchmakers, however; any suspicions competitors or consumers have over possible cheating go through the courts.

“It’s very controversial,” said Alexander Bennouna, watch-division head at Victorinox, maker of the Swiss Army knife, referring to the new law. Swiss Made, he said, is “like a legal certification.” Victorinox watch dials are already stamped with the globally recognized cross-and-shield logo. 

The timepieces, which sell for around 400 francs to 2,000 francs, make up 15% to 20% of company sales. Mr. Bennouna said they meet the new requirements, though he declined to specify further.

Mr. Bennouna sees the new Swiss Made rules as protecting the status quo instead of spurring innovation. “It’s more of a defensive legislation that’s trying to protect what exists,” he said.

The debate is about more than words. “It creates a premium,” said Dominique von Matt, chairman of Jung von Matt/brand identity, a consulting firm. Research his company collaborated on last year showed that more than half of global consumers surveyed preferred a 4,000-franc Swiss watch over a 2,000-franc one of unknown origin.

For some watchmakers, the Swiss Made label remains a touchstone. “We’ve always written Swiss Made on our dials,” said Ulrich Herzog, chairman of Oris, whose mechanical watches sell for $1,500 to $6,000. “Swiss Made, Swiss quality and independence is really part of the values which Oris is based on.”

But it is expensive to produce watches in Switzerland. The strong franc has driven up local production costs and hurt foreign sales, which take a hit in currency conversion. Sluggish economies globally and weakness in China and Hong Kong due to anticorruption laws and new visa rules also hurt high-end watchmakers last year. 
 

“It was really the worst moment to start” the new rules due to the strong franc, Mr. von Matt said.

Swiss watch exports fell 10% in 2016 from a year earlier, though they held up better in the 500-franc-to-3,000-franc range that Oris operates in, declining only 4%. “To keep this price point, you have to buy certain components outside,” Mr. Herzog said. Oris watches are Swiss engineered and Swiss made, except for the crown, buckle and strap.

“A consumer, I think, at the end trusts more the [brand] name than ‘Swiss Made,’” he said.

Moser is counting on it. As part of its protest against the new regulations, the brand created a single, 100% Swiss-made watch—down to the Swiss cowhide strap and even an injection of Swiss cheese—and gave it a symbolic price tag of more than one million francs. 

The Swiss Mad Watch, released alongside a tongue-in-cheek video  featuring a familiar-looking red baseball cap emblazoned with the logo “Make Swiss Made Great Again,” will be auctioned at Christie’s this spring. Proceeds will go to a foundation supporting the watch industry.

Winding down

Swiss watch exports dropped in 2016, especially among luxury watches, while weak economies globally and the strong franc weakened revenues.