The rarefied industry of Swiss watchmaking doesn't really do public fallouts. Considering its huge size and the scale of its influence in the luxury goods world, remarkably little is known about what actually happens inside the likes of Cartier, Omega and Panerai, and tales of disagreements and dust-ups rarely see the light of day.
To the outsider, all seems impossibly well in the world of luxury watches – business is booming, the products are the best they've ever been, and everyone's in it together. Learning about the industry in those glossy Sunday supplements can be like reading an insipid Christmas family newsletter.
So it is ever more fascinating that some of the most famous brands in the world have been locked in a high-profile legal tussle over the world's biggest watchmaker, Swatch, and its supply of "movements" – the delicate motors that make an automatic watch tick, so to speak.
Swatch, whose brands include Omega, Breguet and Blancpain, currently supplies millions of these movements a year, made by its ETA division, to other watchmakers. Indeed, half of all classy Swiss automatic watches have ETA movements inside. If you are lucky enough to have a modern automatic watch, no matter what brand name is on the face, the chances are the beating heart inside it will be made by ETA.
So important are these movements to the industry in Switzerland that, under Swiss law, Swatch has to provide them. Unsurprisingly, it isn't too chuffed, and has been desperately trying to get the rules changed. "Why should we be forced to supply Cartier, owned by the giant Richemont corporation with movements for their watches when they're our arch-rivals?" is a fair paraphrase of its argument.
Or, to quote Nick Hayek, chief executive and son of the late founder Nicolas Hayek: "In no other industry do you have one company supply all the critical parts to the people who then compete directly with it." Take the car industry, he argues, you don't see Volkswagen/Audi supplying engines to BMW.
But it's not so simple, as the smaller watchmakers who make the Swiss "scene" so fascinating for collectors will tell you. Since its formation in 1793, ETA has absorbed other movement manufacturers, including some of those that fell on hard times during the so-called Quartz Crisis of the 1970s and 1980s – when quartz watches from the Far Eastseverely damaged demand for their far more expensive mechanical forebears. The independent makers point out that Swatch Group is already the world's largest manufacturer of watches, with sales last year breaking the Sfr7bn (£4.8bn) mark for the first time, and the withdrawal of ETA movements would leave Swatch to monopolise the market.
Small and medium independents that rely on ETA movements would go out of business, leaving Swatch Group to sail off into the sunset on board the mother of all superyachts and the industry facing a crisis comparable to the 1970s and 1980s, when 1,000 companies went bust and two thirds of the workforce was laid off. However, after years of lobbying, Swatch Group finally got a ruling last year from the Swiss competition commission, saying that it could begin cutting back its supply of ETA movements starting from January 1 this year.
Fury erupted in the Alpine valleys, to the extent that no fewer than nine watch companies challenged the ruling in court.
One of the plaintiffs was Peter Stas, chief executive of Frédérique Constant. Over the last 25 years, Stas and his wife Aletta Bax have built up the independent watch company from scratch and Frédérique Constant now sells around 120,000 watches a year. Between 5 and 10 per cent of these are powered by movements made in-house, but the company is a long way from being entirely self-sufficient, still relying on the supply of parts through ETA.
In a statement he released in the autumn, Mr Stas was unequivocal. "A lot of companies will cease to exist while Swatch, the monopoly operator, will simply get stronger," he said.
Swatch responds that, with booming sales growth in China and other emerging markets, it will need all the movements it can make for its own brands. Why should its expansion be held back by less advanced rivals?
So, why can't the majority of Swiss watchmakers just develop their own movements? It all comes down to money.
Talk to any small watchmaker and they will say they would love to, but the costs are astronomical – between €4m and €7m per calibre – a vast sum that is well beyond the reach of most independent watch brands.
Breitling is thought to have spent as much as €20m on developing its Calibre 01 and Calibre 04 internal mechanisms for its watches. The bigger brands have been moving in this direction for a while now. Rolex is entirely self-sufficient. Omega, IWC and Panerai use a mixture of in-house and bought-in kit.
So what are the independents going to do?
One short cut is to purchase a movement manufacturer, as Cartier did when it bought the industrial arm of Roger Dubuis a decade ago to build movements for its celebrated Fine Watchmaking collection – but again, deep pockets required.
Faced with little alternative, smaller companies will have to strike agreements with other movement suppliers – the main one being Sellita.
The trouble is that ETA is also the main supplier of the tiny parts Sellita uses, and the competition commission ruling allows Swatch to scale back those supplies too. Needless to say, Sellita is none too pleased.
There remains a huge question about whether non-ETA movement makers will be able to keep up with the expected demand. Will the independents be able to capitalise on the new-found demand from the emerging markets, or will they go under?
Christopher Ward, the English watchmaker, uses ETA movements in most of his automatics. He says: "We think the industry outside Sellita and ETA has been relatively lazy – the smaller, independent brands haven't really done anything, yet the writing was on the wall way, way back.
"While I think a lot of companies are bleating that the ruling shouldn't be allowed, we actually think that what has happened will be a stimulus to the industry – a little bit of a wake-up call.
"Certainly, if necessity is the mother of invention, then something is going to happen in Switzerland, otherwise some of the brands in the middle or lower tier will struggle and go under. Long-term, the industry is going to have to operate in different ways, and we see that as being largely positive.'"
He has been developing his own in-house movement, keeping the cost below £1m by partnering up with other companies. Alongside that, he is working with Sellita to reduce his reliance on the ETA models.
Rival firms will have been doing the same, no doubt, but it remains to be seen if they can react fast enough to ensure their survival.
Who owns who?
Breguet, Blancpain, Glashütte, Omega
Richemont: Vacheron Constantin, Baume & Mercier, Jaeger-LeCoultre, Lange & Söhne, Panerai, IWC,
TAG Heuer, Zenith, Hublot