On October 19, 1954, the United States filed an anti-trust complaint
in the United States District Court, Southern District of New York,
under Section 1 of the Sherman Act, 15 U.S.C. § 1, alleging
a wide-ranging conspiracy between Swiss and United States watch
companies to fix prices, terms, and conditions of the sale of watches
and watch parts, restrict the manufacturing of watches and watch
parts in the United States, and control the export of watches and
watch parts into the United States. The complaint named more than
twenty defendants, including Rolex's predecessor the American
Rolex Watch Corporation.
On March 9, 1960, the United States,
and eleven of the defendants named in the complaint (all of whom
were United States importers of Swiss watches or watch parts), including
the American Rolex Watch Corporation, entered into the Final Judgment.
The purpose of the Final Judgment was to prevent the defendant importers
from engaging in certain collusive and unilateral conduct that was
causing significant competitive harm at the time the Final Judgment
was entered.
Section VI.C of the Final Judgment
states, in relevant part, that each defendant importer "is
enjoined from. . . restricting or controlling the use by any person
in the United States of watch parts or watchmaking machines purchased
from" any defendant importer named in the suit, and Section
VI.H of the Final Judgment states that each defendant importer "is
enjoined from . . . entering into any agreement or understanding
with any reseller of watches, watch parts or watchmaking machines
to fix or control the markup or the maximum or minimum price at
which, the terms or conditions on which, or the customers to whom
any such product may be resold."
Most recently, the government has determined
that since 1996, Rolex has required watchmakers to agree to adhere
to Rolex's Policy Statement which included certain provisions that
the government has alleged to violate the Final Judgment. Specifically:
a. One of the provisions in Rolex's Policy Statement, under
the heading "Rolex Trademarks and Goodwill," states:
"Parts may not be used in any watch that has non-Rolex
parts or accessories (such as generic dials, bezels, crystals
or bracelets)." This restriction on the ability of watchmakers
to use parts purchased from Rolex to repair Rolex watches that
have non-Rolex parts or accessories violates Section VI.C of
the Final Judgment by limiting the use by watchmakers of the
watch parts purchased from Rolex.
b. Another provision in Rolex's Policy Statement, under
the heading "Terms of Sale," states: "Spare parts
are sold for end use by the purchaser only. Spare parts may
not be resold under any circumstances." This restriction
on the ability to resell parts violates both Section VI.H of
the Final Judgment by limiting the circumstances under which
watch parts may be resold, and Section VI.C of the Final Judgment
by limiting a watchmaker's use of the watch parts it purchases
from Rolex.
c. A third provision in Rolex's Policy Statement, under
the heading "General Policies," states: "To the
extent that charges for spare parts are itemized, the markup
shall not exceed fifty percent (50%)." This maximum pricing
restriction violates Section VI.H of the Final Judgment by fixing
the maximum markup that watchmakers can charge (when itemizing)
for watch parts when performing repairs.
The government currently alleges that Rolex has been in
civil contempt for violating Sections VI.C and VI.H of the Final
Judgment, since implementing each of these provisions of its Policy
Statement.
On February 28, 2006, Rolex filed a Motion to Terminate
the Final Judgment claiming that the Final Judgment no longer serves
a procompetitive purpose.
The United States of America, through the Office of the
United States Department of Justice, Antitrust Division, 325 7th
Street, N.W., Suite 300, Washington, DC 20530 tentatively agreed
to termination, pending public notice, and the opportunity to evaluate
public opinion.
This agency has been retained by a third party, interested
in the outcome of this case to research the issues and compile a
report, specifically focusing on the status of the Swiss Watch Industry
in general, Rolex USA in particular, and their compliance, or non-compliance
with the Sherman Anti-Trust Act, with a particular emphasis on the
status of the replica watch industry, the nature of their products,
and their potential to force the Swiss Watch Industry into a procompetitive,
fair trade, posture.
If you have information and/or
evidence pertaining to ongoing efforts by Rolex USA to fix prices,
terms, and conditions of the sale of watches and watch parts, restrict
the manufacturing of watches and watch parts in the United States,
and control the export of watches and watch parts into the United
States, please contact:
Oracle International
Bill E. Branscum, Investigator
OracleIntL@aol.com
