Watch on the Rhine

The methodical Swiss, who think that there is a place for everything, staunchly believe that the place for industry is in cartels. Over the years, no Swiss business has been more tightly cartelized than the watch industry, whose three basic cartels 1) fix prices for export, 2) require makers and assemblers to buy their parts at fixed rates, and 3) prescribe minimum profit margins for members of 25%. A special policing committee checks on firms that duck the complex rules and regulations, slaps fines of up to $25,000 on violators.

But last week there were signs that the iron grip of the cartels has been slipping. The watch industry's own trade magazine, Schweizer Uhr, launched an attack in a front-page editorial titled "We Declare War." Said the magazine: The cartels, "euphemistically called associations," are "not keeping pace with economic trends and [are] abusing their strength and power to the detriment of our national economy." Noting that for months it had been receiving complaints from watchmakers about the rigid price fixing, the magazine said: "The cartels' management has won such power and independence that many of the members have lost their influence . . . The trouble with our cartels is that they fix prices according to the least efficient producers. In order to support this category, better and more efficient firms are forced to price themselves out of the market."

The Swiss have been hard hit by competition from the German watchmaking industry. Unhampered by rigid price fixing, the Germans have snatched up a fat slice of the Swiss watchmakers' markets in Scandinavia, the Far East and the U.S., with prices as much as 20% lower. On top of that, Swiss watchmakers, whose exports to the U.S. were already dropping, were further hurt by the 50% boost in U.S. tariffs last summer (TIME, Aug. 9). Their exports to the U.S. market dropped from $68 million in 1953 to $51 million in 1954, and are still running down. As a result, price cuts within the industry and to foreign buyers have become so common that a special word has been coined to describe them: hintenherumrabatte, or "backdoor rebates."

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