Newspaper article International New York Times

Tiffany Told to Pay Swatch $449.5 Million

Newspaper article International New York Times

Tiffany Told to Pay Swatch $449.5 Million

Article excerpt

Tiffany was ordered to pay the equivalent of $449.5 million in damages to the Swiss watchmaker, an amount that exceeds Tiffany's earnings for last year.

The Swatch Group, the world's largest watchmaker, said Monday that it welcomed an arbitration ruling ordering Tiffany to pay the equivalent of $449.5 million in damages to the Swiss company for a failed watch partnership.

The decision by the Dutch arbitration panel, made last weekend, exceeds Tiffany's earnings for last year.

Nick Hayek, the chief executive of Swatch, said in an interview that the payment from Tiffany would cover about half of the cost of buying Harry Winston, the jeweler headquartered in New York. That purchase last year, after the partnership with Tiffany collapsed, was for $750 million in cash and the assumption of $250 million of Harry Winston's debt. It was Swatch's largest acquisition.

In 2007, Swatch and Tiffany announced what they called a historic alliance to jointly develop and sell Tiffany-branded watches. But the alliance stalled and was eventually broken off acrimoniously in 2011.

Swatch then took the issue to arbitration in the Netherlands, claiming that Tiffany had breached the terms of their contract by delaying the introduction of the products they had collaborated on. Tiffany filed a counterclaim, blaming Swatch for not getting the watches onto the shelves of other retailers.

Mr. Hayek, speaking by telephone, said he welcomed the penalty as "a fair amount," even if Swatch had initially sought 3.8 billion Swiss francs, or $4.2 billion, in damages, arguing that the penalty should cover the duration of the planned partnership, which was for at least 20 years. He said the arbitration panel had seen that this was "a problem of a partner that has apparently misled us from the beginning." Mr. Hayek added: "We had a partner who said that his priority was watches, and after signing a contract, you see that his priority is everything but watches."

Tiffany, in a statement released on Sunday, said it was "shocked and extremely disappointed" by the arbitration panel's decision and would review its legal options. …

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