November 24, 2003
EC Confirms It Will Respond to Supplier of Choice Complaints
Mario Monti, Europe's competition commissioner, confirmed Nov. 19 the European Commission will look into complaints about De Beers' new Supplier of Choice system, less than a year after clearing it as sufficiently competititive, according to the Financial Times of London. Monti said last week the EC first needed to gather more facts to take a stand on the issue and would send requests for information to the parties involved "in the coming weeks."
In January the EC said it had decided not to oppose De Beers' Diamond Trading Co.'s Supplier of Choice initiative, which urges the industry to use marketing and branding to stoke demand instead of DTC controlling the supply of diamonds. The EC said in January, however, it was still concerned DTC could use Supplier of Choice to artificially reduce the supply of diamonds, especially high-quality gems, which could drive up prices. The EC says DTC controls 60-65% of the world's supply of rough diamonds by value, but DTC only says it handles more than 50 per cent, according to the FT.
The DTC and the EC agreed in January that an ombudsman, approved by the EC, will watch over the system to be sure abuses don't occur. The EC also reserved the right to reopen its examination of Supplier of Choice if necessary.
Since then the EC has received several complaints about the new system, from some companies that have not been chosen by DTC to buy its rough diamonds, as well as other concerned entities. IDH Diamonds, a Belgian company that supplies rough diamonds to small manufacturers, has filed a number of allegations, for example. The DTC says it will defend itself against all complaints.
The EC also is still considering the pact signed almost two years ago between DTC and Alrosa, the state-owned Russian diamond producer, in which De Beers will sell half of Alrosa's rough diamonds, worth reportedly over $900 million a year. If approved, the pact would give De Beers control over more of the world's rough diamond supplies.