EU MP Raises Questions About De Beers

February 27, 2004

EU MP Raises Questions About De Beers

Despite the European Commission's formal approval of De Beers Diamond Trading Co.'s Supplier of Choice strategy a year ago, it continues to receive questions about De Beers possibly stifling potential market competition, reports Johannesburg, South Africa's Business Day. BD says European Member of Parliament Jacqueline Foster wrote a letter to the EC, outlining her concerns that De Beers is "destroying" the secondary market for rough diamonds, particularly supplies of rough to non-sightholders through De Beers' Diamdel subsidiary. She asked that "urgent steps" be taken to curb that trend. In October 2003, MP Richard Corbett also questioned the Supplier of Choice strategy, saying it reduced competition and supply by placing diamonds in fewer companies' hands.

Mario Monti, the European competiton commissioner, responded to Foster's letter by noting the commission continues to scrutinize rough supply agreements between Alrosa [Russia's state-owned diamond company] and De Beers. In her letter, Foster had outlined her concerns that De Beers' agreement with Alrosa was stifling competition.

Monti said the EC continues to monitor DTC's Supplier of Choice implementation closely. In January 2003, the EC formally cleared the path allowing DTC to go forward with its strategy, but reserved the right to reopen its file if any change in the factual and legal circumstances led it to alter its position. At the time, it voiced objections to De Beers' five-year agreement with Alrosa, which would enable DTC to sell half of Russia's annual diamond production.

by Robert Weldon

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