July 12, 2004
De Beers Said to Settle Antitrust Case
De Beers, the global diamond group, will plead guilty to 10-year-old price-fixing charges, reports the New York Times and the Financial Times of London. Under an agreement reached with U.S. Department of Justice lawyers De Beers is expected to plead guilty and could pay a fine up to $10 million to settle charges that it conspired with General Electric to fix the prices of industrial diamonds, people familiar with the talks say. The case is scheduled to be heard on July 13 in federal district court in Columbus, OH. While U.S. officials cleared G.E. of the price-fixing charges, papers were never served on De Beers because it had no legal presence in the U.S.
If accepted by the judge, the settlement will bring De Beers closer to its U.S. customers by allowing executives of the company's London-based Diamond Trading Co. to interact directly with American retailers and other business partners. The U.S. consumes about half the world's gem diamonds by value and was the biggest contributor to De Beers' record $5.5 billion earnings last year. The company's legal compliance should ease its ability to raise financing, conduct market research, develop new products and launch other new ventures.
De Beers, which controls about half the world's rough diamond production by value, currently operates via intermediaries in the US. If the settlement goes ahead, Nicky Oppenheimer, chairman of De Beers, and Gary Ralfe, managing director, who were previously prevented from entering the U.S. on business, will be able to attend the opening of De Beers' new store on Fifth Avenue in New York later this year. Analysts say the opening of the store, part of a partnership with LVMH was delayed to await clearance from the Department of Justice concerning the antitrust charges. The store is likely to become its flagship, competing with Tiffany & Co. and Harry Winston.
The decision to put the charges behind it reflects De Beers' recent confidence in its ability to fend off new antitrust lawsuits. In January 2003, the European Commission gave its approval to De Beers' Supplier of Choice strategy, which channels its output to a limited number of sightholders. But the settlement may not spell the end of its legal problems.
Earlier this month, New York City diamond company W.B. David sued De Beers on counts including antitrust, fraud, and unfair competition claims. The EU also is still investigating De Beers' latest trade agreement with Alrosa, Russia's diamond producer. Finally, though the EU cleared De Beers' supplier of choice system of possible antitrust charges in January 2003, the governing body has since asked for more information to see if there are grounds to renew its investigation after receiving complaints about the system from some of the company's former business partners.