De Beers to Scale Back Diamond Purchases from Alrosa

December 20, 2004

De Beers to Scale Back Diamond Purchases from Alrosa

Alrosa, the Russian state-owned diamond company, and the De Beers Group agreed they will phase down the amount of rough diamonds De Beers purchases from Alrosa over a period of 6 years, the two companies announced Dec. 20. In 2005, De Beers will purchase $700 million in rough diamonds; in 2006, $625 million; in 2007, $550 million; in 2008, $475 million; in 2009, $400 million; and in 2010 and each year therafter, $275 million.

The two companies notified the European Commission of their altered commitments, which were spurred by an EC investigation concerning the two companies' proposed agreement of 2002, in which De Beers announced it would purchase annually the equivalent of $800 million in rough diamonds for a period of five years. The EC objected to the agreement, saying it appreciably restricted competition on the rough diamonds market by eliminating competition from Alrosa. EC also felt the agreement constituted what it called "an abuse of De Beers' monopoly power."

"We believe that these [new] proposals address the concerns that the Commission identified on the agreement and look forward to having these formally accepted early in 2005. In the meantime, De Beers and ALROSA continue to trade on a willing buyer, willing seller basis," said the companies in a written statement.

Alrosa's and De Beers' commitments will soon be available on the EC's competition website. The commitments will subsequently be published in the EU Official Journal so that interested parties can give their views to EC within one month from the date of publication.

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