Antwerp, July 15, 2005
PRESS RELEASE
The Belgian Association of Dealers, Importers, Exporters of Polished Diamonds (BVGD) has lodged yesterday afternoon, an official complaint with the European Commission’s Competition authority against De Beers for its Supplier of Choice program (SOC) which is implemented through De Beers’ Diamond Trading Company (DTC).
De Beers controls around 70% of the worldwide rough diamond supplies (through its own mines, joint ventures mines, and purchases from third party competitors).
The Supplier of Choice system has been announced by DTC/De Beers in July 2000 and its implementation was suspended pending an investigation by the European Commission’s antitrust authorities. On 25th of July 2001, the Commission addressed its objections to DTC, for infringement of articles 81 and 82 of European Competition law. De Beers replied and made several proposals to amend the notification. The Commission accepted the proposed changes end of November 2002 and wrote a “Comfort Letter” to De Beers on January 16th 2003, not opposing Supplier of Choice. However, the Commission had stated in the same letter that it would reopen the case if the availability of certain categories of diamonds were artificially limited or if there were not enough liquidity of diamonds on the market.
BVGD believes that, in view of the now obvious abuses of SOC and the now visible goal that DTC/De Beers wants to achieve through its implementation, which is the restriction of competition and a total control of the diamond market downstream up to the consumer, the paltry measures proposed by De Beers were completely insufficient and ineffective to counterweigh the numerous anticompetitive effects that the Supplier of Choice Program causes.
De Beers has misled the European Commission, has abused its dominant position and has artificially limited the availability of diamonds on the market. Furthermore, it has installed obscure selection/allocation criteria barring traders the access to adequate quantities of diamonds. Liquidity of diamonds in the market has disappeared.
Because the SOC Program - as well as the accompanying obligations imposed by De Beers on its exclusive customers, called ‘sightholders’ - has had a disastrous impact on the polished diamond market, we are asking the European Commission to reopen the case.
The SOC system must be declared illegal and abolished by the European Commission’s antitrust authorities. Only in this way De Beers will finally sell diamonds in a transparent manner, choosing its customers –without excluding rough diamond dealers – through clear and objective criteria. De Beers should also be barred from giving incentives to customers dealing with polished diamonds, enticing them to switch supplies from non sightholders to sightholders, as well as falsely advertise that non-DTC diamonds are of dubious origin.
The Commission must ensure that there always are sufficient supplies of diamonds to ensure liquidity on the secondary market. Accordingly, the final prices of the diamonds will reflect a situation of fair competition on the market.
Separately, on June 28 2005, the BVGD has submitted Comments to the European Commission concerning the De Beers/Alrosa Agreement. The collaboration agreements between De Beers and Alrosa (The second largest producer of diamonds in the world), which is now also under investigation by the European Commission’s Competition authorities, has also a very negative effect on the availability of diamonds. These two companies control together almost the totality of the best quality high color diamonds. If De Beers is allowed to continue to purchase the Russian diamonds (even at a reduced volume), it will further reinforce the control obtained on the market through SOC. Other independent traders will be deprived from access to a source of distribution that could be under the control of someone else than De Beers.
The BVGD is not against De Beers, nor against the sightholders. We are against the obligations imposed by a company holding - and abusing - a dominant position that destroys competition.
The BVGD believes very strongly in the functioning of free, fair, open and competitive markets. That is still the most efficient way to bring the best merchandise at the best prices to the consumer.
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