Court Allows Alrosa/De Beers Sales

By Rob Bates -- JCK Online, 9/1/2007 2:00:00 AM

European antitrust regulators cannot prevent Russian diamond producer Alrosa from selling to De Beers, an EU court ruled recently.

In 2006, the European Commission's antitrust division said Alrosa could not sell to De Beers after 2009, ending a 40-year relationship. “For the first time in the history of the diamond market there is an opportunity for genuine competition,” said EC competition commissioner Neelie Kroes.

But Alrosa, the world's second-largest diamond producer, appealed the ruling. “We believe the [initial] decision by the Commission violates our rights,” Alrosa vice president Sergey Oulin told JCK before it was overturned. “We are challenging our rights in principle, regardless of what we are going to do.”

The Appeals Court agreed, saying that the antitrust regulators had failed to demonstrate that further Alrosa sales to De Beers would create a “collective dominant position.”

No matter what happens, the days of Russia selling the majority of its production to De Beers are almost certainly a thing of the past. The two sides' final contract proposed selling $275 million a year to De Beers after 2010—a fraction of Alrosa's annual production.

At press time, De Beers, which took no position on the matter, said it was “studying” the verdict. The Competition Commission has the right to appeal. Alrosa officials did not respond to requests for comment.