EC approves De Beers Supplier of choice plan

By JCK Online Staff -- JCK Online, 11/11/2002 2:00:00 AM

The European Commission in Brussels on Monday approved a plan by De Beers to overhaul its distribution system of more than $4 billion of rough diamonds a year to help drive demand for the precious stones, Reuters reports.

Known as Supplier of choice, it is part of a plan by De Beers to rejuvenate demand for diamonds by streamlining distribution and creating the designer branding that already exists in other luxury goods, experts say.

Tentative approval by one of the world's two big antitrust authorities is a triumph for De Beers, which had for decades been branded as a cartel.

Final Commission approval next month is likely to be little more than a formality, because the Commission is satisfied De Beers will give customers enough flexibility to meet requirements of antitrust law.

"This is not a cartel," De Beers spokeswoman Amelia Torres reportedly said.

She said that even when a company is in a dominant position it is entitled to choose what it considers the most efficient distribution channels.

Although the decision is all but a done deal, the public is free to raise any objections over the next month.

"This is an indication that the commission has almost completed its inquiry into supplier of choice and that it is likely to take a positive view," De Beers spokesman Tom Tweedy in South Africa, reportedly said.

De Beers now sells to an exclusive group of about 120 customers, who are traders or cutters located in diamond cutting centers around the world including New York, Antwerp, Joannesburg, Tel Aviv, and Mumbai, India.

Now the Commission and De Beers have agreed to a number of approaches designed to increase the rights of its customers, including an ombudsman to settle disputes.

If De Beers does not follow the agreed procedures, the ombudsman will recommend it reconsider its decision. The ombudsman's decision may be appealed in court by either party.

In addition, De Beers must give customers six months notice if it wants to cancel a contract, up from three months now.

Instead of finding out the quantities of stones they will be getting on the day they receive them, customers will be notified six months in advance, Torres said.

By notifying the Commission and getting approval for a marketing deal, De Beers has the imprimatur of one of the two top competition bodies in the world. The other is the United States, which has a long history of disputes with the firm.