De Beers Strategy Gets EC Approval

Rob Bates -- JCK Online, 1/1/2003 2:00:00 AM

The European Commission recently approved De Beers' "Supplier of Choice" strategy, giving it the go-ahead to reinvent itself and the diamond industry.

According to an EC document obtained by JCK, the Commission's directorate-general for competition now takes a "favorable position" toward a revised version of the strategy, agreed to after a year of negotiations between the EC and De Beers.

Most of the EC's requests involved minor fine-tuning of the "Supplier of Choice" concept, but one seemed to strike at its heart: the EC's insistence that "sightholders no longer [be] obliged to keep DTC informed of their specific marketing or promotional initiatives, but should only do so when they request marketing support from the DTC."

This appears to contradict a central tenet of "Supplier of Choice"—that De Beers could increase marketing spend in the industry by putting its diamonds only in the hands of people who will market them.

De Beers spokeswoman Lynette Hori says this was just a matter of semantics. "If the sightholders want to work with the DTC, of course they would want to tell us about what marketing they are doing," she says. "It's in their interest."

Among the other changes requested by the EC and agreed to by De Beers:

The sight system's "take it or leave it" tradition is no more. Sightholders now will get only the boxes they apply for and have the right to reject a certain percentage of the goods.
An independent ombudsman will mediate conflicts between De Beers and its sightholders.
De Beers' "sightholder profiles," which will likely decide who stays on its roster and who is dropped, are now "less intrusive."

While the EC clearance has no official impact on De Beers' standing in the United States, analysts think the Commission's blessing puts De Beers in a much stronger position with U.S. antitrust authorities.

Hori notes that the EC statement does not constitute a final official green light, and that the policy has been put out only for public comment. "We have to wait for third-party comments," she says. "There's not an awful lot we can say at the moment."