The diamond industry will soon be entitled to claim its share of the $300 million class action settlement against De Beers for anti-trust violations, the lawyers who brought the suit announced at a packed Diamond Manufacturers and Importers Association of America meeting, Wednesday at restaurant 3 West.
To file a claim, industry members have to file a form showing the best two years of their business from the 1994 to 2006. How much trade members receive from the overall pot—estimated to be over $100 million on the trade side—will then be calculated based on the amount of diamonds purchased and the amount of claims received. (In certain cases, sightholders are not eligible.)
People considered “direct purchasers”—meaning they purchased diamonds from Diamdel, De Beers’ polished diamond division, or directly from a mine—during the period have their own separate fund. Sightholders are not eligible because no one represented them in the class action, the attorneys said.
As a result of the settlement, De Beers will be forced to abide by U.S. anti-trust laws. It also agreed to limit any possible purchases from outside producers like BHP, Rio Tinto and Alrosa to 40% of their production. (The latter point is moot, since the European Commission ruled that De Beers could not buy from Alrosa.) It also agreed to not to fix prices under certain provisions.
“These provisions protect the competition environment and prevent the past conduct that De Beers became notorious for,” said Joseph Tabacco, another lawyer involved in the case.
But this was challenged by Martin Rapaport, who has editorialized against the settlement in his newsletter, claiming the “injunctive relief” was not strong enough.
He noted that most anti-trust settlements require defendants to abide by the law.
“We are about to get enough money to send a postage stamp,” Rapaport said. “Everyone knows that you can’t violate the laws of America. You haven’t given us anything here. I don’t believe the attorneys who are supposedly representing the industry are able to adequately press this point for us. You wanted your $25 million [contingency fee], so you don’t press hard with De Beers.”
“We know that Supplier of Choice makes it impossible for someone to say, ‘Give me diamonds and I will sell them to members of the Diamond Dealers Club,’” he continued. “Why can’t De Beers just agree they can’t fix prices – period.”
Tabacco noted that individuals had the right to opt out of the class action settlement if they wanted to take on De Beers on their own.
But another of the lead lawyers, Jared Stamell, added, “On an individual basis, you are not likely to get very far. I’m in favor of injunctive relief but in every case, you have an opponent so you can only get so far.”
Tabacco added: “How many of the people here in the industry decided to take on De Beers on their own? A lot of people who have known about this conduct for decades and did nothing about it are now saying, ‘This is not enough money.’”
The lawyers noted that it has not been easy to bring cases against De Beers, as for years it didn’t show up in court due to its lack of an official presence in America. Even for the settlement of the industrial diamond price-fixing case, the lawyers claimed they weren’t contacted by De Beers directly, simply by a law firm representing “a friend” of De Beers.
Other highlights from the meeting:
* Some in the trade have been contacted by companies that file class-action claims in exchange for a fee, but Tabacco said, “We don’t think most companies would benefit from losing up to a third of their claim for their service. We hope the claim forms will be simple. I think it would be a waste of money for class members to use that service.”
* Regarding how much the lawyers stand to make from all this, Tabacco noted that “15 to 20 percent fees are not uncommon”—which would translate to about $20 million each for the different teams of lawyers—but it’s up to the judge’s discretion.
* Stamell, who has had two settlements against the company, asked attendees to keep him abreast of other possible anti-trust violations as he was looking for other reasons to “sue De Beers.”
“It’s up to you to decide whether you want to do something,” Stamell said.
* Stamell said that he didn’t think the lawsuit’s settlement will have any impact on whether De Beers can officially enter the United States. Many in the trade feel that De Beers is just waiting for the suit to be settled before it officially enters the country, especially since De Beers’ activities in the U.S. have been stepped up lately, with officials visiting on a far more frequent basis.
* The lawsuit also has a consumer component, and some worried that consumers being informed that De Beers has to pay an anti-trust judgment would further hurt consumer confidence in the industry.
“Most consumers do not equate a claim or a product as a reason not to buy a product,” Tabacco said, noting Microsoft’s stock has gone up despite the anti-trust cases against it. He said he was working with the Jewelers Vigilance Committee on the proper way to inform consumers.