Battle Brewing in European Union Over De Beers Policy

Yet another battle is brewing over De Beers’ “Supplier of Choice” policy, as Antwerp diamond dealers and manufacturers are petitioning the European Union to have it declared illegal.

When the Competition Authority of the European Commission (the Union’s legal arm) issued a “comfort letter” with Supplier of Choice in 2003, it was considered a great victory for De Beers and its sales marketing arm, the Diamond Trading Company. Now many are asking for that to be taken away. If the E.C. changes its mind, it would undercut one of the main “Supplier of Choice” goals, which was to make De Beers “legally compliant” in all its jurisdictions.

Many people behind the effort to get the E.C. to rescind its approval are sightholders that were dropped when De Beers launched the policy in 2003. Published reports say that the E.C. has reopened its inquiry after complaints from one dropped client, Antwerp’s IDH. The E.C. has also sent sight-holders and others new questionaires about the impact of Supplier of Choice. Meanwhile, another dropped Antwerp sightholder, A. Spira, won a victory of its own last year when a local court ruled that De Beers must continue to supply the company for an extra six months. The court cited the hardship this would cause Spira, whose supplies mostly came from the DTC. When De Beers appealed, the next court also ruled against it, even forcing the company to extend the period to 18 months and raising doubts whether the E.C.’s okay still matters legally, given the reopened inquiry.

Another ex-sightholder, Stephane Fischler of Antwerp’s Fischler Diamonds, now heads the European Community Diamond Manufacturers Association, a group of manufacturers from across Europe that aims to talk to the European Union about “competition issues.”

Leaders of Antwerp’s main bourses also plan to talk to the Commission about problems they have with the policy. Many are nervous it will cut out industry middlemen.

“Supplier of Choice is not the best policy for the Belgian trade,” says Arthur Beller, president of the Beurs von Diamanthandel, Antwerp’s largest bourse. “It has already hurt a lot of people. By going direct to the retailer, you are cutting out a lot of middle people.”

Other bourses, including the Diamond Club West Coast and the Diamond Dealers Club of South Florida, have complained to the E.C.

Asked about the current status of the Eur-opean Union and De Beers, DTC managing director Gareth Penny said, “We were very pleased to get approval from the E.C. for Supplier of Choice. We have an ongoing dialogue with them on all manner of different things.”

The European Commission is also ruling on the legality of De Beers’ contract to buy diamonds from Alrosa, the Russian diamond monopoly. In this instance, the news is said to be better, with the E.C. likely to approve some form of the contract, published reports say.

The Commission rejected the first contract between the two parties, which they submitted to the Commission in 2003. Any new contract will likely call on Russia to sell less to De Beers than was previously agreed.

The European Commission’s Competition bureau spokesman did not respond to a request for comment.

Top Ten U.S. Diamond Jewelry Markets

1. New York
Source: J. Walter Thompson/The Diamond Trading Company
2. Philadelphia
3. Los Angeles
4. Chicago
5. Washington, D.C.
6. Minneapolis-St. Paul
7. Detroit
8. Baltimore
9. Boston
10. Atlanta