De Beers Delays ‘Supplier of Choice’ After European Commission Launches Investigation

De Beers is delaying its planned reinvention because of a European Commission investigation into the company. De Beers’ new strategy, dubbed “Supplier of Choice,” was scheduled to start this month. There was widespread speculation that the launch would be accompanied by the dropping of sightholders and information about the new “Forevermark” co-brand.

However, the European Commission, which was already investigating De Beers’ retail venture with LVMH, last month began an investigation into the new strategy, to determine whether it will violate E.C. antitrust rules. De Beers spokesman Andrew Lamont says De Beers wants to hear the E.C.’s reaction to the LVMH venture before it goes ahead. The E.C. is due to report its finding August 28.

In a letter mailed to De Beers sightholders, the E.C. said it “has to investigate whether the ‘Supplier of Choice’ agreements … present any restriction of E.C. competition rules.” The Commission also is looking into “concerns that the creation of the [LVMH] joint venture and the launch of the De Beers retail brand could lead to strengthening of De Beers’ dominant portion of the upstream market for the supply of rough diamonds,” according to the letter, which asked sightholders the following questions:

  • In your opinion, what will be the effect of the “Supplier of Choice” arrangements on your business and on the market for rough and polished diamonds?

  • Do you expect an increase in demand for DTC diamonds resulting from these new “Supplier of Choice” arrangements?

  • Do you think “Supplier of Choice” will have an effect on the price of diamonds to the end consumer? Please explain.

  • How will creation of the [LVMH] joint venture affect your business?

  • Could you imagine that if the joint venture is successful, the high demand for De Beers diamonds at the retail level will increase demand for diamonds overall?

  • What percentage of your purchases of rough diamonds do you buy from the DTC (in value)? Would you find it difficult to switch to another supplier of rough diamonds?

  • De Beers uses 16,000 different categories to sort rough diamonds. How do you think diamonds could meaningfully be categorized into only a few different quality segments?

The questionnaire also asks about sightholders’s rough and polished sales and purchases, their suppliers, and sales of diamonds sold in jewelry. These questions were modeled after the “sightholder profiles” De Beers sent to clients last year.

In the United States, sightholders said they were perplexed by the questionnaire and didn’t know whether they were legally required to answer it. Many grumbled that De Beers should have run “Supplier of Choice” by EU authorities before announcing it to the world.

Phone calls to the European Commission attorneys named in the letters were not returned.