DiamondNotes

De Beers: Tired of Being an Outcast

The U.S. Justice Department has refused a request by De Beers for a meeting to review the antitrust provisions barring it from doing business here. A De Beers spokeswoman says that Justice officials wouldn’t cooperate because of De Beers’ 1994 indictment on industrial gem price-fixing. Since De Beers had no presence here, it never answered the indictment. The same charge against General Electric was eventually thrown out of court.

De Beers spokesman Andrew Lamont notes that “when the ban was enacted, virtually all the world’s diamonds went through De Beers. Now it’s down to 60% or 65%.” He says despite the Justice Department’s rebuff, De Beers isn’t giving up its effort to re-enter the United States.

But legal experts doubt that even a bigger change in market share than Lamont cites would make much difference to U.S. authorities. Steve Salop, a professor at the Georgetown University Law Center, says the issue is whether the company is considered a “naked cartel” under U.S. law. And if it was considered one in the past, it likely will be considered one in the future. Eleanor Fox, an antitrust professor at New York University, notes that if De Beers were to come into the United States, the company would have to follow U.S. antitrust laws—which might conflict with some of De Beers’ standard practices, such as selling other miners’ stones and stockpiling diamonds to keep prices up. She adds: “De Beers just doesn’t have a great record with the United States.”

Did Lack of Control Hurt the Millennium Brand? Ashford.com

There are opposing views about the fate of De Beers’ Millennium brand diamonds. Some retailers say they scored big with them, while others describe their performance as below expectations. The general wholesale market consensus was that they did better in Asia than in the United States.

Sightholders and sources close to De Beers say the stones initially did well but distribution got out of control. “The momentum stopped,” says one sightholder. “The limited-edition Millennium stones were supposed to be exclusively for the upscale retail jeweler. But they surfaced in many discount-oriented locations, which undermined the exclusivity of the product.” This sightholder notes that some of his comrades ignored the initial plan and sold the stones to other wholesalers and to Internet sites—including Ashford.com.

But the biggest blow may have been struck by Diamonddepot.com, a site owned by Millennium sightholder R. Steinmetz, which sold the stones at 20% above the Rapaport list price—significantly lower than they had been going for. Many felt that hurt the price of the stones overall.

Another problem: De Beers left marketing to individual sightholders—to avoid antitrust problems, many feel.

(De Beers denies this.) Ten of the sightholders had planned their own marketing effort, but that petered out after only one press conference, which included an appearance by supermodel Heidi Klum. Sources say that once distribution fell apart, so did the marketing effort. “[The problems with distribution] made everyone lose their enthusiasm,” the sightholder says.

De Beers sales and marketing executive Nigel Wisden recently sent a letter to the 14 Millennium sightholders that discussed some of the problems. “The letter said we have learned a lot and we could all do a little better next time,” he says. “With careful marketing, we could all have a tremendous product.”

In related news, De Beers managing director Gary Ralfe recently warned sightholders to get prior approval from

De Beers before they use the company’s name. Many thought this was related to Diamonddepot.com, which created controversy when it placed ads that included De Beers’ name.

Pegasus to Step Up Marketing Efforts

Consumers reacted well to the first test of General Electric-processed Pegasus stones, according to Charles Meyer, the recently appointed managing director of Pegasus Overseas Limited.

The treated stones—all of high color and clarity—were sold at a number of high-end retailers last Christmas under the name “Monarch.” Company officials stress that the name is a test and may be changed.

Meyer, formerly of Henry Meyer Diamond Co., says stores that sold the diamonds with a markup enjoyed the most success with them. “It’s almost as if, with a premium, people like it better,” Meyer says. He notes that the company plans to sell them to retailers at a 15% discount off the standard wholesale price.

One store—Borsheim’s of Omaha, Neb.—did so well with the processed stones that it plans to carry them again. Borsheim’s president, Susan Jacques, says she found customers bought them mostly because they were cheaper than natural stones.

“The customers were really receptive,” Jacques says. “We were somewhat concerned with a backlash, and there were some purists who only wanted what nature produced. But it was a nice niche item for the customer wanting a price break and something a little different but who doesn’t want the precautions you have to take with clarity-enhanced.” She notes that the technological factor and General Electric’s name and reputation helped sell the stone.

Lazare Kaplan and GE, the companies behind the process, say selling the stones directly to retailers will reduce the chance that the identifying “GE POL” inscription will be polished off. Nevertheless, most of the industry is hoping for a detection technique. Dr. Thomas Anthony, the GE scientist who oversaw the development of the treatment process, says some of the stones may be detectable because they have big inclusions surrounded by a “little halo.” But he notes that these inclusions sometimes appear in natural stone.

Anthony thinks 40% to 50% of the diamonds will remain undetectable forever, since the process closely mimics what nature does. But the Gemological Institute of America’s Tom Moses says, “Last year, they said all the stones were undetectable. So we don’t know.” Still, he notes that some stones will be easier to detect than others, and some will be “difficult” to identify.

Anthony says GE can also create fancy-colored diamonds with the process. Meyer says the company plans to introduce “neon-green” stones similar to those being produced by Provo, Utah-based NovaDiamond. GE has already produced red, blue, and other fancy-colored diamonds with the process, but not in sufficient quantities to introduce in the market.

Founder’s Son Takes Helm At William Goldberg

Saul Goldberg recently became president and chief executive officer of William Goldberg Diamond Corp., the renowned sightholder founded by his father, William, more than 50 years ago.

Saul Goldberg stressed that his father, former president of the Diamond Dealers Club and inductee into the Diamond Industry Hall of Fame, will remain active in the business as chairman.

Saul Goldberg began in the industry 22 years ago.

Fischer Diamonds Clears Up Web Confusion

Jeff Fischer, president of Fischer Diamonds and a well-respected New York manufacturer, recently sent out a press release stressing that his company does not sell on the Web.

The press release noted that last year a site named Fisherdiamonds.com premiered, but he says that site is owned by Fisher Brothers, another 47th Street manufacturer not connected to him. “Our policy has always been to sell through the traditional jewelry channels,” says Fischer. “Everyone asks us: ‘Is that site you?’ It’s a very frustrating thing.”

Diamond Dealers Club Talks with State Department

The State Department has requested a meeting with the Diamond Dealers Club to discuss what can be done to prevent dealers from buying “combat diamonds,” or stones that fund civil wars in certain African countries. Club president Eli Haas noted that the club recently released a statement saying it supported United Nations sanctions that prohibit the sale of Angolan diamonds that are not accompanied by a government certificate.

Meanwhile, a Canadian non-governmental organization called Partnership Africa Canada has issued a report blaming illicit diamond sales for the continuing civil war in Sierra Leone. The report criticizes both De Beers and the Antwerp diamond industry for ignoring obvious signals that they’re buying diamonds from the western African country. But De Beers spokesman Andrew Lamont says the report fails to note that the company has shut down its buying operations in western Africa. And, in a statement, Antwerp’s HRD, the industry’s umbrella organization, said it had “learned from its mistakes from the past” and was no longer buying Sierra Leone diamonds.

The Canadian group’s report takes a harder line against the diamond industry than other watchdog groups have, even raising the specter of a global consumer boycott of all diamonds. In this country, Congressman Tony Hall, who has introduced a bill mandating all diamonds be sold with “origin certificates,” has introduced another bill banning the purchase of all diamonds specifically from Sierra Leone.