The diamond industry—including retailers—will soon be entitled to claim a share of the $300 million class-action settlement against De Beers for antitrust violations, the lawyers who brought the suit announced at a packed meeting of the Diamond Manufacturers and Importers Association of America.
At press time, the claim forms hadn’t been prepared, but the lawyers pledged to tell the industry when they’re available. JVC will also post them on its Web site (www.jvclegal.org).
To file a claim, industry members must submit a form indicating the two best years of their business from 1994 to 2006. How much trade members receive from the overall pot—estimated to be around $140 million on the trade side—will be calculated based on the amount of diamonds purchased and the number of claims received.
People considered “direct purchasers”—meaning they purchased diamonds from Diamdel, De Beers’ polished diamond division, or directly from a mine—during the period have a separate fund. Sightholders are not eligible, because no one represented them in the class action, the attorneys said.
Some in the trade have been contacted by companies that file class-action claims for a fee, but Joseph Tabacco, a lawyer involved in the case, 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.”
The settlement contains unprecedented restrictions on De Beers’ future behavior, including a requirement that the company abide by U.S. antitrust laws. It also limits any possible purchases from outside producers like BHP, Rio Tinto, and Alrosa to 40 percent of their production. (The latter point is moot, since the European Commission ruled that De Beers could not buy from Alrosa.) De Beers also agreed not to fix prices under certain provisions.
“These provisions protect the competitive environment and prevent the past conduct that De Beers became notorious for,” Tabacco said.
That assertion was challenged by Martin Rapaport, who has editorialized against the settlement in his newsletter, claiming the court’s injunctive relief was not strong enough. “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 said. “Why can’t De Beers just agree they can’t fix prices, period, without all the provisos?”
Rapaport noted that most antitrust settlements require defendants to abide by U.S. law.
“We are about to get enough money to buy a postage stamp,” he 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 didn’t press hard with De Beers.”
Tabacco noted that indivi-duals 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 a case you have an opponent, so you can only get so far.”
The lawyers noted that it hasn’t been easy to bring cases against De Beers, because for years it had no official presence in the United States and, as a result, didn’t appear in court. For the settlement of an older 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.
“How many of the people here in the industry decided to take on De Beers on their own?” Tabacco added. “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.’”
Regarding how much the lawyers stand to make from all this, Tabacco said the judge will decide, but that “15 to 20 percent fees are not uncommon”—which would translate to about $30 million each for the different teams of lawyers.
Stamell, who has won two settlements against the company, asked attendees to apprise him of other possible antitrust violations, since he was looking for other reasons to “sue De Beers.”
Stamell added that he didn’t think the lawsuit’s settlement will have any impact on whether De Beers can formally do business in the United States. Some in the trade feel De Beers is just waiting for the suit to be settled before it officially enters the country—although De Beers’ activities here 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 if the public finds out De Beers has to pay an antitrust judgment, consumer confidence in the industry would suffer.
“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 antitrust cases against it. He said he was working with the Jewelers Vigilance Committee on the proper way to inform consumers.