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De Beers Goes to U.S. Court on March 11

Feb 26, 2004 12:00 PM   By Martin Rapaport
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Decade Old Antitrust Charges About Industrial Diamond May Be Resolved... De Beers Officials May Be Allowed To Travel To The United States... Antitrust Issues Relating To Gem Diamonds Will Take Time to Resolve

De Beers is likely to resolve its decade-old U.S. antitrust indictments involving price fixing of industrial diamonds. A deal with a division of the U.S. Justice Department overseeing the industrial diamond case appears imminent as De Beers representatives head to federal court in Columbus Ohio on March 11. De Beers is expected to offer a pre-negotiated plea bargain for the judge’s approval and it is likely to be accepted.

Resolution of the criminal antitrust charges will enable De Beers executives to officially visit the United States for the first time in a very long time. It will also make it possible for De Beers to begin operating in the U.S. A De Beers-LVMH retail jewelry store is expected to be opened in New York within the next two years. It may take some time before De Beers sets up any direct operation in the U.S. There is not much that De Beers needs to do directly in the U.S. and most importantly, complex antitrust issues relating to De Beers activities in the gem diamond markets have yet to be resolved.

We expect De Beers to take an approach similar to what it has done in the European Union. However, negotiations with the Justice Department over antitrust issues relating to De Beers dominant position in the gem diamond markets will take time and may be much more difficult due to significant differences between U.S. and EC laws. While the EC concentrated on the impact of Supplier of Choice on sightholders the U.S. authorities, if they chose to deal with the matter, will be much more interested in the impact of De Beers' dominant market position and its selective distribution activities on consumers and intermediate polished diamond markets.

There are also a number of court cases in the U.S. that De Beers has--so far--sidestepped. While the merit of these cases may be questionable De Beers is unlikely to expose itself to legal actions without careful consideration. De Beers' approach will most likely be slow and steady with continuous negotiations so as to ensure that De Beers' official entry into the U.S market is sensible and secure.

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Tags: Consumers, De Beers, European Union, Gem Diamonds, Jewelry, LVMH, Sightholders, United States
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