de beers

Topics: De Beers, Competition law, United States antitrust law Pages: 13 (524 words) Published: May 20, 2015
DE BEERS
AND THE U.S
ANTITRUST LAW
PRESENTED BY:
Anuj Vadehra:PGHRM11
Honey Bohare:PGHRM27
Rajul Khare:PGHRM49
Mehec Chopra:PGHRM38
Prachi Gera:PGHRM46

DE BEERS – THE SHINE
 One of the world’s most successful longest running
monopoly
 Controlling force of the international diamond market
 Launched the “millennial” campaign in 1999; aimed at selling “De Beers diamond” rather than a regular diamond

THE DUST BENEATH
THE ROCK
 De Beers marketing and operating structure was in violation of U.S anti trust law ; Unable to directly sell any diamonds in U.S market  De Beers was facing turmoil on all fronts : in western Africa, in Russia, and in their home state of South Africa

THE START OF DE BEERS
 1866 : Discovery of diamonds in South Africa
 1874 : Cecil Rhodes brought Steam-Powered Pump to South
Africa Mines
 1880 : Rhodes formed the De Beers Mining Company
 By 1887 : He had bought out all the other claim holders
 1890 : Merchant’s association formalized as the “Diamond Syndicate”

THE DIAMOND CARTEL
 Cecil worked to consolidate the industry
 Kept the supply sharply limited
 Maintained the fragile illusion of their scarcity
 Kept prices as high as possible
 Sorted and classified a large % of the world’s rough stone  Operated through Central Selling Organization (CSO) in London - Determined who can buy which stones and
- How much each buyer must pay

CARTEL IN ACTION
 1902, Ernest Oppenheimer took over charge
 De Beers controlled almost all the diamonds in South Africa  1960, South Africa contributed 19 % of the total world gemstone production  By 1999, it was reduced to 11 %
 Diamond-producing states signed contracts with De Beers
- To sell their rough diamonds solely to De Beers and its agents - At a price dictated by De Beers

STOCKPILING

 To keep prices high
 To convince public diamonds are scarce
 Whenever market for luxury goods threated, bought “excess” stones back

U.S. ANTITRUST LAW

 Original Legislation : Regulating the Establishment of Commercial Monopolies
 1890 : Sherman Act – every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce  1914 : Clayton Act

EXTRATERRITORIALITY
 The Justice Department said that the reach of the U.S. antitrust laws is not limited to U.S.
 1973 : the Justice Department discovered ; De Beers held 50% of Christensen Diamond Products (De Beers swiftly divested itself of all holdings)
 1976 : the Department of Justice filed a civil and criminal suit  1994 : the Justice Department filed a suit against De Beers and General Electric

THE ROUGH PATH
 1977 : Hoarding of diamonds by Israeli Dealers led to increment in prices  1981 : Zairian government struck a deal with three independent Belgian; Threatened to destabilize the industry
 Soviets and Russians threatened to withdraw from the De Beers structure and establish one of their own
 1992 : De Beers suffered the double blow of Russian and Angolan defections
 1997 : Asian crisis - Diamonds were among the hardest hit  1998 : De Beers and Anglo-American separated into two distinct firms  1999 : American investors held nearly 21% stock; demanding shareholders with little concern for long-term stability

CHANGING TIMES
- A RAY OF HOPE ?
 Change in top management
 Use of external consultants for strategic review
 Research : De Beers - a tremendous brand name with a strong slogan  Brilliant marketing

Ethical?

Thank You

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