De Beers

Topics: De Beers, Diamond, Cartel Pages: 7 (1920 words) Published: June 9, 2013

De Beers and the Diamond Monopoly
Report - Guide Thomas Schieder I.-No.: 648792 SS00 – Wirtschaftsrecht SuK - Economic Policy

1. History 1.1 De Beers and the Diamond Cartel 1.2 Cecil Rhodes and the discovery of Diamonds in South Africa 1.3 Evolution of the Cartel 1.4 The Cartel in action 1.5 Stockpiling

2. U. S. Antitrust Law 2.1 History and Motivation 2.1.1 The Sherman Act 2.1.2 The Clayton Act 2.2 Extraterritoriality

3. De Beers in 2000


- Harvard Business Review: N9 – 700 – 082; Case Study on De Beers -

Thanks to Mark Irvine, Investor Relations Manager, De Beers Consolidated Mines Ltd., Johannesburg, South Africa


De Beers and the Diamond Cartel

For centuries, Diamonds have been regarded as one of the most valuable commodities (Waren) in the world. They have been the stuff of legend and the privilege of royalty, the symbol of romance and of greed (Gier). They have been treasured (geschätzt) of their beauty, their hardness and their unique ability to capture (erobern) and transform light. Most of all, however, diamonds have been treasured because they are rare. In ancient times this scarcity (Knappheit) was real. Known to exist only in the riverbeds of India and jungles of Brazil, diamonds were the most exclusive of stones and only a tiny portion of the world´s people had ever seen one, much less worn one. Then, by the end of the 19th century the South African mines have been discovered and they brought an avalanche (Lawine) of stones into the market. Suddenly the privilege was transformed into a commodity for the mass. At this time the vast change of supply of Diamonds had little effect on their price because there was a deeply ingrained perception (tief verwurzelte Auffassung) around the stones even they were cascading into the markets of Europe. Realising that Diamonds would be virtually worthless once they appeared commonplace, a young Englishman named Cecil Rhodes worked to consolidate the entire Industry and keep the supply of gemstones (Edelsteine) sharp limited. Under his guidance the international Diamond Cartel was born. Following his philosophy it became one of the most successful cartels of all time. Since then this cartel has regulated the market for Diamond gemstones and maintained the fragile illusion of their scarcity. The cartels reach is legendary. It controls a significant number of the world´s diamond mines; it sorts and classifies a large percentage of the world´s rough stones; and through its Central Selling Organisation (CSO) in London it determines (bestimmt) who can buy which stones and how much each buyer must pay. Its strategy is as simple now as it was in Rhodes’s time: To balance the number of diamonds released (freigegeben) into the market in any given year and thus to perpetuate the illusion of diamonds as a scarce and valuable commodity. 1.2 Cecil Rhodes and the discovery of Diamonds in South Africa

In 1866 the accidental discovery of Diamonds in South Africa changed the Diamond Industry. The first stone, picked up on the Banks of the “Gariep River” by a 13-yearold boy, was generally dismissed as a geological fluke. The 2nd find, a stone of 83 ½ carats, was too tempting (verführerisch) to ignore. In 1869 the Diamond Fever hit South Africa 10.000 Miners had rushed to the plains of the Cape Province to stake their claims and make their fortune. Then, in 1872, five separate Mines had been established These Mines produced an avalanche of gem-quality stones. As the diggers delved deeper and deeper into the Kimberlite the miners tapped into underground water tables, flooding the claims and rendering (hinterlassen) them virtually unworkable. In 1874 the Steam-Powered Pump was introduced by Cecil Rhodes, a young sick Englishman. He rented out his pump to several Miners, and within a year Rhodes was serving all of the mines in the area. With...
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