Nothing stays the same

The Wall Street Journal reports today that DeBeers is in talks with the Justice Department to reach a settlement in the long-standing case against the South African based firm. DeBeers is best known for their virtual monopoly of natural diamond. They are also a strong competitor in the industrial diamond market.

The case against Debeers stems from their industrial diamond business. It has been open since the 1940’s and was reignited in 1994 when they and GE were both charged with price fixing. The case against GE was thrown out after only two days in trial. With no business operations in the U.S., the Justice Department was unable to prosecute DeBeers. Sources say DeBeers is going to plead guilty and pay a fine to settle the case.

Why settle? Times are changing. There are more sources for jewelry quality diamonds. Artifical diamonds are starting enter the market. DeBeers has decided they need to have a physical presence in the U.S. They have been developing retail stores in Paris and Tokyo with a French firm. Other plans may be in the making. Legal issues cloud their ability to establish a high quality brand.

My interest in the story is that I worked for GE Superabrasives for three years. I started about six months after the price-fixing case was thrown out. What I always found interesting was DeBeers’ strategy to create stability in the marketplace. They wanted stable demand and stable prices. This held true in both their natural and industrial diamond business. That started to change in industrial diamond with new competition from Asia forcing prices lower.

It now seems DeBeers is dealing with the same problem on the other side of their business.

One thought on “Nothing stays the same

  1. The DeBeers quest for stability in diamond prices make me chuckle. OPEC has the exact same public mission for oil prices, but make no mistake, they want HIGH stable prices. The conveniently omit the fact that they want to keep prices high. Let’s face it, they could make prices stable and low if they wanted. Cartels are there for one reason alone and that is to enrich the members. In teh parlance of economists, they want to extract consumer surplus. Good Blog, keep it up.

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