Alrosa, De Beers Offer EU Diamond Trade Commitments

The European Union’s is considering accepting a proposal by De Beers and Alrosa to “phased down” De Beers’ diamond buying from Alrosa over a period of six years. If approved, rough diamond purchasing will decrees from $700 million next year to $275 million by 2010.

Following is the full text of the EU press release from today:

In response to an investigation launched by the European Commission into a possible violation of EC Treaty competition rules, Alrosa and De Beers have offered commitments to the Commission regarding their notified rough diamonds Trade Agreement.

The commitments offered foresee that quantities of diamonds to be purchased by De Beers, the largest supplier of rough diamonds in the world, from the Russian state-owned company Alrosa, the second largest diamond producer, would be phased down over a 6 year period as set out below and would remain at a maximum equivalent of $275 million/year after that period:

Diamonds to be sold to De Beers by Alrosa

The parties also agreed that two independent Trustees would monitor the commitments offered by Alrosa and De Beers respectively.

The Commission initiated an investigation triggered by the notification of a Trade Agreement in March 2002 between De Beers and Alrosa, by which De Beers agreed to purchase annually the equivalent of $800 million in rough diamonds from Alrosa for a period of 5 years.

Pending the investigation of the Commission, the parties suspended the implementation of the Trade Agreement and established an interim framework within which they continued to trade on an ad hoc basis.

The present commitments were offered after the Commission opened proceedings in January 2003 by issuing objections to De Beers and Alrosa on the grounds that the notified Trade Agreement appreciably restricted competition on the rough diamonds market by eliminating competition from Alrosa and that it also constituted an abuse of De Beers’ monopoly power (in alleged violation of respectively Articles 81 and 82 of the EC Treaty).

Alrosa’s and De Beers’ commitments will be available on the Commission’s competition website (http://europa.eu.int/comm/competition/antitrust/cases) and will subsequently be published in the EU Official Journal so that interested parties can give their views to the Commission within one month from the date of publication.

If their robustness is confirmed, the commitments will be accepted by the Commission and become binding on these companies through a so-called ‘Commitment Decision’. If companies subsequently breach a ‘Commitment Decision’, a fine may be imposed.