De Beers is set to phase out rough diamond purchases from Alrosa by 2009. A commitment by De Beers to end such purchases has been rendered legally binding by a formal decision adopted by the European Commission. De Beers' purchases of rough diamonds from Alrosa will decrease from $600 million in 2006, to $500 million in 2007 and $400 million in 2008.

 

The process will be overseen by a monitoring trustee, who will supervise De Beers' compliance with the commitments of the agreement. If De Beers were to break its commitments, the Commission could impose a fine amounting to 10 percent of De Beers' total worldwide turnover. 

 

From 2006 to 2008, there will be a phasing out of rough diamond purchases

De Beers’ purchase of rough diamonds from Alrosa will decrease from $600 million in 2006 to $500 million in 2007 and $400 million in 2008.

 

The Commission has also received a number of complaints about the Supplier of Choice system for rough diamonds. The Commission is conducting an ongoing investigation into these complaints. 

 

The full press release follows:

 

Competition: De Beers’ commitment to phase out rough diamond purchases from Alrosa made legally binding by Commission decision.

 

Commitments entered into by De Beers to end purchases of rough diamonds as of 2009 from Alrosa, the world’s second largest producer, have been rendered legally binding by a formal decision adopted by the European Commission. Following a phasing out from 2006 to 2008, De Beers undertakes to refrain from all purchases of rough diamonds from Alrosa. This will result in more rough diamonds being available on the open market, paving the way for genuine competition in the supply of rough diamonds. The Commission had been concerned that the practices of De Beers may have violated EC Treaty rules on abuse of dominant market positions (Article 82) but has now closed the case in the light of the commitments submitted by De Beers.

 

Competition Commissioner Neelie Kroes commented: “For the first time in the history of the diamond market there is an opportunity for genuine competition. De Beers’ long-running primacy can now effectively be challenged by its biggest competitor, Alrosa. The Commission’s decision frees up a viable alternative source for supply of rough diamonds, which will ultimately benefit consumers.”

 

De Beers, based in South Africa, whose registered office is in Luxembourg, is a global operator primarily active in the production and supply of rough diamonds.

 

Alrosa is a Russian company mainly specialising in the production of rough diamonds.

 

For much of the 20th century De Beers held an unrivalled position in the diamond market. Its grip over alternative sources of supply will now be broken. This creates a new opportunity for competition in the world-wide rough diamond market.

 

The commitments offered by De Beers relate to its purchases of rough diamonds from Alrosa and provide for the termination of purchases from Alrosa as of 2009 after a phasing out period from 2006 to 2008. During this period, De Beers’ purchases of rough diamonds from Alrosa will decrease from US$ 600m in 2006 to US$ 500m in 2007 and US$ 400m in 2008. This is approximately equivalent to a decrease from euro 500m in 2006 to euro 420m in 2007 and euro 340m in 2008.

 

A monitoring Trustee will supervise compliance with these commitments. The text of the commitments, the Trustee Mandate and the Trustee’s contact details will be published on the Commission’s and De Beers’ websites.

 

The Commission decision, based on Article 9 of the procedural Regulation (1/2003) for the implementation, in the present case of Article 82 (abuse of dominant position) of the Treaty, takes into account the result of consultations on the commitments offered by De Beers (see IP/05/664). This decision brings the proceedings concerning the Trade Agreement to an end. However, if De Beers were to break its commitments, the Commission could impose a fine amounting to 10 percent of De Beers’ total worldwide turnover.

 

The Commission has received a number of complaints against De Beers’ Supplier of Choice distribution system for rough diamonds (see IP/03/64). The Commission is currently assessing these complaints in the light of the market changes resulting from De Beers’ commitments.

See also MEMO/06/90.