De Beers in deal with EU

BRUSSELS – Top diamond producer De Beers has settled a long-running monopoly abuse case with the European Commission by pledging to phase out the purchase of rough diamonds from number-two producer Alrosa of Russia from 2009.

The EU executive Commission said yesterday that the settlement was approved under its so-called Article 9 procedure, which allows companies to make binding commitments to avoid abusive practices without admitting wrongdoing. “Following a phasing out from 2006 to 2008, De Beers undertakes to refrain from all purchases of rough diamonds from Alrosa,” the Commission said in a statement.”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.”De Beers, 45 per cent owned by mining conglomerate Anglo American, accounted for about half the world market in 2005.Alrosa extracts nearly a quarter of the world’s diamonds.Under the solution, De Beers purchase of Alrosa rough diamonds will reduce from US$600 million (N$3,7 billion) in 2006 to US$500 million in 2007 and US$400 million in 2008, the Commission said.The EU executive has been investigating the two companies for years.It said in 2005 it had concerns that the volume of Alrosa rough diamonds bought by De Beers might enhance De Beers’s market power and eliminate Alrosa as an alternative source.The Commission is involved because De Beers also operates in the European Union.More than once, the Commission has sent out possible compromises to customers and competitors for their comments.The European Union executive opened a probe after a five-year deal in 2002 between the companies, in which De Beers agreed to buy US$800 million of rough diamonds a year from Alrosa.The firms suspended the agreement but Alrosa, which sells about half of its rough diamonds outside Russia, continued to sell most of its international supply to De Beers.-Nampa-Reuters”Following a phasing out from 2006 to 2008, De Beers undertakes to refrain from all purchases of rough diamonds from Alrosa,” the Commission said in a statement.”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.”De Beers, 45 per cent owned by mining conglomerate Anglo American, accounted for about half the world market in 2005.Alrosa extracts nearly a quarter of the world’s diamonds.Under the solution, De Beers purchase of Alrosa rough diamonds will reduce from US$600 million (N$3,7 billion) in 2006 to US$500 million in 2007 and US$400 million in 2008, the Commission said.The EU executive has been investigating the two companies for years.It said in 2005 it had concerns that the volume of Alrosa rough diamonds bought by De Beers might enhance De Beers’s market power and eliminate Alrosa as an alternative source.The Commission is involved because De Beers also operates in the European Union.More than once, the Commission has sent out possible compromises to customers and competitors for their comments.The European Union executive opened a probe after a five-year deal in 2002 between the companies, in which De Beers agreed to buy US$800 million of rough diamonds a year from Alrosa.The firms suspended the agreement but Alrosa, which sells about half of its rough diamonds outside Russia, continued to sell most of its international supply to De Beers.-Nampa-Reuters