Forever: de Beers and U.S. Antitrust Law

In: Business and Management

Submitted By zoe9393
Words 13029
Pages 53


Forever: De Beers and U.S. Antitrust Law

Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I
Order reference F267708
CoursePack code C-788-275379-STU

“As a worldwide dealer in enchanting illusions, Disney has nothing on De Beers.”
- The Economist1
In 1999, a series of spectacular advertisements adorned the bus-sides and billboards of major
American cities. Set against a lush black background, the ads displayed a perfect set of diamond earrings, or a single sparkling solitaire. The lettering, in white, was sparse and to the point: “What better time to celebrate the timelessness of love?” they asked. Or, “What are you waiting for, the year
3000?” Some were even more direct: “This wouldn't exactly be the year,” they noted, “to give her a toaster oven.”
Coyly, the ads captured a joint fascination with the new millennium and the enduring allure of diamonds. How better to capture time than with a diamond, they urged. How better to herald eternal love? Indeed. According to analysts, U.S. diamond sales (30% of which occurred during the
Christmas season) were expected to surge by more than 10%, hitting a high of over $20 billion for
1999.2 A significant portion of this windfall would flow to De Beers, one of the world’s most successful corporations and the controlling force of the international diamond market.
There were many ironies behind De Beers’s millennial campaign, not least of which was that diamonds — those eternal gifts — had only been sold on the mass market for a hundred years. And that their allure was largely a creation of advertising. There also, though, were many stories buried behind the campaign — stories which ran to the core of the global diamond market and De Beers’s position within it. The millennial campaign, for example, was part of the company’s first attempt to…...

Similar Documents

De Beers

...DE BEERS De Beers is a market maker in the diamond industry as it acts as a liaison between the producers and retailers of diamonds. It captured and coordinated the market of distribution of diamond production through a reliable and stable stream of quality diamonds. DeBeers has been a highly successful and effective controller of the diamond market, having developed a unique purchasing and marketing cartel that has influenced prices in the market for almost a century. Since the company was founded in 1888, De Beers followed a strategy of supply control. In addition to mining its own diamonds, it bought diamonds from other producers controlling about 90% of the world's diamonds. The United States was far and away the world’s biggest purchaser of diamonds accounting for 46% of total demand followed by the Middle East with 12% and Japan with 9%. De Beers has advertised, for a long time, using the caption ‘A diamond is forever’, does the same apply for De Beers’ business model and strategy? Over 80% of the world’s diamonds were traded through the De Beers CSO until 1990s. De Beers’ tight control and regulation over a vast amount of supply and optimization of the timing of release through the CSO enabled it to keep prices high for diamonds successfully creating a notion that diamonds are scarce. The CSO served as a clearinghouse for the entire industry. Suppliers were forced to sign an exclusivity requirement with the CSO. It regulated the quantity and price in the market...

Words: 387 - Pages: 2

De Beers

...Case study De Beers- An Ethical Idealism “At De Beers there has always been a clear recognition that, while our primary purpose as a business shapes what it is that we do, it is how we work that defines who we are.” -Nicky Oppenheimer Executive Chairman, De Beers Introduction For generations, diamonds have been marketed as tokens of power and love. For some however, diamonds have a more utilitarian appeal. Easily concealed, immensely valuable and largely untraceable, stones from rebel-held mines have raised billions of dollars on world markets to finance revolution in Angola, Sierra Leone and the Democratic Republic of Congo (DRC). For years these "conflict diamonds" have encourage rebel leaders to arm and equip their armies in violation of UN weapons and financial sanctions. Diamond monopoly De Beers is notable for its monopolistic practices throughout the 20th century, whereby it used its dominant position to control the international diamond market. The company used several techniques to exercise this manipulation over the market: Firstly, it persuade independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to price control through supply. In 2000, the De Beers forced to change the model, due to certain unavoidable factors such as the decision by producers in Russia,...

Words: 2699 - Pages: 11

Antitrust Law

...Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies.[1] The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks. Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.[1] Countries may allow for extraterritorial jurisdiction in competition cases based on so-called effects doctrine.[1][2] The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not......

Words: 259 - Pages: 2

De Beers

...De Beers' Multifaceted Strategy Shift Faced with such challenges as new sources of competition and suspicion about conflict diamonds, Gareth Penny had to rethink the basics A diamond may be forever, as De Beers' famous advertising slogan contends, but is the same true of a business model? That was the question facing Gareth Penny, managing director of De Beers, in the late 19'90s, when the famed diamond cartel found itself beset by a series of events that ultimately forced it to examine and then retool its business strategy. Since the company was founded in 1888, De Beers followed a strategy of supply control. In addition to mining its own diamonds, it bought diamonds from other producers and had what it called the "central selling organization," controlling some 90% of the world's diamonds. Its tight control over such a vast amount of supply enabled De Beers to keep prices high for a commodity that is neither particularly scarce nor useful. If a competitor offered diamonds on the market outside of De Beers' central selling organization, De Beers would simply flood the market with similar stones, thus eliminating any pricing power the competitor might offer. By the end of the 1990s, the business model of controlling supply and managing how much of its inventory went to market at any time was no longer effective: New sources of diamonds were discovered in sufficient quantity that they could be sold competitively outside of De Beers' central selling organization. Demand for...

Words: 5529 - Pages: 23

Antitrust Laws

...Who Enforces the Antitrust Laws? The antitrust laws are enforced by both public and private parties. A. Government Enforcement The United States Department of Justice Antitrust Division (“DOJ”) and the Federal Trade Commission (“FTC”) share responsibility for investigation and litigation of cases under the Sherman Act; and, review potentially anticompetitive mergers under the Clayton Act. There is not a formal system by which the DOJ and the FTC divide enforcement responsibilities, the agencies devote resources to particular industries where they have investigated or litigated in the past. Typically the DOJ will review mergers in transportation industries, such as airlines or railroads, as well as the telecommunications industry. The FTC focuses its enforcement responsibility in the oil and gas, pharmaceutical, and health care industries. State attorneys general have authority to enforce federal and state antitrust laws. States investigating a matter arising under the federal antitrust laws will jointly investigate with either the DOJ or the FTC, or may conduct a separate investigation. Individuals or businesses that violate antitrust laws are subject to civil penalties that vary by state per violation for individuals, and vary by state per violation for corporations. In addition, state attorneys general have authority to seek restitution on behalf of the citizens of their states as a result of violations of either the federal or state antitrust laws. Some states allow......

Words: 3102 - Pages: 13

De Beers

...DeBeers “A Diamond is Forever” Prepared April 16, 2012 For decades, De Beers has been the preeminent name in diamonds. Thanks to a stockpile of the world's rough diamond supply, indelible marketing schemes and even negotiations with foreign governments for their diamonds, De Beers has been the most important name in one of the world's most lucrative businesses for almost a century. This paper will review the billion dollar rise and fall of a monopoly that has crushed competitors and cash-strapped governments since the 1800s. Diamonds became a symbol of love thanks to De Beers, which is fitting, since De Beers became what it is today because of a love story: the love of money. In the beginning, the diamond trade took place mostly in India and Brazil. With the discovery of diamonds in South Africa, the trade simultaneously took off and became much less profitable. Up until the mid-1800s, diamonds were a rarity and could be seen only on the hand of a monarch. But the diamond rush that began in South Africa in the second half of the 19th century flooded the market with diamonds, killing demand. It would take some ingenious plotting and advertising to keep the diamond's reputation as intrinsically valuable and desirable, which is where De Beers comes in (Goldschein, 2011). Company History and Overview De Beers got its start when English-born businessman Cecil Rhodes, broke into the diamond business in South Africa by renting water pumps to miners before buying diamond......

Words: 6593 - Pages: 27

De Beers

... | |Nom des étudiants |Chioderoli Christophe | | |Clavel Antoine | | |Curot Maxime | | |Hyvrier Sylvain | | |Russo Arnaud | | |Streiff Pauline | |Date |09.12.2011 | CAS DE BEERS [pic] Sommaire 1. Identifiez les influences structurelles dans l’environnement de De Beers. 2. À l’aide du modèle des 5(+1) forces de Porter, identifiez les facteurs clés de succès dans l’industrie du diamant. Lesquelles de ces forces ont connu les plus fortes variations ? 3. Considérez-vous que De Beers dispose de ressources uniques et de compétences distinctives ? La valeur de ces ressources et compétences est-elle croissante ou décroissante ? 4. Comment s’appelle le mouvement stratégique correspondant à l’ouverture de boutiques par De Beers ? Qu’est-ce qui justifie cette stratégie ?......

Words: 3092 - Pages: 13

Antitrust Law

...Antitrust law is the law of competition, and it is perhaps the least understood law of all. This article provides an overview and explanation of the essential principals of antitrust law, along with comments on certain recurring themes and recent developments in the voluminous case law by which the courts have struggled to give meaning and practical effect to the principal antitrust statutes. What Is Antitrust Law? Broadly speaking, antitrust laws seek to promote fair competition on the merits and to protect consumers and wronged competitor businesses from anti-competitive business practices — practices undertaken in effort to undermine competitive commercial behavior in a given market or line of commerce. The antitrust laws therefore forbid the wrongful acquisition or preservation of monopoly power, the abuse of monopoly power in order to establish a new monopoly, and concerted restraints of trade (i.e., business practices undertaken by two or more firms that improperly stifle or suppress “competition on the merits” in a given market). They also govern proposed mergers and acquisitions that are sufficiently large to constitute a threat to competition, and they address commercial practices that pose an arguable danger to competition on the merits in a properly defined antitrust market. The Principal Antitrust Offenses. Antitrust law is the law of competition. It is concerned with wrongs committed against competition on the merits in a given line of commerce or market. It......

Words: 5498 - Pages: 22

De Beers Diamond Corporation

...Assignment 1: Social Performance of Organizations The De Beers Diamond Corporation Dr. Beth Kane Business 475: Business and Society January 28, 2014 The De Beers Diamond Corporation is a multinational diamond mining, hops, trading, and manufacturing business. In this paper the nature, structure, and types of product this corporation is involved well be analyzed. As with every large corporation stakeholders salient stakeholders are involved with the shaping of the companies direction, three key stakeholders relationships and roles will be evaluated. There are five key points for primary stakeholders wielding influence inside the corporations mainframe and the evidence of this behavior at De Beers. During the building and development of most businesses there are social issues that arise to challenge the structure and integrity of the corporation, De Beers faced this as well. This paper will detail the issue in which De Beers faced as well as the corporate and social changes that were wrought from the situation. This paper will also cover a hypothetical situation were a first person narrative of the roles of forming a stakeholder coalition. During this hypothetical situation the leader role will explore three (3) potential holdups for the the forming of a stakeholder coalition. The De Beers Diamond Corporation is a privately owned multinational conglomerate established in 1888 by Cecil Rhodes. Rhodes invested money made from renting...

Words: 2390 - Pages: 10

De Beers

...Introduction In this paper I will be explaining how the diamond company manufacturing and importing company, De Beers, violated US antitrust laws in an effort to become the most sort after monopoly in the diamond manufacturing and importing industry. I will also be discussing how De Beers maintained their monopolistic power. Violation of Antitrust Laws De Beers was investigated for antitrust behavior because the company ended up violating antitrust laws. They violated antirust laws by importing and exporting diamonds from countries they were prohibited from buying diamonds from such as Sierra Leone. Also they purchased products from “outside producers” (Bates, 2) which were “BHP, Rio Tinto, and Alrosa” (Bates 2). Also De Beers was largely behind fixing the price of rough diamonds in order to make increase their profits and take away from other diamond companies. Pecuniary and Nonpecuiniary costs The antitrust act that was violated was the Sherman Act. Under the Sherman Act companies are prohibited from conducting any type of acts that would help to destroy healthy competition. There were several pecuniary and nonpecuiniary costs associated with antitrust behavior of the De Beers Company. Their actions cost other diamond companies millions of dollars so a settlement of “300 million”(Bates, 1) was greater to other diamond companies who substantiated a loss. Monopoly versus Oligopoly I believe that a monopoly can be bad for......

Words: 259 - Pages: 2

Antitrust Law

...| ANTITRUST LAW | | Name -Manpreet Kaur [Date] | “The mission of the Antitrust Division is to promote economic competition through enforcing and providing guidance on antitrust laws and principles”. Antitrust laws have been developed to create the strong foundation of a free & open market of a vibrant economy. Market is so competitive now a days, there are so many options available for products & services, which is the result of antitrust laws. Antitrust is developed to help both consumers & business owners. “These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices” Antitrust laws are developed by the U.S. Government, also commonly known as "competition laws". Antitrust law was put in place by U.S. Government to protect consumers from being vulnerable to exploitery business practices. Government protects consumers by ensuring that the competition which exists in the market is fair, & would also ensure that enforcement leads to an open-market which is consumer friendly. ANTITRUST LAW-GOAL & HISTORY The goal set by government is to protect the end user, consumer, antitrust laws “is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace”. Consider being in a market with one option, what it would offer to consumers, technically nothing, because there are no options. Antitrust law ensure that the “Competition in a free market benefits......

Words: 2734 - Pages: 11

Antitrust Laws

...Antitrust Laws After much research and investigations on Antitrust Laws, and reading up on individual cases, I think that overall Antitrust Laws are effective and good for the people. Without the Sherman, Clayton, and Federal Trade Commission Act, there would be a monopoly of every industry, trade, marketing, and services. This would in-turn lead to higher prices for the consumer, lower quality products, less innovation, and poor service. As I mentioned in my opening sentence, I will bring up two individual cases that the DOJ (Department of Justice) is pursuing when it comes to Antitrust Laws. I would like to begin by quoting the DOJ’s mission statement. Mission “The mission of the Antitrust Division is to promote economic competition through enforcing and providing guidance on antitrust laws and principles. Antitrust Laws The goal of the antitrust laws is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace. Competition in a free market benefits American consumers through lower prices, better quality and greater choice. Competition provides businesses the opportunity to compete on price and quality, in an open market and on a level playing field, unhampered by anticompetitive restraints. Competition also tests and hardens American companies at home, the better to succeed abroad. Federal antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation,......

Words: 918 - Pages: 4

De Beers

...n previous years De Beers owned a key resource for diamond production – mines. The monopoly’s power stemmed from the company’s ability to collect the world’s rough diamonds and send them out again, anonymously and bereft of origin. Because of turmoil which the company was facing on all fronts: illegal flow of diamonds from Sierra Leone and Angola, Russia’s diamond fiefdoms, etc; the formerly closely-held corporation had to undergo some rapid changes. Today De Beers maintains its monopoly power through marketing activities such as active advertising, e.g. the millennial campaign which was the company’s first attempt to brand gems, to sell a “De Beers diamond” rather than a regular diamond. De Beers tries to remove substitutes for its product and to make it unique in order to increase its market power. The possible substitutes for diamonds can be emeralds, rubies and sapphires. If people view them as diamond’s substitute, De Beer’s market power will be relatively little. On the other hand, if the company tries to increase the price for its product, some people can switch to other gemstones. That’s why De Beer’s makes so much effort to distinguish its product from any others and to support its image of a scarce and unique product. De Beers supports a symbiotic relationship between production and sales. The formation of a single marketing channel contributed to the diamonds price increase. In the past two and a half decades, rough diamonds have out-performed commodities such as...

Words: 256 - Pages: 2

De Beers Case

...economic rules, the price will finally drop. However, De Beers have controlled and manipulated the price by continuously purchasing the stockpiles of diamond that come from other competitors. The price of which, has amounted to more than $10 billion up till now. How long can De Beers last and how much diamonds can they buy? No one knows. 天价打造的“浪漫形象”。戴比尔斯在世界钻石市场的成功,可以说是一个近乎达到垄断的完美范例。它一方面总能刺激市场对钻石的需求,另一方面则减少钻石供给,即使在1955年通用公司(GE)研究实验室宣布发明了人造钻石后,戴比尔斯公司仍能成功维持钻石的高价完美形象。事实上,戴比尔斯公司每年花在广告上的费用多达1.6亿美元,不断传递着“Diamonds are Forever”的信息,持续钻石浪漫的传奇。 They has put much emphasis as well as financial resources on preserving the romantic image of diamonds. To be frank, De Beers spends as high as $160million in advertising every year, continuously conveying the idea of ‘Diamonds are Forever’ to us and make diamond a legend of romance. The success of De Beers in diamond industry is almost a perfect illustration for market monopoly. They stimulates the demand for diamonds on one side and decrease the supply on the other side. Even after the invention of rhinestones were announced by GE Research lab, De Beers still successfully keeps the valuable, precious, luxury and grace image for diamond. De Beers(德比尔斯)的自我声明是:“全球领先的钻石权威”和“钻石的梦想的守护者”并且是世界钻石理事会的成员之一,并参加了许多金伯利处理回顾任务Kimberley Process Review Missions和其他会议。他们声称,他们在金伯利的发展的过程中,发挥著举足轻重的作用. Being the ‘world’s leading expert on diamond’ and ‘the Guardian of the diamond dreaming’ as they claimed, De Beers has taken part in a lot of Kimberley Process......

Words: 1909 - Pages: 8

Forever: de Beers at the Millennium

...Forever: De Beers at the Millennium – Study Questions 1. Who writes the rules of the international diamond market? How are they enforced? * De Beers and the other diamond companies of the their time and specifically the Central Selling Organization (CSO) and the government partners where they are mining (?) * Their sorting process and the which went through many different grades that measured the 4 Cs: carat, color, clarity, and cuttability (?) 2. How has De Beers structured its relationship with the U.S. diamond dealers and the U.S. government? Are these relationships sustainable? * Most expensive stones were cut and polished in New York. The U.S. was the biggest market for De Beers. The Gemological Institute of America (GIA), the largest, most respected nonprofit institute in its field, had developed the widely-used D-Z color scale and the Flawless-I3 clarity scale for polished diamonds. De Beers had irked U.S. authorities by failing to appear, in 1994, in a suite by the Department of Justice alleging price-fixing in industrial diamonds in which it was a co-defendant along with General Electric. And socially, the diamond industry began to be criticized for dealing in “conflict diamonds” from African countries. (?) * These relationships cannot be sustainable (?) 3. What should the U.S. government do about the flow of diamonds from Angola, the Congo and Sierra Leone? What should De Beers do? * Continue the fight started by......

Words: 395 - Pages: 2