Brussels, 16/01/2003 (Agence Europe) - Following an in-depth investigation and having heard the evidence from the different parties, the European Commission has, as it expected to do, cleared the De Beers's Supplier of Choice system for the sale of rough diamonds, with the latter agreeing to introduce certain modifications. The investigation began in July 2001, with the Commission warning the South African De Beers company in a statement of objections to the company's request for the commission to grant it a exception for its De Beers Supplier of Choice (SoC) distribution system. The Commission explained that the agreements could not be approved in their original form as the criteria for selecting the sightholders as well as the amount of detailed confidential information and contractual commitments required from them could restrict their commercial behaviour. De Beers agreed to rectify matters (see EUROPE 13 November p 15) and the Commission decided not to oppose the SoC system but explained that given remaining concerns that the system could be used to artificially reduce supply, namely of high quality diamonds, it would keep a close watch on the market. The Commission will also particularly want to ensure that the system does not lead to a restriction in the supply of adequate quantities of rough diamonds to traders in order to ensure enough liquidity in the market. The Commission reserves the right to reopen the case should changes in the factual situation modify its present view.
The Commission has also addressed a Statement of Objection to De Beers and the Russian Alrosa group, the second largest producer of rough diamonds in the world and, therefore, a potential competitor to De Beers. The two companies concluded a contract according to which Alrosa agreed to sell to De Beers rough diamonds worth around €800 million a year for a period of five years which De Beers will, subsequently, release on the market. Alrosa's contractual sales to De Beers amount to about half Alrosa's annual production. The Commission takes the view that the agreement restricts, to an appreciable extent, competition by eliminating competition from Alrosa. The Commission also takes the view that by entering into the agreement, De Beers has abused its dominant position in the rough diamonds market. De Beers and Alrosa have two months to reply to the Commission's objections.