2001

De Beers Can Go Retail, But New Strategy Up in the Air

Sept. 2001

The European Commission has okayed De Beers’ retail venture with LVMH, but also warned that its new demand-driven strategy, "Supplier of Choice," may break E.C. anti-trust law.

De Beers and LVMH said they plan to open diamond jewelry stores all over the world, including the United States, within the next year.

This new alliance should be competition for high-end retailers like Tiffany and Harry Winston. If its other stores are any indication, LVMH usually aims for the upper end of the market.

The Commission did, apparently, have problems with De Beers’ new demand-driven "Supplier of Choice" strategy. Because De Beers notified the Commission voluntarily about its new strategy, the E.C.’s lawyers will not automatically prosecute the company, but warn the group to halt those activities. The Commission appears worried that the strategy would increase demand for De Beers diamonds, as opposed to helping the market as a whole.

The E.C., whose fervent anti-trust lawyers recently halted the GE-Honeywell merger, has not specified just what’s it found objectionable to "Supplier of Choice," but, in a statement, De Beers said it would "respond positively" to any issues E.C. identifies in its Statement of Objections. De Beers has said it wants to be "legally robust."

Analysts expect there to be "horse-trading" with the E.C. as the company resolves the objections. The launch of "Supplier of Choice" was supposed to take place in June, but was postponed after the voluntary submission.

The question many have: If the E.C. eventually finds "Supplier of Choice" to be okay under its laws, could that eventually clear De Beers’ way to entering the United States?