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BVGD Pushes European Commission on SOC

Mar 24, 2006 7:09 AM   By Marc Goldstein
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(Rapaport…March 24, 2006) Now that the European Commission (EC) ruled to end trade between De Beers and ALROSA, beginning in 2009, the Belgian Association of Traders of Polished (BVGD) wants the governing body to address supplier of choice (SOC.)The association sent a 15 page letter with this request on March 17.

The BVGD explained in a recent press release that by comparing the 2005 estimated sales numbers between the two diamond majors of $695 million, with the amount allowed in 2006, the extra rough available to the market is $95 million. Compared with a worldwide mining output of $12 billion, the difference represents 0.08 percent, or “hardly an opportunity for genuine competition” as described by EC commissioner Neelie Kroes.

While the BVGD filed an official complaint with the EC in July 2005 against the SOC, the dealers consider that the EC’s ruling to end De Beers/ALROSA agreement was only the first step.

First, the BVGD sees no big changes until 2009, and second, it makes no assumptions about market conditions four years from now in 2010. For the BVGD the open issue remains with the SOC, which embodies the implementation of a system based upon an abuse of dominant position.

Lynette Hori, spokeswoman for De Beers, told Rapaport News, “The supplier of choice is a strategy designed to drive consumer demand for diamonds in a long term, sustainable way, and is not based on a dominant position.”

André Gumuchdjian, who recently resigned as president of the Belgian polished diamond dealers association (BVGD) and who has been championing the rights of smaller companies,considers, “Since no official position was ever taken by the HRD, which would have put things in a clearer perspective, some higher officials at the HRD tried constantly to undermine and belittle our work.”

So, now the BVGD is renewing its “call to the Commission to take action concerning SOC. Again at the last sight, De Beers raised its prices for rough without any upsurge of demand from the market,” Gumuchdjian said.

“This proves the claim that SOC which was touted by De Beers as being a demand driven mechanism, is false. The industry has never been as supply-driven as today. De Beers knows that sightholders don’t have any other choice and will pay whatever price it asks.”

Hori said the Diamond Trading Company “only makes price adjustments when it believes them to be sustainable by the market.”

“Of course, SOC is demand driven,” she said. “Diamonds fight for their share of the consumers’ wallet in a fiercely competitive environment.”

In order to clarify the EC’s procedure, there are basically three stages for handling complaints brought under competition rules:

1. Examination of the complaint, and decision making what action should be taken.

2. Further investigation. If the Commission considers that there are insufficient grounds for acting on the complaint, it informs the complainant of its reasons and offers him the opportunity to submit any further comments within a time-limit. This is the procedure which was applied for the De Beers / ALROSA case.

3 Decision making. The Commission decides to initiate a procedure or to adopt a decision rejecting the complaint.

According to the BVGD, they’d desire swift EC action.

“De Beers is, in all markets, aggressively pursuing all retailers to encourage them to buy from sightholders,” Gumuchdjian said. “Recently in Italy, DTC [Diamond Trading Company] has written to all the jewellers asking them to send their company information, which would be place on the DTC Extranet, which is only accessible to sightholders.”

“In the letter DTC informs the jewellers that the sightholders will get in touch with them,” a monopolistic action viewed by BVGD’s original complaint in 2005.

In order words, if jewellers want the services and use of logo offered by the DTC, but in order to participate they must only use SOC members, which ultimately leaves out individual dealers in Antwerp.

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Tags: Alrosa, Consumers, De Beers, DTC, HRD, Sightholders
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