De Beers close to US entente

Dan Atkinson|Mail13 April 2012

ONE of history's longest-running legal grudge matches is tantalisingly close to a settlement.

A year short of its 60th anniversary, the epic spat between the American government and De Beers, which dominates the world diamond market, may finally be coming to an end.

The original protagonists - President Franklin Roosevelt and De Beers founder Ernest Oppenheimer - are long dead. Yet the American indictment against De Beers - that it is a price-rigging cartel and should be banned from the US - still stands.

But, as befits the mysterious world of precious stones, nothing in this dispute has ever been quite what it seems.

Officially, US action against De Beers has been motivated solely by the company's blatant disregard of American competition law.

In fact, the original legal move was effectively a revenge strike after Oppenheimer withheld industrial diamonds from the US during the Second World War, fearing a glut would depress prices.

Officially, De Beers has been unable to do business in America for more than half a century as a result of that 1945 Department of Justice ruling. In fact, the US is the largest single market for De Beers, although the stones have to be routed through intermediaries based in London.

Officially, no De Beers employee can visit America, on pain of arrest. In fact, staff routinely travel to the US, but only on holiday.

Recently, a senior employee had to cancel a speech to a diamond conference when it emerged that the Caribbean island chosen for the venue was US-administered.

Indeed, for most of the post-war period, De Beers was in the curious position of being shunned by both its biggest market, America, and one of its biggest suppliers, the Soviet Union.

But just as it was able to find a back way into America, so it enjoyed cordial relations with Moscow's communist bosses, despite formal denunciations of the company's white-ruled South African apartheid homeland.

Given the ease with which De Beers has managed to do business in America, why the sudden urge to bury the hatchet? Mainly because the company itself has changed drastically in the past few years and the old fudge is less appealing than it was.

These days, De Beers has given up trying to control the diamond market, preferring to sharpen up its mining operations and sell its own branded stones directly through flagship stores such as the branch in London's Piccadilly.

The image these days is not of buttoned-up South African men with attache cases - it is of supermodel Iman, the public face of De Beers.

But until the 1945 ruling is set aside, along with a 1994 indictment for suppressing an artificialdiamond manufacturing process bought from General Electric, it cannot properly exploit the American market, which buys nearly half of all diamond jewellery.

The company is 'hopeful of a resolution, and perhaps soon there will be an historic handshake between Nicky Oppenheimer, the bearded, genial De Beers chairman, and R. Hewitt Pate, the boyish assistant attorney general in charge of the anti-trust division.

Alas, Pate is not alone in gunning for De Beers. At least two huge class-action lawsuits from plaintiffs claiming losses as a result of De Beers's cartel operations are waiting for the company should it set foot back in America.

As with its products, it seems that De Beers's legal problems in the United States are on course to last for ever.

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