EC Ends Rough Diamond Investigation Following SoC Improvements
January 31, 07
The European Commission has closed its investigation of the rough diamond market following changes that De Beers has made to Supplier of Choice (SOC). The EC said this afternoon that the investigation ended, "on the basis of increased transparency in De Beers' distribution arrangements." DTC MD Varda Shine said she is pleased with the decision. The EC reported that at its request, De Beers revised the mandate for the SoC Ombudsman, allowing enhanced transparency in the selection of Sightholders and in the allocation of diamonds. This, the EC added, will enhance competition in the rough diamond market. The EC’s Competition Commissioner Neelie Kroes said, "The combination of more diamonds coming onto the open market from alternative sources of supply, together with the improvements to the way De Beers' Supplier of Choice scheme works, means that there is now more competition on the rough diamonds market as a result of the Commission's intervention." The Ombudsman, an independent and Commission-approved supervisor, is an integral part of the SoC system. In a press release, the EC stated that a number of complaints had been lodged with the Commission, alleging that SoC allowed De Beers to gather "excessive sensitive commercial information from its clients, which could ultimately lead to arbitrary supply decisions and indirectly aggravate non-clients' access to raw materials." In light of the resulting investigation, De Beers reportedly improved the transparency and the checks and balances of the SoC selection process – at the Commission's request. The EC further noted that De Beers has "significantly revised" the Ombudsman's mandate on "Other improvements include enhanced transparency of the SoC criteria through the publication of their weightings, the possibility for the Ombudsman to apply in certain circumstances compensation for incorrect supply decisions, the possibility for the Ombudsman to conduct investigations at the Commission's request or on his own initiative and more detailed rules on conflicts of interest." "The Commission considers that the revised Ombudsman mandate enhances the level playing field for supplies of De Beers' rough diamonds. Moreover, with his wider powers of investigation, the Ombudsman, who will closely cooperate with the Commission, is well equipped to safeguard the correct implementation of the SOC scheme." A separate complaint, relating to alternative sources of rough diamonds, was also submitted. Regarding this complaint, the EC said in its decision that it relied considerably on De Beers' phasing out purchases from Alrosa. Therefore, the Commission concluded that the main competition concerns of the complaints have been addressed. The Commission closed its announcement stating it will continue to monitor the implementation of De Beers' commitments and the SoC scheme. In response, the DTC said it is delighted that, "after further thorough and detailed examination of its sales and business practices, the European Commission has decided to reject all outstanding complaints brought against the DTC." The DTC noted that it had extensive and constructive discussions with the Commission, and that it voluntarily agreed that the scope of the SoC Ombudsman's investigatory powers will be expanded. "The mechanism by which the Ombudsman reports to the Commission will also be more formally operated. The DTC believes that the Ombudsman is an effective forum for the resolution of disputes relating to SoC and therefore welcomes the enhancements to this role." Shine said the Commission’s decision demonstrates that SoC has "withstood scrutiny from one of the world’s most rigorous competition authorities and the recent complaints about Supplier of Choice are without merit.” Currently, a case relating to the SoC Ombudsman is being heard in the Chancery Division of the High Court in
More details about the case are available in