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European Commission closes case on SOC complaints

January 31, 2007

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Brussels, Belgium—The European Commission (EC) has closed its investigation into De Beers' Supplier of Choice (SOC) program based on increased transparency in the company's distribution arrangements.

At the request of the EC, De Beers revised the mandate for the SOC ombudsman, an independent and commission-approved supervisor charged with safeguarding the objectivity of the SOC distribution system. According to the EC, this revised mandate allows enhanced transparency in the selection of sightholders and the allocation of diamonds.

"The combination of more diamonds coming into the open market from alternative sources of supply, together with improvements to the way De Beers' Supplier of Choice scheme works, means that there is now more competition on the rough-diamond market as a result of the commission's intervention," Commissioner Neelie Kroes said in a statement from the EC.

While SOC was initially approved in 2003, complaints alleged the program would enable De Beers to gather sensitive commercial information from clients that could lead to arbitrary supply decisions and impact non-clients' access to rough-diamond supply.

After an investigation into the complaints, the EC requested that De Beers increase transparency and the checks and balances of the selection process. In response, De Beers revised the ombudsman's mandate on Dec. 21, 2006. Among the significant changes, the ombudsman will review the information De Beers collects for the purpose of choosing sightholders and allocating rough diamonds. Other improvements include enhanced transparency of SOC criteria and the ability of the supervisor to apply compensation for incorrect supply decisions under certain circumstances. The ombudsman will also be able to conduct investigations at the commission's request or on his own.

In a statement, the Diamond Trading Co. (DTC) said it was pleased with the EC's decision to reject all outstanding complaints against SOC.

"We are pleased with today's announcement of the commission's decision," DTC Managing Director Varda Shine said in the statement. "It demonstrates, once again, that Supplier of Choice has withstood scrutiny from one of the world's most rigorous competition authorities, and the recent complaints about Supplier of Choice are without merit."
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