Diamonds
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De Beers says operations staying outside U.S.
July 09, 2008
London—De Beers stands firm that it has no plans to launch full-scale operations in the United States, even though the London-based company's days of being locked out due to antitrust laws appear to be all but over.
U.S. District Court Judge Stanley Chesler announced in mid April that a written ruling approving the $295 million settlement in the De Beers class-action suit was forthcoming.
The case against De Beers began with a series of lawsuits filed in federal court in New Jersey alleging the diamond giant charged anti-competitive prices for its diamonds, that it monopolized the market and disseminated false advertising.
Under the court's ruling, De Beers will pay out the $295 million to both direct purchasers—those who bought diamonds directly from De Beers or one of its mining competitors—and indirect purchasers—those who bought diamonds from a company other than De Beers or one of its mining competitors.
The deadline to file claims in the settlement was May 19, with payouts expected later this year or in early 2009.
Despite the legal settlement, which protects De Beers from future antitrust suits, the company says it has no plans to change the way it does business, although it could now presumably enter the world's No. 1 consumer market for diamonds freely.
"Our business is run from London and South Africa," says De Beers spokeswoman Lynette Gould. "We have operated very successfully for decades without a U.S. presence and have no plans to change this."
Of course, De Beers has been running operations at arm's length in the United States for some time.
Its iconic "A Diamond Is Forever" advertising campaign is run through the Diamond Promotion Service, part of New York-based advertising firm JWT, and De Beers operates retail stores in Beverly Hills, Calif., Dallas, Houston, New York, Las Vegas and Washington, D.C., through De Beers Diamond Jewellers Ltd., its retail partnership with LVMH Moet Hennessy Louis Vuitton.
De Beers also has had a representative working in the United States since 2006 in what the company stresses is a "non-commercial" position.
Washington, D.C.-based Rosalind Kainyah, the former Diamond Trading Co. director of corporate communications, works to spread the word among members of Congress and the president's administration about De Beers' social investment in Africa.
Kainyah's jump across the pond in November 2006 stirred up talk of De Beers entering the U.S. market, just as the settlement of the antitrust suit is doing today.
Analysts interviewed by National Jeweler then viewed Kainyah's appointment as a precursor for other De Beers executives to follow suit.
 | | Last November, De Beers got into the watch business, offering at retail a line of eight men's and women's watches, above, priced between $12,000 and $38,000, and inspired by its popular "Talisman" jewelry collection. |
But, nearly two years later, Kainyah remains De Beers' only U.S. representative, and Gould says De Beers has no plans for additional ones.
Despite De Beers' repeated denial, some analysts remain unconvinced that the company does not have ambitions for the U.S. market.
Industry analyst Ben Janowski of Janos Consultants says he sees De Beers entering the U.S. market as a certainty.
"They will come," he says. "Even if it's a low level, they're going to have a presence here."
Predicting that De Beers will say more about its U.S. plans after the settlement concludes in July or August, Janowski says that De Beers' continued claims that it will not enter the market is just an example of a company being careful not to put the cart before the horse. Or, in this case, before a final court decision. It's a move he views as wise.
"I don't blame them. I'd be very cautious if I were them," Janowski says.
He says in the short term, De Beers' presence in the United States won't impact retailers. In the long term, however, he predicts De Beers will be working to see if its Forevermark branded diamond can be successfully launched here.
However, London-based industry analyst Charles Wyndham of WWW International Diamond Consultants, says that while De Beers may make small inroads into the U.S. market, he doesn't think the company has the funding right now to make a "serious entry."
He says De Beers has invested $200 million in its joint retail venture with LVMH—and presumably, the company won't be "rushing off into too many other ventures, and certainly not any major ventures."
But he agrees with Janowski that De Beers will try, at some point, to launch the Forevermark—a branding program that Wyndham says De Beers sees as the "new panacea to cure all their problems"—in the United States.
De Beers executives shared their plans for making the Forevermark one of the world's leading diamond brands during a series of events held from April 30-May 2 at the London rooms of auction house Phillips de Pury.
During these meetings, De Beers announced the rollout timeline for the Forevermark: Hong Kong, mainland China and its Macau region in the fourth quarter of 2008; Japan in the first quarter of 2009; and Taiwan, South Africa and India in the second quarter of 2009.
When asked if the Forevermark had a future beyond second quarter 2009, Gould says, "Yes, of course, and I am sure we'll hear about them in due course. The focus now is on Asia."
—E-mail: michelle.graff@nationaljeweler.com
Editor's note: This story first appeared in the June 2008 print edition of National Jeweler.
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