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Debeers pleads guilty in 10yr old price fixing case { July 13 2004 } Original Source Link: (May no longer be active)
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2004/07/13/financial1453EDT0176.DTLhttp://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2004/07/13/financial1453EDT0176.DTL
De Beers pleads guilty in 10-year-old price-fixing case
- MARK WILLIAMS, AP Business Writer
Tuesday, July 13, 2004
(07-13) 12:35 PDT COLUMBUS, Ohio (AP) --
De Beers pleaded guilty in a 10-year-old price-fixing case Tuesday and was fined $10 million fine as part of an agreement that would clear the way for the diamond giant to resume selling diamonds directly in the lucrative U.S. market.
The company admitted conspiring to fix prices in the $500 million industrial diamond market. Industrial diamonds are used to make cutting and polishing tools for a variety of manufacturing and construction equipment.
De Beers has sold diamonds in the United States only through intermediaries since shortly after World War II, when it was first charged with price fixing.
The company was charged along with General Electric Co. in 1994. A judge later dismissed the charges against GE, saying the government had failed to prove its case.
U.S. District Judge George Smith accepted the plea in the case, in which the Department of Justice charged De Beers with keeping prices in the worldwide industrial diamond market artificially high.
The case was filed in Columbus because GE's industrial diamond business was headquartered in suburban Worthington.
Smith did not order any restitution, saying a separate settlement of a civil case resolved that issue. He also did not put the company on probation.
Smith said the company must operate under the regulations of the European Union and will be subject to the jurisdiction of courts in the United States if it decides to do business directly in the United States.
De Beers general counsel Glenn Turner entered the plea on behalf of the company. He declined to make a statement in court but said afterward that De Beers was happy to have the case resolved.
Turner said resolution of the case makes De Beers legally compliant in all parts of the world where it operates. He said, however, that the company has no plans to directly enter the U.S. retail market.
De Beers has stores in Tokyo and London.
"It doesn't make a big difference in the way we do our business," Lynette Hori, spokesman for De Beers in London, said before the hearing. "We operate a selling system to our clients from London and Johannesburg, and we have no plans to change that."
De Beers had sales of $5.5 billion and earnings of $676 million in 2003. The company spends $180 million on advertising.
The United States represents half of the worldwide diamond market.
Prosecution of De Beers has been difficult because U.S. officials have no jurisdiction over the company, which is based in South Africa.
But the case also has hindered De Beers from doing business in the United States, said antitrust lawyer John Majoras, a partner with the law firm Jones Day in Washington.
Corporate officials trying to enter the United States run the risk of being stopped by authorities, he said.
"That's a pretty big market to give up and not be actively involved in," he said.
On the down side, Majoras said the deal could expose De Beers to more lawsuits from plaintiffs who now think it is easier and less costly to sue the company.
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On the Net:
www.debeersgroup.com
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