De Beers and US Anti

Trust Law
CASE
STUDY

Abhishek Bhatnagar
Arti Jain
Sameer Jain
Siddharth Gupta
Varun Baxi

15P003
15P011
15P045
15P051
15P055

De Beers Tryst with US Anti

Trust Laws
Two Anti Trust
Laws

189
0 Sherm
an Act

191
4 Clayto
n Act

1945 President Roosevelt request Justice

department to investigate De Beers
1976 Department of Justice filed a Civil and criminal
suit against De Beers and two other associates for
grit
1994 Justice Department filed a suit against De Beer
and General Electric for price fixing in Industrial
Diamond Market

Challenges Faced
1977 Israeli Dealers hoarded their diamonds and
drove the prices up creating a speculative bubble
1981 Zaire struck a deal with independent Belgian
merchants for trading of small industrial grade
stones thus threatening to destabilize industry
1992 Russia and Angola began leaking diamonds in
world market causing De Beer to load more
diamonds in its stockpile to maintain prices.
1997 Asian Crises saw a significant dip in diamond
sales bringing down the sales and the share prices.
1999 With more American investors investing in De
Beer, questions were raised on their business
strategy and accounting practices

SWOT Analysis
Strengths
1.High level of expertise in
Diamond Production
2. Extremely efficient team in
finding growth prospects
3. Strong Brand Name
4. Single channel marketing
beneficial
5.Extensive reach in various
Markets
6.Strong Market Control
-Complete regulation of
production line with marketing
and supply

Weakness
1. Accused of monopolistic
activities by the US justice
department- Growth prospects
in largest consumer market
hindered.
2. Destroyed shareholder value
with returns on capital below
weighted average cost of
capital.

Opportunity
1. Circumvent way through US
anti trust law to capture world
largest consumer market US(47%)
2. Use of Ingenuous Strategies
no tangible presence in US
,but using sightholders to
export diamonds indirectly to
the United States

Threats
1. Economic fluctuations
influence customer buying
trends
2. Government policies, taxes
affect the diamond market

Porters Five Force Analysis

Threats from
New
competitors

Suppliers
powers of
negotiation

Competiti
on in the
sector

Threats from
substitute
products

Customers
powers of
negotiation

Porters Five Force Analysis

Threat to entrants
(Very Low)

+
+
+
+
+
+

Rivalry among the

competitor
(Low)

+ Strong Brand
+ Trust already built with consumers and
partners
+ Expertise
+ Control of output
+ Distribution channel

Bargaining power of
supplier
(High)
Bargaining power of
Buyer

+
+
+
+
+

Threat of substitute

+
+
+
+

High cost of entry

Strong Brand
Existing mining and political relationships
Access to new mines
Owns distribution channel
Control of output

Controls output
Owns distribution channel
Alliances
Relationships with foreign governments
Cash on delivery

+ zirconium based diamond

+ Customs/tradition
+ War
+ Quality of product
- Luxury item / not necessity
-/+ Economy
zirconium based diamond
Cultural history
Social issues/status
High cost of entry

Strategy For Future

Branding De Beers should try to establish itself as
a brand in the international market.
US Anti Trust Laws - De Beers must try to settle
down the impending issues with the US Justice
department regarding its business practices as US is
one of the largest markets
Change of Business Model - De Beers Rough
diamond stockpile has risen from less than $1 billion
in 1980 to roughly $4 billion in 1999. The business
model is not sustainable in long run now that De
Beer does not control the supply as it once did

Continuing with the

Cons
monopolistic
attitude
Pros
Market Prices
determined by the
cartel
Remains leader of
the market
Inventory release as
per company
determined rate

US market stays
closed due to
entanglement with
Anti Trust Law
No specific time
frame for stockpile
reduction
Decreasing share
price
The shareholders
are not in favour of
this way of
functioning

Modifying the function to work

within the framework of US
anti-trust
law
Cons

Pros

Entry into the US

market
Reduction of
inventory
Gradual increase in
share price
Can gain leverage
of its brand value

Price is determined
by the market
Risks associated
with foraying into a
new style of
business
Lose its
stranglehold and
gets exposed
towards the market
uncertainties.

Thank You