DeBeers Diamonds: Not A Monopoly?

[Skott]

I remember a while ago watching a documentary about the diamond business... specifically the part about DeBeers and its monopolistic human-rights violating practices. However, after doing a search on the web, I was only able to come up with this reference:

http://www.wam.umd.edu/~sek/wedding/mlynek.html#mines

Which is obviously outdated, since DeBeers runs commercials in the US all the time now.

My question: When did DeBeers lose its status as a monopoly? And how?

Also, if I wanted to buy a diamond that didn't pass through DeBeers hands, how would go about doing that?

Thanks for the help!

Scott

P.S. The human rights violations had to do with DeBeers not allowing their diamond miners, mostly black south africans, to have congugal relationships with their wives and forcing them to live in mud huts for months at a time. I did have a URL for that at one time, but I don't think it's available any more.

[astorian]

Historically, the U.S. federal government has only taken legal action to break up DOMESTIC companies that engage in monopolistic practices. DeBeers is not an America firm, and so it has been considered off-limits by the U.S. Justice Department.

I'm not a lawyer, so I won't offer an opinion as to whether we COULD take action against a foreign-based monopoly, but I question whether it would be worthwhile. Given the huge international demand for diamonds, and DeBeers near-stranglehold on the diamond supply, I suspect DeBeers could play hardball with the U.S. government, and maybe even win.

[Skott]

It's not so much the idea of breaking up DeBeers, which the US could not do, but the idea that at one time DeBeers was not allowed to operate in the US and had to do all its US business through a third party (Ayer's); however, you can currently find DeBeers business, ads, etc., all over the place.

What changed? When did it change? Why?

Also, many people point to the diamond business as one of the major starters of the aparthied concept. Was it because of the end of aparthied that the US policy changed?

[SuaSponte]

As a matter of fact, due to antitrust concerns, DeBeers' executive do not travel to the United States (to avoid subpoenae, service of process, etc.)
Source of information: Several articles in The Economist, which seems to have an unhealthy obsession with DeBeers.

[Gunslinger]

They are a monopoly, they just stay out of the US, and sell to you through (legal) distributors.

[stuyguy]

Skott:

That was indeed a kick-ass documentary! I enjoyed it so much that about 6 mos. ago I tried to find it again. I got as far as nailing down the exact title, producer and airdate:

The Diamond Empire
Produced by Bee Reynolds
Aired on Frontline (PBS) on 2/1/94


The doc said -- as other posters have mentioned -- that there is a standing anti-trust suit (or is it an actual violation/conviction?) against DeBeers, thus no execs enter the US for fear of being slapped with a subsoena.

The doc also said that one of DeBeer's monopolistic tactics is to buy out all new gem sources the moment they enter the marketplace. A new diamond strike in Australia, and the Soviet diamond supply that burst on the scene when the Iron Curtain fell, are the two illustrations they gave. So, bottom line: good luck finding a non-DeBeers diamond outside of an antique shop.

(BTW, you mention Ayers. Are you talking about N.W. Ayers, the Chicago-based ad agency that (I think) creates DeBeers' advertising? They are not in the gem-selling business.)

MINOR HIJACK: The second most facinating thing the doc taught me is that diamonds are not rare. There is a huge glut of them in the world, but they are released into the marketplace at a trickle -- by DeBeers -- in order to keep the prices artificially high.

The MOST fascinating thing I learned is that everybody who currently owns a diamond -- your grandmother, the Queen of England, your fiance, etc. -- has unwittingly been recruited as a "co-conspirator" in DeBeers' scheme. Why? Because if diamonds were valued at their real market rate (not very rare) instead of today's artificial rate (rare), the value of EVERYBODY'S diamonds would sink like a stone overnight. Money -- not just politics -- makes strange bedfellows, too.

[yabob]

A tidbit you forgot to mention is that the "tradition" of the diamond engagement ring (as applicable to the common person) was invented by DeBeers about 100 years ago.

I saw that "Frontline" commentary, too.

Russia and Australia are beginning to buck DeBeers - they now have a mere 50% of the market instead of 70%, and are beginning to hit back. An interesting article here:

http://www.thestandard.com/article/display/0,1151,4877,00.html

I'm not a lawyer either, but I would guess being barred from selling your product in the US (except through intermediaries) does not bar you from advertising it should you wish too.

Overall, DeBeers behavior as a corporation makes Bill Gates look like a socialist, makes Nike look like a charitable organization, and the only reason why the marketing tactics of the tobacco companies are more odious is that DeBeers isn't marketing a product that actually presents any health risks to the consumer. They only convince people to give up unreasonable amounts of money for a pretty rock.

One commentator I heard on NPR suggested that a diamond was actually a "semi-precious" stone, and should sell for about a tenth of its current price. That may be a bit extreme, but it is definitely true that DeBeers has enjoyed 100 years of a very inflated market due to their operating a cartel.

[yabob]

Gee, maybe somebody ought to report a bug to vBulletin corcerning their automatic URL parsing. Although uncommon, commas are legal parts of URL names, as in that one I just posted. ",1151,4877,00.html" is part of the URL.

[Skott]

Stuyguy:

Thanks for the info on the documentary... I'll have o see if I can find it again; it's been a while since I've seen it.

I do remember the information on the idea that diamonds are not rare at all and that DeBeers buys up any excess in the marcketplace in order to keep prices artifically high. Just think of it... storehouses with tons of diamonds in them that just stay there for years.

It all seems ironic: The object that is supposed to be a symbol of the deepest love comes from a company that one might actually have the inclination to call evil after hearing their practices.

Believe it or not I lost a friend when I told her about the information from that documentary. Then again, it could be my fault: All she did was say "I really think those DeBeers commercials are romantic."

yabob:

Thanks for the link.... good information there. I've actually heard, though, that the diamond engagement ring dates back to the 15th century, at least according to my "Extraoridnary Origins of Everyday Things" (by Charles Panati) book.

I wouldn't doubt, however, that DeBeers made it popular and then a required part of the wedding process.

So what does one do when he wants to ask a girl to marry him but not partake in the depravity of DeBeers?

[yabob]

Yep. The engagement ring went back to the 15th century for the aristocrats who could afford it. DeBeers marketing stroke was the idea that the common man should pony up two months of wages. Before that time, ordinary people may have gotten a gold ring, perhaps with the woman's birthstone, and usually did not spend that much money on it.

[Chronos]

If you want to impress your SO with a precious stone, without serving the DeBeer's monopoly, why not go for a genuinely rare stone, like a saphire? Star saphires in particular are amazingly beautiful, but also extremely expensive, so weigh the pros and cons accordingly.

[casdave]

Remember, when you buy a diamond you are heping to keep the war in Sierra Leonne going.

It has been suggested by Tony Blair and several other politicians that the only way to stop some of these greed driven conflicts is to boycott the mercants who deal in stone obtain from such places.

Incredible amounts of money have been spent by De Beers in finding a way to authenticate natural diamonds because of the threat of artificial ones. It might now be possible to identify which area they came from too.

In an effort to hang on to their monopoly De Beers have experimented with laser-etching gemstones with their copywrighted trademark.

The mark is minute but it makes the differance in the price of the two. This has to be the ultimate in that pointless excercise - the designer label.

[Skott]

I'll have to think about alternatives to diamonds... but that's not my first inclination. One thing I have heard about is a field in the midwest where you can search for diamonds yourself by sifting through a "diamond field". Only thing is, I'm on the west coast.

So, casdave, tell me more about Sierra Leonne... I haven't heard anything about.

This all reminds me of a Bloom County comic strip:

Opus: Um... I'm recently engaged. Apparently I need some diamonds.

Salesman: Certainly! We'll make it simple... What's your life savings?

Opus: Actually, I was saving so we could go on an African photo safari...

Salesman: Come sire! Why spend money on a life-enriching experience when you could blow a wad on a chip of glass-like material? Remember... a diamond is forever!

Opus: Forever *what*?

Salesman: We're not sure, but the woman who dies with the most wins!

Opus: WHO STARTED THIS COCKAMAMY IDEA?!

Salesman: Guilty!

Opus: Well, heck... I can't afford much.

Salesman: Sir! Maybe there's a minor purchase you could put off...

Opus: [walking away with a huge diamond ring] Shoot... who needs a house??

And in the background, there's a sign that changes from "Remember! A woman without diamonds is a tree sloth!" to "...is gross buckets!" to "...is like a day without twinkies!" to "is a parsnip."

*finds himself caught between logic and social obligations*

[casdave]

Skott

Don't forget Jonas Savimbe and Angola too.

Amazing how the conflict there has died down since an embargo was placed by the UN on diamonds mined there .

Artificial diamond are as large and chemically the same as natural ones so why is there a need to take part in the De Beers monopoly?

As I say, designer label vanity.

[tracer]

Personally, I'm hoping the synthetic diamond biz gets its act together enough to make gem-grade diamonds indistinguishable from the ones dug out of the ground. Then we can pretty much wave the DeBeer's monopoly bye-bye.

[tracer]

Chronos wrote:

If you want to impress your SO with a precious stone, without serving the DeBeer's monopoly, why not go for a genuinely rare stone, like a saphire? Star saphires in particular are amazingly beautiful, but also extremely expensive, so weigh the pros and cons accordingly.

Everything you've ever wanted to know about sapphires:
http://www.fix.net/~jamiefoster/gemstuff/sapphire.html

According to that page, synthetic Star Sapphires were first produced in 1947.

[Gaudere]

More miscellaneous sapphire trivia: Sapphires are generally cheaper than ruby; they are the same stone (corundum) but the true red ruby is pricier that an excellent quality sapphire. If a corundum is pink, green, white, yellow, orange, blue or black it's a sapphire; if it's red or reddish-purple it's called a ruby. Top quality rubies and sapphire are expensive, but still less than a top quality diamong, and a primo emerald tops them all. Most synthetic stars are "Lindys", so named for the company that made them--look on the back and you will see a small cursive capital letter "L".

Personally, I'm hoping the synthetic diamond biz gets its act together enough to make gem-grade diamonds indistinguishable from the ones dug out of the ground. Then we can pretty much wave the DeBeer's monopoly bye-bye.I have my doubts--haven't we discussed thie before, tracer? Or was it someone else? :) You are buying romance, not a certain chemical composition. Just try to buy your girlfriend a synthetic diamond for an engagement ring. ;) I'd rather have a plain gold ring than a synthetic stone for my engagement ring, and I am more accepting of synthetics than most. The synthetic stone market has affected the cheapo colored stone market, but people who want a top quality colored stone are still willing to pay for it. I trust that diamonds will be the same. The synthetics will be used in earrings, bracelets, etc., but they'll almost certainly make little inroad on the engagement ring market, and very little for the high-end diamond market as well. They *will* affect the poor-quality diamond market, I predict--the yellowish, cloudy stones used in inexpensive jewelery. DeBeers will lose a segment of their low-end market if diamond synthetics become competitive, and will have to adjust, but the high-end will remain relative untouched, I suspect.

[Chronos]

Yeah, tracer, a flawless ruby is worth more than a flawless sapphire (and both are worth more than the free-market price of diamonds), but I had understood that a star sapphire (whis is actually flawed, from a crystalography standpoint) was worth more than a ruby. Yes, they can be synthesized, but so can rubies (same chemical, different impurities), and star gems have to be harder to make than non-stars.

Besides, I happen to think that sapphires are prettier. :p

[Gaudere]

Stars aren't any harder to synthesize than a non-star synthetic--as tracer noted, synthetic stars have been around for quite some time. Quarts, garnet and mica can also exhibit stars ("asterism") if cut properly. The "star" comes from the "silk" (usually rutile needles) in the stone. Heating the stone can eliminate much of the silk, resulting in a clear stone but one without a star (many sapphires are heat-treated to remove the silk). Most stars you see are totally opaque with silk, which is not desirable in a star. The best stars are brilliant, clear blue, with just enough silk to give it a strong star.

[Random]

Maybe we're starting something here. This is at least the third thread in the last 8 months or so that evolved into a debunking of the whole DeBeers-created myth about diamonds.
See, for example, my rant at

http://boards.straightdope.com/sdmb/showthread.php?threadid=17005

[Skott]

Okay, so let's recap to see if I understand everything:

Question 1: Since DeBeers is a monopoly, how are they allowed to do business/advertise in the US?

Answer 1: They don't do business in the US and anybody can advertise (except for cigarette companies) regardless of monopololy position. DeBeers commercials are especially unique since they are more promotions than advertising.

Question 2: What is an alternative to buying a DeBeers diamond ring as an engagement ring?

Answer 2: Buy a different stone (e.g. sapphire); unless you mine it yourself it's impossible to tell with whom a diamond originated (at least not until DeBeers begins laser etching their diamonds).

Question 3: Is DeBeers evil?

Answer 3: Santa ain't visiting, is he?

All said and correct, and in deference to Random's threadspot, I ask two more questions:

1. Is it possible to tell a diamond-desiring woman about the true history of diamonds without getting castrated? Would she ever accept it?

2. What does it say about someone who requires expensive jewelry, regardless of the source, to feel loved?

[Usurer]

Friendly neighborhood pawnbroker here. Until I became a pawnbroker, I told my wife she'd never get a diamond. I said I'd spend the same money on a car for her, or to take her to Polynesia or someplace, but that diamonds were a horrible ripoff. Then I became a pawnbroker. All of a sudden, diamonds were common and she got them every birthday, etc.
So here's the deal: In wholesale terms, a diamond has to be at least a 10 point (1/10 carat) before it's worth anything at all. That means a sparkly ring with many, many diamonds in it is worth far less than one with one big diamond.
The standard retail markup on diamonds (and, indeed, most jewelry) seems to be about 300 percent. That is, a 1/4 ct diamond I buy from my wholesaler for $220 will generally sell for $660 to $880. Further, my wholesaler buys his diamonds in Israel and probably makes 300 percent markup himself. My point, in any case, is that diamonds are neither especially rare nor expensive, except when presented for sale to the public.
BTW, synthetic emeralds have apparently gotten so good now that many jewelers can't tell them from real ones. Diamond buyers should also watch for Moissanite, a synthetic diamond that fools standard diamond testers (your salesman should have a Moissanite tester on hand).

[samclem]

Userer said The standard retail markup on diamonds (and, indeed, most jewelry) seems to be about 300 percent. That is, a 1/4 ct diamond I buy from my wholesaler for $220 will generally sell for $660 to $880. Further, my wholesaler buys his diamonds in Israel and probably makes 300 percent markup himself.

You are right about the general standard being a 300% markup on jewelry in a typical commercial jewelry story.

However, I doubt that your wholesaler gets them for $75 for a 1/4 ct. He probably pays $125-175, depending on the quality.

At $9/point, you're paying pretty stiff wholesale.

I would be hard pressed to envision an $800 1/4 ct.(even in a department store).

But if you run a pawnshop, why do you need to buy overpriced 1/4 ct diamonds from a wholesaler. That's why you're there, to buy them from the public for $75-$125.

[foolsguinea]

1. Diamonds are the greatest of all precious stones.
>>Hmm, well, they're the hardest, but that's their chief superlative quality.

2. They're the most beautiful of precious stones.
>>OK, obviously, this is in the eye of the beholder. I much prefer red coral, malachite (a cyan & green semiprecious), and various green stones to boring little yellow, white, and gray diamonds (which is most of the diamonds you'll see, admittedly). Why not get something visually interesting, instead of the merely obvious?

3. Diamonds are white, more or less, and the closest to clear of precious stones. (Thus perhaps the most boring ;)!)
>>Actually, as a mineral, diamond is commonly rather brown. There are gorgeous green diamonds, red diamonds (now those can really be worth something), blue diamonds, and lots of yellow and brown diamonds. Ask a jeweler about these "unusual" colors. You might be surprised what a diamond can look like.

4. Diamonds are the rarest & most expensive....
>>Next to rubies? Red coral? Yeah, whatever. Even your "classic" color diamonds (white/yellow/grey/blue) litter jewelry stores across the world. Throw in the browns, and, well, there are a lot. (Of course, there's a lot of demand, too.) DeBeers is protecting its income by limiting the supply, or they'd be pretty cheap (relatively).

5. It just isn't an engagement ring without a diamond.
>>There is no such law on the books. Wedding rings don't have to be gold, either. Of course, it's nice if an engagement ring or a wedding ring is recognizably that thing, but then, the "ring finger" serves that function in our culture. You have a lot of options, and of course, you don't necessarily need rings at all.

[Usurer]

Yeah, I buy diamonds off the street for about half of wholesale, but sometimes I don't have the right grade, color, size, shape that a customer wants. Most of the stuff that comes in from the general public is not all that great, mostly Wal-Mart stuff...
$800 for a quarter carat might be a little high, but not much. You wouldn't believe the number of people around here paying $1500 for a 1/4 carat wedding set; subtract $800 from the $1500 total price and you're left with $700 for the setting, which is outrageous considering how much the gold in them isn't worth. These customers almost cry when I tell them I could've sold them the same ring for $600.
I think the current jewelry markup is probably the reason most jewelers don't buy stuff off the street--it's easy to appraise a $600 ring for $1800 when you're not the one buying it.

[Gunslinger]

Originally posted by Skott
One thing I have heard about is a field in the midwest where you can search for diamonds yourself by sifting through a "diamond field". Only thing is, I'm on the west coast.


Yep, it's in Murphreesboro, Arkansas. DeBeers owns it, but can't mine it because they're not allowed to do business in the US (the monopoly thing)...so they "donated" it to the state. It's a state park, and they even rent shovels and sifting screens, the money going to the state treasury.

[dtilque]

There is an active diamond mine in the US. The Kelsey Lake mine is in Colorado near the Wyoming border. See here (http://205.136.241.171/Largest.htm) for details about the largest diamond found in the US.

[TampaFlyer]

> 1. Is it possible to tell a diamond-desiring woman about the true history of diamonds without getting castrated? Would she ever accept it?

I think it might come off as something you made up because you are too cheap to buy the diamond.


> 2. What does it say about someone who requires expensive jewelry, regardless of the source, to feel loved?

That she's female? ;)

[Odieman]

In Canada we have a new gem quality diamond mine coming on stream in the North West Territories and (suprise)today DeBeers has announced they are going to buy 66% of the company. So it seems that they do have an unhealthy tendency to buy out their potential competitors.
Keith

[Odesio]

Originally posted by casdave
Skott

Don't forget Jonas Savimbe and Angola too.

Amazing how the conflict there has died down since an embargo was placed by the UN on diamonds mined there .

Artificial diamond are as large and chemically the same as natural ones so why is there a need to take part in the De Beers monopoly?

As I say, designer label vanity.

You can purchase artificial rubies as well. Doesn't seem to have affected the value of real rubies very much.

Marc

[Manda JO]

Honest to God, I would rather have a DeBeer's diamond than one from Sierra Leone. The "rebals" there instigated a brutal cival war that resulted in truly stomach-churning atrocities--they cut the right hands off of whole villages, including toddlers. In some cases they took the left hands and feet, too. These terror tactics were always aimed at obtaining control over the diamond mines--there were no higher princeples involved. Furthermore, there is no real way of knowing if a diamond you buy came from Sierra Leone. They have been smuggled out for years. Worse than paying a monopoly inflated prices, you may be supporting an orginization that maims two year olds.

I may be a minority here, but I am a woman and I don't ever want any type of engagement ring. I would much rather have a new computer. Neither my mother nor either of my grandmothers ever had an engagement; wedding rings serve a purpose, announcing that a person is married. Unless you are going to be engaed for years, engagment rings don't serve the same purpose. I also think that they are a pretty patriarchal idea; the man is deciding how much money the soon-to-be-joint finances of the couple can take. If your lover borrows money for an engaement ring, you marry that debt. It is the sort of thing that I would want to be consulted about beforehand, not expected to just look grateful that he loved me so much he put both of us in debt.

Furthermore, I think it is a bad idea to invest too much emotional and symbolic signifigance in an item that is so easily lost.

[Rusalka]

Originally posted by TampaFlyer
> 1. Is it possible to tell a diamond-desiring woman about the true history of diamonds without getting castrated? Would she ever accept it?

I think it might come off as something you made up because you are too cheap to buy the diamond.


> 2. What does it say about someone who requires expensive jewelry, regardless of the source, to feel loved?

That she's female? ;)

1. My question to you would be: Why are you interested in a diamond-desiring woman in the first place? If you really are on the same page about social issues and materialism this shouldn't even be a problem. If you're not on the same page, you should re-examine the reasons why you want to marry this person.

You don't have to come off as cheap, either - there are other things you could buy instead of a diamond. If it must be jewelry, get a unique ring.

2. It says they are selfish and materialistic. I am a woman and for the life of me I can't understand why other women care about diamond rings. I saw the deBeers documentary and it re-confirmed everything I'd ever thought about diamonds. Women who are stuck on the diamond thing can't think for themselves. Do you want a lemming for a wife?

[Skott]

Originally posted by Rusalka
1. My question to you would be: Why are you interested in a diamond-desiring woman in the first place? If you really are on the same page about social issues and materialism this shouldn't even be a problem. If you're not on the same page, you should re-examine the reasons why you want to marry this person.

You don't have to come off as cheap, either - there are other things you could buy instead of a diamond. If it must be jewelry, get a unique ring.

2. It says they are selfish and materialistic. I am a woman and for the life of me I can't understand why other women care about diamond rings. I saw the deBeers documentary and it re-confirmed everything I'd ever thought about diamonds. Women who are stuck on the diamond thing can't think for themselves. Do you want a lemming for a wife?

Whoa nelly! Just so you know, I originally wrote out those questions as hypothetical. :)

The girl I'm engaged to is not diamond-desiring nor does she require expensive jewelry to be loved. She would prefer a house to a diamond engagement ring. I am looking (http://boards.straightdope.com/sdmb/showthread.php?threadid=31955)for a way around the problems that are associated with diamonds, while yet maintaining some sort of tradition.

It just upsets me when I hear women giving advice to other women that if your boyfriend doesn't buy you a diamond engagement ring by such-n-such a date, then he's no good. Note that both requirements are required to be fulfilled: 1. Diamond ring; 2. Time Limit. If you don't get #1, he's cheap. If you don't get #2, he's using you and is afraid of commitment.

Anyway, I'm glad to see that there are women who feel this way about the problems with diamonds. Frankly, before posting to this board, the only other person who had gone against the diamond engagement ring that I knew of was a guy who gave his girlfriend a plastic ring and kind of jokingly asked her to marry him. She decided to take it seriously (and he was happy about that too), and still wears the ring to this day.

[The Ryan]

I remember reading about some melons in Japan that sold for something like $50. Apparently the idea was not that the melons themselves were worth $50, but that having someone know that you cared enough about them to spend fifty dollars on a melon was worth $50.