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De Beers Faces Class Action Price-Fixing Lawsuit in Canada

6/5/2011 4:43:06 AM  Shira

de beers diamondsDe Beers, the world’s second largest producer of diamonds, faces a class action lawsuit in Canada for price fixing practices. Although the case was filed in 2007, it was only last week that a Canadian justice ruled that the Supreme Court of British Columbia has jurisdiction to hear the case, despite De Beers` claim that it does not conduct business in British Columbia.

Michelle Fairhurst, who describes herself in the suit as a Canadain resident forced to pay unfairly high prices for gems because of price-fixing, has been named plaintiff.
Fairhurst details a diamond price fixing conspiracy in her claim. De Beers Canada is named in the suit, along with additional De Beers entities.

"We consider that claim to be wholly without merit," said Lynette Gould, a spokeswoman for the De Beers Group.

De Beers, who controls about 35 per cent of the world diamond supply, runs two mines in the Canada and is in the process of establishing a third. De Beers is no stranger to lawsuits. In a similar case filed in the United States about ten years ago, De Beers agreed to settle for $275 million. The case has still not been concluded. In 2004, DeBeers was also sued over a price fixing scheme and was ordered to pay a $10 million fine.

In her class action claim, Canadian Justice Brenda Brown stated that from 1997-2007, De Beers Canada and other De Beers entities--Anglo American PLC, Central Holdings Limited, S.A., DB Investments, Inc., De Beers S.A., De Beers Consolidated Mines Ltd., The Diamond Trading Company Limited, CSO Valuations A.G. and De Beers Centenary A.G.--wrongfully suppressed competition in diamond sales in British Columbia.

"The plaintiff pleads that these agreements to fix prices were calculated to produce, and have produced, pernicious monopolies and that the defendants have been able to charge and receive artificially inflated and unreasonable prices," stated Brown.

De Beers attorneys argue that De Beers and the entities named in the suit do not conduct business in British Columbia and that their commercial sales are only of rough, unprocessed diamonds that are sold to customers in England or South Africa. The courts ruled, however, that since the processed, gem-grade diamonds have been routinely sold in British Columbia through normal business channels, the case is valid. "The defendants knew or ought to have known that the product would be sold in British Columbia,” said Brown.

None of the allegations against De Beers diamonds have yet been proven in court.