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The future of the meaning of ‘conflict’

It didn’t take very long after the World Diamond Council (WDC) and the Kimberley Process (KP) expressed their support for broadening the definition of “conflict” diamond for the first sign of resistance to surface.

The day after the news emerged from Vicenza, The Times of India ran a story stating the Indian gems and jewelry industry is ready to “lock its horns” over the proposal. An unidentified “senior functionary” from India’s Gems and Jewellery Export Promotion Council (GJEPC) interviewed by the Times is quoted as stating the U.S. is trying to “control” the KP, including African countries such as Zimbabwe, by “implementing such vicious laws.”

“Indian industry will oppose it tooth and nail,” the unnamed source said.

(Another interesting note from the Times story is that it states that “leaders of the industry” oppose the U.S.’s plan to establish a permanent administrative office for the KP. I didn’t know establishing a permanent secretarial-type body for the process -- which seems both logical and benign -- was that controversial. Who is opposed to this and why?)

While I know this is just one article that was not particularly well written (see: the huge factual error in the fifth graph regarding the U.S.’s involvement in the origin of the KP), it did bring to the forefront a question that had been lingering in my mind: How much support, outside of the KP chairwoman and the WDC, neither of whom gets a vote, does a broader definition of conflict have?

It’s a change that definitely needs to happen and one that some say is the most pressing need for the KP right now. As it stands, the process defines conflict, or “blood” diamonds, as rough stones that are used by rebel movements to fund wars against legitimate governments. Calls are to broaden that definition to include diamonds that are linked to violence of any kind.

As we all know, the KP requires complete consensus to pass any issue. All it takes is one country saying “no” to prevent change from taking place.

“We’ll see,” one industry player commented when I asked him about the proposal’s chance of passing.

He says the intersessional, scheduled to take place June 4 to 7 in Washington, will be very telling of which members are on board with revising the definition of conflict diamonds and which ones aren’t.

He does note, however, that having a country as powerful as the United States backing a broader definition of conflict --and serving as KP chair--does help, as does having a seasoned ambassador who is “very well liked” (at least in the U.S.) as the process’ official chairwoman.

“People listen,” when the United States speaks, he said.

The participants might listen, indeed, but how they will vote remains the big question.

The Kimberley Process opens up

For about 45 minutes on Tuesday morning, Kimberley Process Chairwoman Gillian Milovanovic did something unprecedented in the history of the 9-year-old process. She hosted a video web chat open to anybody who wanted to listen.

According to her office, the web chat drew more than 150 viewers from 24 countries, including the U.S. embassy in Harare, Zimbabwe. The ambassador’s office also released a list of 15 countries with the highest participation numbers; curiously, the United States was not on the list.

Following the chat, a discussion continued on the KP’s Facebook page.

Having just worked with National Jeweler contributor Pete Vernon on a lengthy Q&A with Milovanovic and having read a number of similar articles, much of what was discussed was not news to me.

A few of the more interesting elements of the chat are below.

-- The process’ complete-consensus voting model, which has its critics, might not be addressed during the U.S.’s one-year term as chair. Milovanovic said that decision-making is “something the Kimberley Process is looking at or will be looking at ... if not this year than next year in the course of the South African chairmanship.” She also noted that the issue isn’t just consensus but decision-making as a whole and that perhaps the process should examine forming a steering committee or some type of board that assists in making decisions throughout the year.

-- The U.S. doesn’t want to be seen as a bully. “We were very pleased to have been selected to chair this process. In being selected, we also were very conscious as the United States that we weren’t going to establish our agenda and impose it on anyone,” she said. “This is a process that operates by consensus and, in essence, we wanted to be giving an impetus, to be giving a certain direction. Ultimately whether our concept of the issues to be looked at was correct would be answered by the membership itself.”

-- Making changes that require massive legislative overhauls isn’t a good thing. During the chat, someone asked a “very important” question: would proposed changes to the KP require countries to alter their government’s legislation? Milovanovic said the process should examine areas--such as enforcement, monitoring and peer review--that could be improved via better implementation and won’t involve country representatives having to return home and try to get laws changed.

“I think this is, looking ahead in the Kimberly Process, a very important thing because it seems to be doubly challenging to think of change and having to do a lot of legislative changes. And it’s very important that the nations involved understand that there are many, many things that we can look at, and that I hope we will look at in the year ahead, that will not require massive legislative change,” she said.

-- The ad hoc committee will meet this month. Last November at the plenary, the process formed an ad hoc review committee, chaired by Botswana and co-chaired by Canada, to re-examine how the process is, and isn’t, working.

That committee is currently collecting input from other KP members, and Milovanovic said she believes they are meeting this month to go over those responses.

--Venezuela and the KP are on speaking terms. The South American nation, which withdrew voluntarily from the process in 2008, did “provide some materials” to the KP and is engaged in a dialogue with the process.

-- Officials from Zimbabwe are expected to attend the intersessional in June. “We have every expectation that Zimbabwe will have a delegation here and we look forward to it,” she said. “I might add that I also had an opportunity to speak with Zimbabwean officials who were present at the mining (conference) in Cape Town (South Africa) and we had a good conversation.”

At the beginning of the chat, participants were told they could ask questions via Twitter using the hashtags #KimberleyProcess or #KPchair. I tweeted twice, asking first what countries outside of Africa the KP would focus on this year. (Lebanon comes to mind as one that might bear some looking into.) 

I also asked if the ambassador foresees any non-governmental organizations stepping up to join the KP, taking the place of the now-departed Global Witness.

As I am sure was the case with many other questioners, the 45-minute session was up before the ambassador could address my inquiries.

Still, it was 45 minutes more than I’ve gotten with any other KP chair and marked a new era (or perhaps just year?) in transparency for the process.

Will a chat like this, or similar engagement, happen again? It doesn’t seem out of the question. 

“I’m very pleased we had this opportunity and I would like to see us continue, whether in this particular format or in any other way,” Milovanovic said in concluding the chat. “I think that exchanging information, transparency of this type is extremely important for people to understand what the Kimberley Process is, what it isn’t and what it might become.”

Is this what a recovery feels like?

In compiling our Majors newsletter yesterday afternoon, I noticed a trend among the stories I was loading, a trend that I haven’t seen in some time.

All the quarterly financials for the major chains covered by National Jeweler and included in that particular newsletter were positive. Comps rose 14 percent for Sterling Jewelers, 6 percent for Zale Corp., 15 percent for Tiffany & Co. in the Americas and 8 percent for Neiman Marcus.

The sales figures released by major chains are in harmony with the reports we received from retailers and the post-Black Friday sales figures released by a myriad of different analysts and agencies.

In short, it was a strong weekend for sales.

But, will this momentum continue through the holiday season and into next year? The answer seems to be nobody knows, or, at least, nobody can agree on a prediction.

In analyzing sales on Black Friday, The NPD Group Inc. said that the day came in with a “roar” as consumers packed stores early to take advantage of heavily advertised savings but went out with a “whimper.”

According to NPD, 56 percent of consumers who shopped on Black Friday said they weren’t likely to shop again that weekend, an indication that consumers are “tapped out,” one industry analyst said.

The National Retail Federation (NRF), the world’s largest trade association for retail, was more positive in assessing the weekend, stating in news releases recapping the weekend that retailers are “playing a significant role in powering the economic recovery” and that consumers are “clearly demonstrating their desire to spend this holiday season.”

The NRF did note, however, that while consumers are spending, they aren’t exactly sprinting to the cash register with armloads of full-priced merchandise. Both the NRF and the analysts interviewed in this story for The New York Times said retailers are going to continue to have to discount to drive sales throughout the rest of the holiday season.

What impact this will have on retailers’ bottom lines is yet to be seen, one analyst noted.

In addition, I found the conflicting viewpoints of two car company executives interviewed in this story to be interesting, even though it does not pertain to jewelry in particular. One said it was “overstating things” to say the auto industry was in the midst of a sustained turnaround while another offered the conflicting view that the current sales momentum was not an “aberration.”

So where does that leave us? It seems like we’re running out of clichés to use to describe how we feel about these uncertain times (see “cautiously optimistic”). 

But let me borrow just one more: We’ll just have to “wait and see.”

I attended a watch event here in New York on Thursday afternoon and one of the executives told me that the company just experienced one of their best months ever for sales. Yet even he was unconvinced of the recovery, unable to commit to saying he expected a great holiday season.

I guess you could say he was “cautiously optimistic” about the weeks ahead.

A closer look at the ‘Kinshasa contract’

Last week at its plenary meeting in the Democratic Republic of the Congo, the Kimberley Process (KP) ended its long-standing impasse on the issue of exporting rough diamonds from the Marange area of Zimbabwe, more due to the fact that United States abstained from voting than because the situation there has necessarily improved or the process has made great strides in bringing everyone together. It reminds me of that last, lone juror who believes the defendant is guilty but bows from pressure from other jurors to switch their verdict to “not guilty” so the trial will end and everybody can just go home.

The agreement allows for imports to begin immediately from two mines and for monitors to be able to visit other Marange mines and see what conditions are like there before they begin exporting.
 
Since the meeting, the U.S. State Department has said that it chose not to stand in the way of the KP finally reaching a deal--a compromise that, it admits, could have been “stronger”-- rather than allow the stalemate to continue. Many have speculated that the United States agreed to the exports so it could win the KP chairmanship for 2012, which it ultimately did.

So now the KP, and the industry as a whole, are faced with two interesting propositions going forward.

1) We’ve now made an agreement with Zimbabwe, but much speculation abounds about the government actually keeping its word. As Zimbabwean human right activist Farai Maguwu observed last week, “Zimbabwe has not honored the previous agreements and there is no reason for optimism that Zimbabwe will honor these agreements.”

2) The United States now is in the driver’s seat of the KP and, ostensibly, thinks it can push through some major reforms, reforms deemed necessary by Jewelers of America and the Diamond Importers and Manufacturers Association (DMIA) prior to last week’s meeting. I will be curious to see how this plays out 2012. As we all know, the KP is structured as such that a complete consensus is needed to move forward on any issue, and that has not always been so easy to obtain.

It took two years to reach an agreement on Zimbabwe (keeping in mind that there was no true consensus reached there; when push came to shove, the United States simply did not vote). So, how easily will more changes come in 2012? Does the United States think it has curried enough favor by abstaining on the Zimbabwe issue to push through other reforms it deems necessary? I guess only time will tell.

In the meantime, it’s worth noting for retailers here in the United States that despite the KP vote, Marange diamonds remain illegal because of U.S. sanctions on Robert Mugabe and his government. JA maintains that members avoid trading in Marange stones, and learn as much as possible about their supply chain, difficult as that may be.

As JA alluded to in the release it penned with the DMIA, the industry also is the process of working on a mechanism for greater inventory control that would, ultimately, help bolster consumer confidence, above and beyond what the KP can offer.

I don’t have many details on this initiative right now but it will be interesting to see what this industry coalition comes up with, and if the United States is able to make any headway in overhauling the KP.

It looks like 2012 is shaping up to be as interesting as 2011.

The malaise of the ‘Millennials’

In the four years I’ve worked here, much has been said about the generation labeled as “Generation Y” or the “Millennials” and its importance to the jewelry industry. As just one example, I penned this article in August 2010 on how the size of the Millennial generation is poised to have a big impact on the bridal market.

When I wrote that article, we were in the midst of an upswing, and the pervading sentiment was that a 100 percent recovery was just around the corner.

More than a year later, we can see that this is not the case. Unemployment remains high and many young adults, some just fresh out of college, are struggling just to find a full-time job and scrape together the necessary funds for a security deposit on their own apartment.

Forget spending $4,000 or more on an engagement ring to pop the question and then putting a down payment on a house.

A recent article in New York magazine titled “The Kids Are Actually Sort Of Alright” and written by a 27-year-old New York staff writer presented some eye-opening statistics in this vein, showing just how deeply members of the Millennial generation have been impacted by the downturn.

To wit: 14 percent of those who were members of the undergraduate classes of 2006 to 2010 can’t find full-time work, and only about half (55 percent) of those aged 16 to 29 have jobs. Many young people (ages 25 to 34) have moved back in with their parents since the start of the recession, and the majority of Americans think this current crop of 20-somethings won’t be better off than their parents.

After reading the New York magazine article, I checked in with industry analyst Ken Gassman, a contributor to my Millennial brides story, to see if he’s revising his outlook on this generation.

What he told me is this: 2009 jewelry sales data by age of shopper shows that Millennials continued to spend their money on jewelry. The acquisition rate for diamond engagement rings held steady at 75 percent of all brides, though the average ticket for said rings fell by about 10 percent.

The 2010 data won’t be available until sometime in late November but Gassman is betting that those current trends won’t hold.

Interestingly enough, he also noted that he recently revised his wedding forecast downward in the past month or so. This is in line with statistics presented in the New York article, which stated that the median age of first marriages increased by a solid year since 2006, and that the overall marriage rate is at an all-time low.

It makes sense. After all, it seems like not being able to find a full-time job and move out of your parents’ place--the normal, and up until now, unconditionally accepted touchstones of transitioning into adulthood--puts a real crimp in your social life.

The New York article also raised, in my mind, the question of how this generation will view material possessions, including jewelry, when, and if, the economy begins to pick up again. One author interviewed for the story said that the recession has brought about a pronounced decrease in materialism in this particular generation. It’s a group that can experience books, movies and music without having to actually own them and that is perfectly alright with them.

Millennials, as the story’s author puts it, are “onboard” with having “less stuff,” perhaps making it less of a gold mine (no pun intended) of jewelry buyers than originally thought.

Is all publicity positive?

My colleague and I just had a discussion this week about the tendency of some news websites to use too many clichés in their headlines.

Yet I just can’t get around applying the cliché “any publicity is good publicity” when I think about the recent, supposed marketing “missteps” by J.C. Penney.

As I am sure many of have heard -- as it received roughly as much coverage as the president’s jobs bill -- J.C. Penney made quite a stir this fall with its “I’m too pretty to do homework so my brother has to do it for me” shirt, which I agree does send an abysmal message to young girls but certainly isn’t the only negative message filtering into their lives.

J.C. Penney pulled the shirt from store shelves but not before the chain’s juniors’ T-shirts received widespread press.

The next “gaffe” on J.C. Penney’s part was this commercial for its Van Heusen line of clothing for men, an advertisement I’ll refer to as the Fast Times at Ridgemont High flashback.

The ad was a split screen. The right side featured men modeling clothes from Van Heusen while the left showed the famous scene from that film when actress Phoebe Cates emerges from the swimming pool in her red bikini. (Before you leave this blog to Google the video clip, let me just tell you that the commercial cuts it off at the pivotal moment, the “good” or “bad” part, depending on your point of view.)

Saatchi & Saatchi, the same firm that did the award-winning “Welcome to the Doghouse” campaign for J.C. Penney a couple of years ago, crafted the commercial.

J.C. Penney got slammed for the spot, with many crying sexism. The chain apologized on its Facebook page and said it wouldn’t air the Fast Times flashback commercial again after its scheduled run ended in September. (As an aside, I didn’t find the commercial offensive. It was just a woman in a bikini, not to mention it’s a clip from a movie that’s almost 30 years old. Oh, and here’s a newsflash: men like to look at women, and sex is often used in advertising to sell products. Cates is hardly the first attractive woman injected into an unrelated ad targeting men.)

A number of news articles and blogs criticized J.C. Penney for being “dumb” for airing the Cates ad after the homework-shirt debacle, but I am not so sure the decisions were short-sighted. 

J.C. Penney, after all, is in the middle of a major image overhaul, bringing in executives from Apple and Target to update their shopping experience and attract more consumers.

And when one’s in the midst of a makeover, isn’t any publicity good publicity?

What will become of the KP?

When Brad Brooks-Rubin, the special advisor on conflict diamonds to the U.S. State Department, spoke about how the United States would remain vigilant on monitoring conflict diamonds even if the Kimberley Process (KP) fell apart, I thought he was speaking theoretically.

Looking back on that panel discussion now, I am beginning to think he was speaking prophetically.

Just a couple of weeks removed from the discussion, which was held during the Las Vegas shows, the industry finds itself in a very familiar place. Yet another scheduled KP meeting has ended without being able to come to a consensus on the issue of rough exports from the Marange region of Zimbabwe.

According to sources close to the negotiations, the United States, Canada, Australia, Israel and the Europe Union lined up on one side of the debate. They wouldn’t agree to the Marange deal unless it included some kind of mechanism for supervising exports from an area once (and still perhaps) riddled with human rights abuses and rampant diamond smuggling.

“This was the major stumbling block,” the source said.

On the other side of the debate, Zimbabwe, backed by nations including South Africa, equates constant monitoring of rough exports from Marange with colonialism and wants no part of it. (Interestingly, Russia, along with China and India--two countries consistently mentioned as having a keen interest in the Marange goods--reportedly did not take sides at the intersessional.)

And that’s how the deal ends, at 2 p.m. in the afternoon on Thursday afternoon. Officials from the DRC, which hosted the intersessional as current chair of the KP, came in and said time was up, the meeting was over.

No resolution was reached, again. So where does this leave the industry? It’s not an easy question to answer.

Both Jewelers of America and the World Diamond Council (WDC) have said publicly that goods from Marange shouldn’t be traded as the KP officially remains at an impasse. WDC President Eli Izhakoff stressed in a statement that the meeting didn’t end with “any parties slamming the door on the KP.” Efforts are ongoing (and seemingly never-ending at this point) to arrive at a consensus.

In the meantime, certain parties in the industry seem to be busy making other plans, regardless of whether the KP makes it or not.

Rewinding to the KP panel discussion held in Las Vegas, Brooks-Rubin mentioned the possibility that in the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which already contains a section addressing “conflict” minerals, could be expanded to address the issue of conflict diamonds.

He also said that “if the KP falls apart” the U.S. government would remain vigilant about conflict diamonds. “Congress won’t simply repeal the Clean Diamond Trade Act and say, ‘That was a nice experiment. Let’s go back to the way things were,’” he said.

Preaching to the KP choir?

A number of interesting points came up last Thursday in Las Vegas during a Kimberley Process (KP) panel held at the JCK show. I just wish there had been more people there to hear them.

To open the meeting, World Diamond Council President Eli Izhakoff told attendees that he believes the KP soon will be able to come to an agreement over exports from Zimbabwe. (The KP’s Working Group on Monitoring approved exports from the country based on a number of conditions at a meeting held recently in Dubai. Zimbabwe rejected those conditions but the stalemate is expected to be resolved -- and exports allowed to continue -- at a KP meeting scheduled for later this month.)

During the discussion, Izhakoff raised the need for KP reforms, namely to establish some kind of permanent staff for the system and change the voting structure. Currently, the KP’s bylaws dictate that complete consensus is needed to move forward on any issue. Izhakoff said the system needs to be changed to allow a supermajority vote (a vote that exceeds a simple majority, which is more than 50 percent) to be enough for issues to be approved.

To me, the whole voting system issue is a giant Catch-22.

How are you going to get everybody to vote for switching the voting system when the center of your argument is that the KP has a difficult time moving forward on issues for that same reason: that it can’t get everybody on the same page? Perhaps some parties at all times--or maybe we should say all parties at some times--view complete consensus as working in their favor. They don’t like a proposal or issue and all they have to do is raise their hand and say “no.” It takes only one vote to throw a wrench into the entire system.

It seems to me that if those involved in the KP believed that they could reach a consensus on the voting issue, which has been afoot for some time now, then the issue would have been solved long ago.

Outside of Izhakoff, Brad Brooks-Rubin, the special advisor on conflict diamonds to the U.S. State Department, raised an interesting possibility when he mentioned that the Dodd-Frank Wall Street Reform and Consumer Protection Act, which already contains a section addressing the issue of “conflict” minerals, could be expanded to include diamonds. He also noted that if the KP did break down, the U.S. government would remain vigilant about conflict diamonds.

“If the KP falls apart Congress won’t simply repeal the Clean Diamond Trade Act and say, ‘That was a nice experiment. Let’s go back to the way things were,’” he said.

Susan Jacques, a Zimbabwe native and the president and CEO of Borsheims, added frank insight from the retail perspective when she detailed how she called her suppliers and told them Borsheims wouldn’t be dealing in any diamonds from Zimbabwe. She said the suppliers told her that she was unfamiliar with how the supply chain works and that it was going to be nearly impossible to guarantee that because of the lack of traceability.

Her response to them: Change the system.

“I cannot control what the government of my homeland does,” she said. “Can I control that I don’t want those goods in my store? Yes I can.”

(It’s probably worth noting here that Borsheims is one of a handful of retailers already involved in De Beers’ branded diamond program, the Forevermark. One of the main highlights of the program is that De Beers can essentially trace the stones from its mines to market and guarantee they are conflict-free.)

The one bright spot on the panel were the comments of Diamond Empowerment Fund board co-president Dr. Benjamin Chavis, who said that activist and former President of South African Nelson Mandela is firm believer in the mission of the KP.

Chavis also cited a report that came out last month detailing the strongest economies in Africa. The nations topping the list were those that produce diamonds, he said.

“When a consumer buys diamonds they should also know they are buying diamonds that help empower African nations, and that message sometimes gets lost,” he said. “The issue is not whether or not we need the Kimberley Process but how to strengthen it.”

Looking around the room during Thursday’s discussion, I was pleased—and at the same time dismayed—that I recognized many of the faces. I saw a number of my fellow industry trade journalists, representatives from groups such as the Responsible Jewellery Council (RJC) and diamond dealers I know from 47th Street, among others.

With the room only about half-full, and many of the attendees immediately recognizable to me, I had to wonder: How many retailers actually attended this session? And, if they didn’t come because they were busy with other appointments or simply don’t think it’s a big issue for their store, how many will read this blog?

On May 24, I blogged about the Forevermark. At the conclusion of the piece, I asked retailers for feedback on how important they felt the issue of the KP and conflict-free diamonds were to their customers. I received only one comment. And stories about Robert Mugabe, Zimbabwe or the Kimberley Process rarely show up as the “Most Popular” or “Most E-mailed” on NJ’s site.

I’ll be curious to see if this blog is any different.

Dissecting De Beers' 'distribution update'

After a sleepy couple of weeks, news wise, De Beers woke up the diamond world on Monday when it announced a series of changes, a "distribution update" if you will, to the way it sells its rough diamonds. See story here.

Probably the biggest change: De Beers announced that Diamond Trading Co. (DTC) sightholders--those vaunted companies that receive rough directly from De Beers at its 10 sights (sales of rough diamonds) held throughout the year--will be able to buy rough at Diamdel auctions beginning in October (more on this below).

In addition, De Beers also announced that it will give non-sightholder companies the chance to apply for the sightholder status in the midst of the next contract period and that it is taking steps to make the sightholder application process less cumbersome. I'm sure the latter, especially, is a welcome change, as I have heard numerous complaints about the heavy volume of paperwork involved in applying.
 
After dissecting the alphabet soup-like release (SoC, ITO, DTC, CPQ, whew...), I sent a few questions to De Beers' spokeswoman Lynette Gould in London, who kindly took time to answer via e-mail.

Q. What percentage of De Beers' production goes to Diamdel? How much of Diamdel's allocation is currently sold at auction?
 
A. De Beers typically sells up to 10 percent of its annual production to Diamdel, which is basically De Beers' rough diamond sales and distribution arm for non-sightholders, companies that are also referred to as the "secondary market." Launched in the beginning of 2008, Diamdel is based in the diamond-trading center of Antwerp, Belgium, and conducts all of its auctions online.
The amount Diamdel sells at auction as a percentage of its total sales varies, but so far has ranged between 40 and 70 percent.

Q. What percentage will Diamdel's auction sales graduate to as the company "continues to transfer more of its allocation into the auction format?"

A. (Note from blog author: Very interesting response here.) If this pilot program is successful, Diamdel will move to an auction-only model.

Q. How many existing Diamdel customers are there currently, and how are they chosen?

A. Diamdel has more than 500 customers registered. They must successfully complete a registration process to be eligible for participation at auctions.

Q. There have been reports that Diamdel has, in the past, not been able to sell all of its goods, and that it has even canceled auctions due to lack of interest among buyers or the inability to achieve the minimum sale price for goods. Is that true?

A. Diamdel has never cancelled an auction due to a lack of interest or inability to sell. On occasion, lots fall short of reserves, although, to date, this has happened on a very small percentage of lots and was most notable during the downturn.

Q. What was the impetus behind letting sightholders buy at auction?

A. Diamdel has proven expertise at auctioning and we believe the time is right for this expertise to be tested on a wider group of applicants with an expanded volume and range of goods hence the pilot.

Q. How does De Beers respond to concern that allowing sightholders into Diamdel auctions will make securing rough even more difficult for non-sightholders, particularly for in-demand goods?

A. Diamdel auctions have provided more customers with more opportunities to buy the rough they require to sustain their operations than the previous placed sales model created. The pilot will build upon this and provide greater volumes of a broader range of rough for purchase at auctions on a more consistent basis. Subject to the outcome of the pilot and availability, this proposed model will offer non-sightholders who consistently demonstrate strong demand for categories of rough at auction the potential to ultimately qualify for a sight.
The auctions themselves won't favor one type of business model over another.

(Note from blog author: Arguably, though, I have to say that auctions, by their very nature, favor bigger companies and/or people with more money, i.e., the sightholders.)
 
Q. What has been sightholder feedback on De Beers' plans to allow non-sightholders/Diamdel customers to compete for sights in the middle of the next contract period?

A. The majority of feedback we have received has been very positive. Sightholders see opportunities in these enhancements.

Q. Can you elaborate a bit on the Contract Proposal Questionnaire (CPQ) portion of the changes? How did it work before? And what is the purpose of this change?

A. The DTC will be streamlining the Supplier of Choice application process for the 2011-2015 contract period to make it quicker, simpler and more efficient. This will include submitting just one CPQ per applicant to cover multiple categories of goods. There will also be fewer questions requiring written answers in the new CPQ.

What's next for De Beers class-action suit?

After the whirlwind of news that was the last two weeks I feel compelled to circle back around and delve deeper into one of the big headliners: the decision on the De Beers class-action lawsuit.

As many of you probably heard, on July 13 the U.S. Court of Appeals for the Third Circuit rejected the 2006 settlement De Beers reached with diamond buyers who sued the diamond giant based on allegations of price fixing, a violation of U.S. antitrust laws. Under the settlement, De Beers had established a $295 million fund to be distributed to millions of diamond buyers separated into two classes. Under the settlement, direct purchasers--companies that bought directly from De Beers or De Beers' mining competitors-were to share a pot of $22.5 million. Indirect purchasers, a group that includes retailers and consumers, were to divide up the remaining $272.5 million.

The court's latest decision likely leaves those with interest in this case (including interested consumers and retailers) with two main questions: Why was the settlement rejected? And, when will I ever get my money?

I'll attempt to answer these questions below, with input from Howard Bashman, the Pennsylvania attorney who filed the successful objection, and another class attorney in the case, Joe Tabacco of Berman DeVallerio in San Francisco.

Why?

In filing his objection, the point Bashman made--which the Third Circuit Appeals Court in Philadelphia agreed with--is that under antitrust laws in some states, you can only sue if you're the direct purchaser of a product or service.

So, Bashman argued, it was unfair for indirect purchasers from certain states to receive a portion of the settlement, since antitrust recovery is limited to only direct purchasers in the states where they reside. (As a point of note, according to the suit, the states are divided on the issue: about 25 allow indirect purchasers to recover in antitrust suits and 25 don't.)

"In this settlement, everyone got to recover no matter what state you're in," Basman says. "The consequences are people like my client are going to get less."

Bashman represents a single individual in this case, a woman from Texas, one of the states that allows indirect purchasers to sue in antitrust cases. Bashman is based in Willow Grove, Pa.

This is a short, simple explanation of the 75-page ruling in the case, which you can read in its entirety by clicking here.
Look at pages 29-31 for a breakdown on which states allow indirect purchases to recover in antitrust cases and which don't.

While much has been written and said about the attorneys involved in this case, particularly those for the objectors, I think two points need to be made here. One, like the delay or not, Bashman brought forward a valid point of law or the court never would have agreed with his objection. Two, the court ruling points out that this type of sweeping settlement has never been attempted in an antitrust case before. The lawyers in this case were trying something new that seems to have failed, at least for now.

What happens now?

Bashman said the attorneys in the case have until July 27 to ask the appeals court to reconsider their decision. If they chose not to, or if the appeals court denies the request, it returns to the trial court.

There, any number of things could happen. What Bashman would like to see is a new settlement organized on a state-by-state basis and limited to indirect purchasers who live in states with antitrust laws that allow them to sue, potentially meaning more money for those individuals.

Or, as Gemological Institute of America (GIA) diamond expert Russell Shor speculated in the July 16 GIA Insider e-newsletter, the case could splinter into separate lawsuits.

Will I ever get my money?
 
It's pretty widely known at this point that while the big diamond guys--the direct purchaser class --could net a substantial sum, the recovery for smaller players isn't going to be as much. But these days, money is money and I don't know many retailers that would turn down a check for any amount, no matter how miniscule.

Tabacco said the appeals court decision could delay the distribution of funds by four to 12 months or longer.
Stay tuned...