Nov. 30 (Bloomberg) — De Beers, the world’s No. 1 diamond company, agreed to pay $250 million to settle lawsuits by U.S. consumers who alleged that the company fixed the price of gems from 1994 to 2005.
The settlement of the group suit, or class action, affects anyone who bought diamonds over the past 11 years. It got preliminary approval yesterday from U.S. District Judge Stanley Chesler in Trenton, New Jersey, company attorney Steven C. Sunshine said. De Beers, based in Johannesburg, agreed to comply with U.S. antitrust laws, he said.
“With this settlement, DeBeers is stepping forward, putting its past behind it and truly becoming a responsible global citizen,” said Sunshine, of Cadwalader, Wickersham & Taft in Washington.
De Beers, which Ernest Oppenheimer turned into a global cartel in the 1930s, pleaded guilty in July 2004 to fixing prices of industrial diamonds and agreed to a $10 million fine, ending a 10-year fight with U.S. prosecutors. The company still faces other class-action suits alleging price fixing in the sale of industrial diamonds in the U.S.
The U.S. accounts for 55 percent of retail diamond sales and has been closed to De Beers since the first antitrust complaint was filed after World War II.
Chesler’s preliminary approval cleared the way for notification of consumers. The judge will hold a fairness hearing, appoint a special master to decide how to distribute the settlement to potentially millions of consumers and decide on fees for plaintiffs’ attorneys, Sunshine said.
Settlement a Surprise
“The fact that they are paying in a class action suit is a surprise,” John Meyer, a mining analyst at Numis Securities in London, said today in an interview.
“I would have preferred a strong, robust defense” instead of a settlement, Chaim Even-Zohar of the Tel Aviv-based industry consultant Tacy Ltd, said in a telephone interview. “They are still vulnerable.”
De Beers’s guilty plea last year to a 1994 indictment in Ohio opened the way for a possible return by the company to the U.S. It had operated in the U.S. through intermediaries since shortly after World War II.
From 1929, when Oppenheimer took over as chairman, to 2000, De Beers bought the output of rivals to control diamond prices, at times selling four of every five unpolished stones.
De Beers is 45 percent owned by Anglo American Plc, the second-biggest mining company.
Two Suits Resolved
The settlement announced today resolves two federal lawsuits pending before Chesler, one in state court in San Francisco and one in state court in Maricopa County, Arizona, Sunshine said.
Settling the cases will “bring an end to a number of disputes” and allow it to pursue “global interests,” the company said today in an e-mailed statement from London.
The case is Sullivan v. DB Investments Inc., 04cv2819, U.S. District Court, District of New Jersey (Trenton).