De Beers Settles Price-Fixing Case, Can Re-Enter U.S. Market

COLUMBUS, Ohio – In a widely expected decision, mining conglomerate De Beers (search) Tuesday settled a 10-year-old industrial diamond price-fixing case, clearing the way for the diamond giant to resume selling its products directly in the lucrative U.S. market.

The company agreed to pay a $10 million fine after pleading guilty to conspiring to fix prices in the $500 million industrial diamond market.

De Beers has sold diamonds into the United States — which represents half of the worldwide diamond market — only through intermediaries since shortly after World War II, when it was first charged with price fixing.

Although the settlement allows the diamond giant to return to the U.S., De Beers has no specific plans yet, a spokeswoman said in London.

"It doesn't make a big difference in the way we do our business," she said before the hearing. "We operate a selling system to our clients from London and Johannesburg, and we have no plans to change that."

Still, De Beers is expected to open a store with LVMH in New York soon and one analyst said that may have spurred it toward a settlement and could pave the way for further retail expansion.

"The U.S. leg ... (of the LVMH joint venture) could become extremely important," the London-based analyst said.

De Beers posted a forecast-topping $5.5 billion worth of full-year sales in February and earnings of $676 million. The company spends $180 million on advertising.

The company was charged along with General Electric Co. (GE) in 1994. A judge dismissed the charges against GE, saying the government had failed to prove its case.

U.S. District Judge George Smith accepted the plea in the case, in which the Department of Justice (search) charged De Beers with keeping prices in the worldwide industrial diamond market artificially high.

The case was filed in Columbus because GE's industrial diamond business was headquartered in suburban Worthington. Industrial diamonds are used to make cutting and polishing tools for a variety of manufacturing and construction applications.

Prosecution of De Beers has been difficult because U.S. officials have no jurisdiction over the company, which is based in South Africa. But the case also has hindered De Beers from doing business in the United States, said antitrust lawyer John Majoras, a partner with the law firm Jones Day in Washington.

Corporate officials trying to enter the United States run the risk of being stopped by authorities, he said.

"That's a pretty big market to give up and not be actively involved in," he said.

On the down side, Majoras said the deal could expose De Beers to more lawsuits from plaintiffs who now think it is easier and less costly to sue the company.

Reuters and the Associated Press contributed to this report.