Formation Of A Diamond Cartel: Legal Actions & Regulatory Framework

Background of the Diamond Industry Cartel

Cartel is basically association and alliance of rivals in the same sphere of business. In order to dominate the market and earn huge profits, a group of independent market participants collude each other, which is known as a cartel. It is mainly considered as anti-competitive behavior. One of the largest cartel formation that dominates the diamond industry over the past decades is De Beers and the diamond cartel (Cochrane 2017). An international corporation was established in 1888 that operates in diamond mining, diamond exploration, diamond trading, diamond retail and industrial diamond manufacturing sectors, which is named as De Beers Group. The government of United States (US) took legal actions against the formation of the cartel in the diamond industry (Wan 2019). This paper discusses the main issues and regulatory framework implemented in the diamond industry. It also provides a comparison of polices adopted in other countries of the world.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

One of the most influential cartel of the diamond industry witnessed artificial diamond scarcity created by De Beers. The company controlled over 90% of the total supply of diamond of the world (Gapa 2016). The British businessman Cecil Rhodes bought new mines in order to control the price of the diamond industry. Another mine owner Oppenheimers also joined with Cecil Rhodes, which strengthen the monopoly presence of the De Beers in the diamond industry. The complex supply chain of the industry was also acquired and controlled by the company through persuasion, coercion and outright threats. The sightholders of the diamond industry were unable to control the price, quality and type of diamonds they are offered. According to the most jurisdiction the formation of cartel in the diamond industry is recognized as the anti-competitive behavior (Newbury 2016). In addition, the cartel behavior in the diamond industry involve various anti-competitive practices such as bid rigging, price fixing and plunge in output. The economic interest led to the formation of cartel in the diamond industry by the individuals. Thus, the business practices of the company De Beers can be analyzed with the help of cartel theory. As the company was accused of being a monopoly that dismantled the competition of the diamond industry. There were many controversies against the company (Cochrane 2015). The main allegations against the company were related to the trust behavior and price fixing. Moreover, the company also stopped releasing the industrial diamonds for the war efforts provided by the US during World War II. In 1890, the company formed the diamond syndicate to keep the prices higher in the diamond industry, which was against the regulatory framework.

Issues with De Beers’ Monopolistic Trade Practices

According to the government of US, the practices related to the fundamental underpinning of capitalism had violated by the De Beers in the US. In 1945, there was an antitrust case filed against the De Beers by the justice department of the US as the company proposed to negotiate through Sherman Antitrust Act for registering a US branch of the Diamond Syndicate Incorporated (Sammut and Chantelle 2020). However, there was false commitment by the company to stockpile the industrial diamond in the US. The legal action against the company was not effective as the company was not operating in the US. Another act named Clayton Act of 1914 was passed to broaden the area of unacceptable behavior and prohibiting illegal behavior that intended to lower the competition and tried to establish monopoly power. The company was subject to US law and under the US detection method, although it had no presence in the US and was run by the nationals of South Africa. As a result, De Beers was prosecuted on various occasions for violating the antitrust law of the US. The monopolistic trade practices of the De Beers hampered the market through abuse in terms of production and sales of diamonds (Press 2017). It resulted in creating profound influence on the economic decision through elimination of competition from the market.

The investigation also ordered against the anti-competitive practices of the company in 1945. The suit of 1945 was failed as bank account was not sufficient to warrant jurisdiction (Munier 2016). Though, there were a wide range of initiatives taken by the diamond council to ensure the entrance of the only conflict free legitimate diamonds into the industry. Over the past decades, the diamond industry of the world suffered from the problems of the conflict diamonds.  One of the key regulatory framework that was implemented by the United Nation (UN) was Kimberly process in the year 2000. The economic rationale behind the initiatives was to free the diamond industry from the conflict diamonds. On the contrary, there was approximately 4% of the total trade involve conflicts diamond of the world in 2000 (Rarick and Arifin 2017).  The effectiveness of the regulatory framework set up by the UN and diamond council helped to scale down the level of conflict diamonds involved in the world trade to lower than 1%. Kimberley process certification system is a detection system for any illegal practices under the diamond industry (Cochrane 2015). An assurance statement on all invoices must be provided by every seller and buyer of jewelry containing diamonds and polished diamonds under this system. Furthermore, all invoices along with written statement must be provided while importing as a guarantee that the sold diamonds are from legitimate sources. As a result, these incentives under this detection system ensure a system of warranties to assure consumers about their diamonds. However, there were a broad range of limitations of the Kimberley process certification scheme, which led to criticism against the initiatives and its shortcomings

Legal Actions and Regulatory Framework

Other countries of the world also adopted policy responses to prevent the illegal practices of the diamond industry. Diamond council and UN took initiatives in order to stop the trading of the blood diamond. It is also termed as the conflict diamond that was mined in the war zone to finance an insurgency. The mining countries related to the blood diamond was mainly undertook in the African countries (Goucher 2015). It resulted in civil war in African countries such as Sierra Leone, Ivory Coast and Liberia. These countries also accused of serious human rights issues even after long years of civil conflict. The civil conflicts in these regions brought consequences including child abuse and child labour. As a result, the policy responses from the Canada and US were applied in order to prohibit the cartel formation and illegal practices under the diamond industry. In order to reduce the violation of law and prohibit the importation of rough diamonds from Sierra Leone into the US, Executive Order 13194 was issued by the president of the US on 18th January 2001. In addition, another Executive Order 13213 was issued by the US government to ban importation of rough diamond from Sierra Leone into the US on 22nd May 2001 (Wan 2019). The Diamond Development initiative was adopted by the government of Canada to improve and regulate the legal diamond industry. Diamond rich areas were discovered in Northern Canada during 1990s. Thus, Canada became a key player of the diamond industry.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

In 1986, Partnership Africa Canada was developed to aid the crisis of the diamond industry of Africa. The organization related to the partnership was part of the diamond development initiatives. Additionally, Canada also established several laws to reduce the trade of conflict or blood diamond. These laws were related to the transfer and export and import of the rough diamonds. Another significant step of the government of Canada include the Export and Import of Rough Diamonds Act, which was passed in December 2002 (Rarick and Arifin 2017). This law intended to act as a system that helps to control the export, import and transpiration of the rough diamond through Canada. Therefore, it can be stated that the initiatives of the government of Canada and US acted in support of the Kimberley Process. Moreover, it also helped to minimize the shortcomings of the Kimberley Process through more stringent regulations in the history of the diamond industry. The cartel formation in the diamond industry was controlled to a certain level through support from various countries, UN and Diamond council.  

Comparison of Policies Adopted in Other Countries

Conclusion

The diamond industry of the world witnessed the formation of most influential cartel. The company that controlled the major activities of the diamond industry include De Beers. The monopolistic practices of the De Beers prevented the competition in the market. In addition, the illegal practices such as price fixing and trust behaviour (Rush and Elizabeth 2017). There were various allegations against the company for the formation of cartel and undertaking anti-competitive practices. The company was also engaged in the trading and mining of blood or conflict diamond. The company mined in the war zone, where the African countries were also involved. One of the major initiative against the cartel formation of the diamond industry was Kimberley Process Certification Scheme. The US government put Executive Order to ban the transportation of rough diamond from the Sierra Leone into the US. The government of Canada also tried to support the African countries to overcome the crisis through stringent laws.

References

Cochrane, D. T. “Book Review: Diamonds & War: State, Capital & Labor in British-Ruled Palestine.” (2015): 328-331.

Cochrane, David Troy. “What’s Love Got to Do with It? Diamonds and the Accumulation of De Beers, 1935-55.” (2015).

Cochrane, David Troy. Differentiating diamonds: transforming knowledge and the accumulation of De Beers. No. 2017/01. Working Papers on Capital as Power, 2017.

Gapa, Angela. “Strategic Partner or Shot Caller? The De Beers Factor in Botswana’s Development.” Journal of Global South Studies 33, no. 1 (2016): 49-82.

GOUCHER, CANDICE. “A BLOODY AND BLOODLESS INDUSTRY-Stones of Contention: A History of Africa’s Diamonds. By Todd Cleveland. Athens, OH: Ohio University Press, 2014. Pp. xiv+ 225. $26.95, paperback (ISBN 978-0-8214-2100-0).” The Journal of African History 56, no. 3 (2015): 490-491.

Munier, Nathan. “Diamonds, dependence and De Beers: monopoly capitalism and compliance with the Kimberley Process in Namibia.” Review of African Political Economy 43, no. 150 (2016): 542-555.

Newbury, Colin. “Cecil Rhodes, De Beers and Mining Finance in South Africa: The Business of Entrepreneurship and Imperialism.” In Mining Tycoons in the Age of Empire, 1870–1945, pp. 101-124. Routledge, 2016.

Press, Steven. “Sovereignty and Diamonds in Southern Africa, 1908-1920.” Duke J. Comp. & Int’l L. 28 (2017): 473.

Rarick, Charles A., and Arifin Angriawan. “Innovative Disruption: The Case of the Diamond Industry.” Journal of Strategic Innovation and Sustainability 12, no. 2 (2017).

Rush, Savannah J., and Elizabeth J. Rozell. “A Rough Diamond: The Perils of the Kimberley Process.” Archives of Business Research 5, no. 11 (2017).

Sammut, Dave, and Chantelle Craig. “Diamonds forever?.” Chemistry in Australia Jan/Feb 2020 (2020): 16.

Wan, Ming Feng. “Lab Grown Diamond: Stone That Shatters the Century-old Cartel.” (2019).

What Will You Get?

We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.

Premium Quality

Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.

Experienced Writers

Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.

On-Time Delivery

Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.

24/7 Customer Support

Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.

Complete Confidentiality

Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.

Authentic Sources

We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.

Moneyback Guarantee

Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.

Order Tracking

You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.

image

Areas of Expertise

Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.

Areas of Expertise

Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.

image

Trusted Partner of 9650+ Students for Writing

From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.

Preferred Writer

Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.

Grammar Check Report

Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.

One Page Summary

You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.

Plagiarism Report

You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.

Free Features $66FREE

  • Most Qualified Writer $10FREE
  • Plagiarism Scan Report $10FREE
  • Unlimited Revisions $08FREE
  • Paper Formatting $05FREE
  • Cover Page $05FREE
  • Referencing & Bibliography $10FREE
  • Dedicated User Area $08FREE
  • 24/7 Order Tracking $05FREE
  • Periodic Email Alerts $05FREE
image

Services offered

Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.

  • On-time Delivery
  • 24/7 Order Tracking
  • Access to Authentic Sources
Academic Writing

We create perfect papers according to the guidelines.

Professional Editing

We seamlessly edit out errors from your papers.

Thorough Proofreading

We thoroughly read your final draft to identify errors.

image

Delegate Your Challenging Writing Tasks to Experienced Professionals

Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!

Check Out Our Sample Work

Dedication. Quality. Commitment. Punctuality

Categories
All samples
Essay (any type)
Essay (any type)
The Value of a Nursing Degree
Undergrad. (yrs 3-4)
Nursing
2
View this sample

It May Not Be Much, but It’s Honest Work!

Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.

0+

Happy Clients

0+

Words Written This Week

0+

Ongoing Orders

0%

Customer Satisfaction Rate
image

Process as Fine as Brewed Coffee

We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.

See How We Helped 9000+ Students Achieve Success

image

We Analyze Your Problem and Offer Customized Writing

We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.

  • Clear elicitation of your requirements.
  • Customized writing as per your needs.

We Mirror Your Guidelines to Deliver Quality Services

We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.

  • Proactive analysis of your writing.
  • Active communication to understand requirements.
image
image

We Handle Your Writing Tasks to Ensure Excellent Grades

We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.

  • Thorough research and analysis for every order.
  • Deliverance of reliable writing service to improve your grades.
Place an Order Start Chat Now
image

Order your essay today and save 30% with the discount code ESSAYHELP