UPDATE: Court Backs EU Decision On Alrosa Diamond Sales

29th Jun 2010 09:39

(Adds background to the case) By Mike Gordon Of DOW JONES NEWSWIRES LUXEMBOURG (Dow Jones)--Europe's highest court Tuesday backed a decision by Europe's antitrust regulator that accepted a deal from diamond dealer De Beers SA to reduce the amount of rough diamonds it buys from Russian supplier Alrosa Co. (ALNU.RS). The decision by the European Court of Justice overturns a lower court ruling that struck down the decision by the European Commission. "The Court of Justice set aside the judgment of the General Court and upheld the commission's decision making, binding the commitments offered by De Beers to cease all purchases of rough diamonds from Alrosa," the court said in a statement. "In adopting the decision, the commission didn't make an error of law or a manifest error of assessment," it said. The De Beers Group controls some 70% of the world's rough diamond supplies, which it sells to manufacturers and dealers. The company, majority owned by Anglo American PLC (AAL.LN), is registered in Luxembourg but based in Johannesburg, South Africa. Alrosa is Russia's largest diamond company, with operations in the exploration, mining, manufacture and sale of diamonds. The company provides about 25% of the world's rough diamond supply and is the dominant (97%) producer of Russian rough diamonds. De Beers had been Alrosa's main buyer for 50 years. In 2002, the two companies asked the commission to approve a five-year trade agreement that would have seen Alrosa sell $800 million worth of rough diamonds a year to De Beers over the first three years, then $700 million worth for the fourth and fifth years. The commission blocked the deal on the basis that it would increase De Beers' global dominance. The commission wanted De Beers to reduce its purchases of Alrosa's rough diamonds, allowing more stones on to the open market. The commission's goal was to increase competition by allowing smaller players to buy the diamonds. Without consulting Alrosa, De Beers offered to rapidly wrap up its purchases of Alrosa's product, buying US$600 million worth in 2006, US$500 million in 2007 and US$400 million in 2008. It would then end purchases of Alrosa's rough diamonds. The commission approved the revised agreement in February 2006. Alrosa, unhappy at not being consulted, challenged the commission's approval at the CFI (now known as the General Court), which overturned the decision in 2007. -By Mike Gordon, Dow Jones Newswires; +352 691 180 766; [email protected] (END) Dow Jones Newswires June 29, 2010 04:39 ET (08:39 GMT)