As a result of all this erosion, DeBeers' share of the world's uncut diamond supply slipped from nearly 90 percent in the mid-1980s to about 62 percent in 2002. Worse still for De Beers, newly developed synthetic diamonds are starting to appear on the market. To counter that threat, De Beers is supplying precision equipment to jewelers so they can spot synthetic diamonds. A monopoly that relies on the control of a key resource, as De Beers does, loses its power once that control slips away. In a reversal of policy, De Beers now says it will abandon efforts to control the world diamond supply and will instead become the "supplier of choice" by promoting the DeBeers brand of diamonds. But as of 2004 there are only a few DeBeers retail stores worldwide, in London and in Tokyo. De Beers is now trying to settle U.S. antitrust charges so it can open stores in the states. (Americans account for only 5 percent of the world's population but for half the world's diamond purchases.) In an effort to differentiate its diamonds, De Beers is etching the company name and an individual security number on some diamonds. Whether this branding effort will work remains to be seen. Sources: Phyllis Berman and Lea Goldman, "The Billionaire Who Cracked De Beers," Forbes, 15 September 2003; Rob Walker, "The Right-Hand Diamond Ring," New York Times, 4 January 2004; Joshua Davis, "The New Diamond Age," Wired Magazine, September 2003; John Wilke, "De Beers Is in Talks to Settle Charges of Price Fixing," Wall Street Journal, 24 February 2004; and the De Beers home page at http:/www.adiamondisforever.com/ Retrieved: September 29, 2020 from McEacher, W. (2016). Economics: A Contemporary Introduction. Ohio, USA. South- Western Thomson Corporation Guide Questions: 1. How did the De Beers cartel try to maintain control of the price in the diamond market? 2. How has this control been threatened?RT" QUARTER. ACTIvITv 1 MARKET sTsucTURE CAEE STUIZ'iI'Ir ANALYSIS- Read the following and answer the guide questions that follow. Is a Diamond Forever? In 1566, a child walking along the IL'Ilrange River In South Africa picked up an odd pebble that turned out to be a 21-carat diamond. That discovery on a farm owned by Johannes De Beers sparked the largest diamond mine In history. Ever since the Great Depression caused a slump In diamond prices. De Beers Consolidated Mines has tried to control the wodd supply of uncut diamonds. The company has kept prices high by carefully limiting supply and by advertising. For example, De Beers spent $133 million In 20bit trying to convince people that diamonds are scarce. valuable. and perfect reflections of love. One promotional coup was to persuade Baywatch. a TV show now seen In reruns around the world. to devote an episode to a diamond engagement ring. The story played up the De Beers line that the ring should cost two months' salary. An episode of The Drew Carey Show had a similar theme. The latest attempt to boost the demand for diamonds Is the \"spirit ring.\" a diamond worn on a woman's right hand as a sign of independence. De Beers limits the supply of rough diamonds reaching the market. The company. which Is sometimes called "The syndicate.\" Invites about one hundred wholesalers to London. where each Is offered a box of uncut diamonds for a set priceno negotiating. If De Beers needs to prop up the price of a certain size and quality of diamond. then few of those will show up in the boxes. thus restricting their supply. The company's actions violate U3. antitrust laws {De Beers executives could be arrested If they traveled to America). But there are no laws prohibiting U.S. wholesalers from buying from De Beers. It might surprise you that. as gems go. diamonds are not especially rare. either In nature or In jewelry stores. Diamonds may be the most common natural gemstone. Jewelry stores sell more diamonds than any other gem. Jewelers are willing to hold large inventories because they are confident that De Beers will keep prices up. De Beers* slogan. 'A diamond is forever.\" sends several messages, including [1} a diamond lasts forever, and so should love; [2] diamonds should remain in the family and not be sold; and [3] diamonds retain their value. This slogan is aimed at keeping secondhand diamonds. which are good substitutes for new ones. off the market, where they could otherwise Increase supply and drive down the price. But De Beers has recently lost control of some rough diamond supplies. Russian miners have been selling half their diamonds to independent dealers. Australia's Argyle mine, now the world's largest. stopped selling to De Beers In 1996. And Yellowknife. a huge Canadian mine. began operations in 199%, but De Beers ls guaranteed only about one-third of Its output. 3. What should they do to keep their position in the market for a long time? You may propose a solution