De Beers: a monopoly in the diamond industry De Beers' advertising slogan "A diamond is forever" was at the heart of its efforts to establish the stone as the only appropriate gemstone to symbolize lifelong love and commitment. The more money spent on advertising, the more diamonds people buy. And when people buy diamonds, De Beers makes money. It's why the company spends $180 million a year worldwide advertising cut diamonds, a product it doesn't even sell. There are very few companies... you may have difficulty finding even one, that has been the leader of its industry as a whole - Miner and buyer of 70-90% of the world's rough diamonds - Buy rough diamonds directly from the mine owners of diamonds - Cutters sell cut diamonds to retailers who in turn sell them to jewelry stores. - And yet De Beers spends 180 million dollars a year all over the world to advertise cut diamonds, a product it doesn't even sell!!! • Inefficiencies created by monopolies and antitrust regulators in the United States - Prices of other commodities (e.g. gold, silver, grains) fluctuate greatly in the United States. In response to 20th century economic conditions, De Beers sold 85% to 90% of the world's diamonds2. Rockefeller's Standard Oil and Gates's Microsoft may have briefly come close to this kind of dominance, but the duration and scope of De Beers' supremacy is unprecedented. It keeps diamond prices artificially stable by adapting its supply to global demand. De Beers acts as the monopoly theory predicts: - It is almost the only seller of diamonds (it sells almost 90% of the world's production). - Sells a product with no immediate substitutes. (created this illusion by advertising) – Limits production and responds to changes in market demand. When demand contracts, De Beers reduces sales and vice versa. OBJECTIVE: S = D for high priced diamonds B) HISTORY (creation of the DE BEERS empire) Before the 19th century, diamonds were exceptionally rare: small quantities in India and Brazil - no diamond mines were discoveredTime: Diamonds /MinesRepublic of South AfricaSub-Saharan countriesSiberiaAustraliaNWT of CanadaBut De Beers still manages to control the world market and still manages to make us believe that diamonds are rare!!!Mid 1860s-1890s1869: first diamond mines in colonies in southern Africa dramatically increased the number of stones available. 1870s: Many diamond hunters purchased mines. Cecil Rhodes purchased the rights to two mines on the farm of Nicolas and Diedrick DeBeer in the Cape Colony (now South Africa). Diamond hunters realized that their price depended on their scarcity. They had no alternative but to merge their interests into a single entity: to control the production of the mines