LVMH, DE BEERS STRONG ON VENTURE

Byline: James Fallon

LONDON — LVMH Moet Hennessy Louis Vuitton and The De Beers Group Thursday said they remain fully committed to their joint venture to create a new prestige jewelry brand despite the European Commission’s in-depth investigation of the plan.
As reported, the EC Tuesday asked for more time to probe the proposed venture following an initial one-month investigation, as required by European law. The further in-depth probe could take another four months. The commission expressed concern that the company, named Rapids World Ltd., “may lead to the reinforcement of the market position of De Beers in the upstream markets for the supply of rough diamonds.”
The commission said it is worried De Beers might favor the joint venture in its supply of rough diamonds. It could do this by restricting the supply of rough diamonds to those of its customers, the so-called sightholders, that supply competitors of the De Beers-LVMH joint venture.
In addition, by turning De Beers into a brand name in prestige jewelry, the venture would increase demand for rough diamonds sourced from De Beers. “This increase in demand for De Beers’ rough diamonds would raise the barriers that other companies have to overcome in order to compete effectively and would therefore strengthen De Beers’ position,” the commission said in a statement.
LVMH and De Beers said in a statement Thursday that they believe their new venture will increase competition in the retailing of diamond jewelry. As reported, the companies plan to invest a total of $400 million in the new venture over the next five years and to open the first shops for the new brand within the next 12 to 18 months.

load comments
blog comments powered by Disqus