De Beers was set up in South Africa in 1888 by Cecil Rhodes as a diamond mining conglomerate that quickly rose to dominate the global diamond market. By 1890, the firm was selling its entire output to the powerful London Diamond Syndicate. In 1926, Sir Ernest Oppenheimer, a seasoned veteran of other South African diamond syndicates, was appointed to the board of De Beers, and became chairman in 1929. To this day, Oppenheimer's descendents still have a hand in leading the formidable De Beers empire.

Sir Ernest Oppenheimer is credited with engineering a consistent pricing model that relies on meticulous control over the global supply of diamonds. In his words, "only by limiting the quantity of diamonds put on the market, in accordance with the demand, and by selling through one channel, can the stability of the diamond trade be maintained." This placed Oppenheimer's Central Selling Organization in the role of a diamond cartel, which would do anything, including agressively buying up excess inventory, to protect prices and reduce volatility in the market. With the momentum of the CSO, De Beers, and other colluding major diamond producers, new players in the diamond market were either joining the cartel or facing the consequences.

Sir Ernest's son, Harry Oppenheimer, contributed to the success of De Beers in a different way, by spearheading innovative advertising campaigns to convince young buyers that diamonds were not only attainable by the middle class, but were also the ideal wedding engagement present. In 1947, N.W. Ayer, the ad agency for De Beers, came up with "a diamond is forever", which grew to become the top advertising slogan of the 20th century. In just 60 years, De Beers has singlehandedly elevated the diamond from just another bauble for the rich to the cornerstone of marriage and the ultimate gift, all through a slick marketing campaign that continues full steam ahead to indoctrinate future generations of consumers.

In order for any cartel to survive, it must flex its muscles when threatened. It is no secret that De Beers hoards an enormous stockpile of diamonds simply to keep demand and prices up, and they have also been known to briefly flood the market with specific kinds of diamonds as a last resort to cripple non-compliant sellers. Eventually, the seller surrenders and sells their stones to De Beers instead of competing against them.

De Beers uses their incredible wealth and power to influence various African governments to keep the diamonds flowing, and is not above flat-out bribery to get their way. One such example was the cozy arrangement between De Beers and Mobutu Sese Seko, the former dictator of Zaire, who received as much as US$1M per month from De Beers just for cooperating, in addition to whatever profits he made selling diamonds to De Beers from mines he personally owned.

De Beers has also come under fire for purchasing uncut diamonds from violent outlaw armies that torture, amputate, and murder innocent civilians, including children. While De Beers pays lip service to the importance of shunning these conflict diamonds, it is believed that De Beers already had a significant number of conflict diamonds in their coffers before they pledged to stop buying more. It is also easy enough for the outlaws to smuggle blood diamonds onto the market that all but the most serious efforts wouldn't help much anyway. Fortunately, the Kimberley Process appears to be of some help in restricting their flow to the public.

Customers of De Beers have grown accustomed to literally begging for permission to buy choice diamonds, since the cartel dictates an all-or-nothing agreement which usually requires the buyer (known as a sightholder) to accept a large number of inferior stones in each parcel. This selling policy strongly favors larger jewelry retailers, who have an established market for selling the less attractive diamonds. Boutique jewelers who want fewer but better stones are forced to pay a premium for being choosy, which often places them at an immediate disadvantage against larger retailers.

In 2004, De Beers finally settled a long-standing anti-trust case in the US that had excluded them from operating within American borders since 1994. It's hard to say if this is evidence that De Beers is willing to clean up their act, or if it is merely a slap on the wrist that allows them to re-enter a very lucrative market. Through their monopolistic practices and a seemingly blind eye to the brutality that fills their vaults, De Beers has become a lightning rod for criticism of the diamond industry. Only time will tell if the public can stay focused on the pertinent issues or surrender to one of the most intense media campaigns ever created.

De Beers also single handedly invented the idea that diamonds should be given for an engagement. Prior to the 20th century, diamonds were not especially coveted or considered valuable because of their relative abundance, and were mostly used for industrial purposes. De Beers set about to create a market other than industrial uses for diamonds so they came up with the whole engagement idea.

In the 20s and 30s they paid movie studios to add scenes featuring the now familiar man on his knees presenting a diamond, which previously had nothing to do with courtship. They chose that method because it was thought that if the man were expected to 'surprise' the woman with a diamond, it would be preferable to the already engaged couple going to pick out a gem together, in which case they might level-headedly decide that the money was better spent on something else.

What a business model! Monopolize the distribution of a marginally valuable product, create a market for it from scratch, and raise armies to act with extreme vengeance against anyone who may challenge the cartel.

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