Case Study: "The De Beers Diamond Antitrust Case"

Background:

This case study focuses on the De Beers diamond company, which historically controlled a significant portion of the world's diamond market. The company faced legal challenges due to alleged monopolistic practices and price$-$fixing, particularly in the U$.$S$.$ market.

Detailed Scenario:

$-$ Market Control: For much of the $20$th century, De Beers controlled about $85\%$ of the diamond market. They managed this through purchasing and stockpiling diamonds to control prices and through exclusive contracts with suppliers and buyers.

$-$ Exclusive Contracts: De Beers' contracts with buyers, known as "sightholders," were particularly stringent. They included clauses that set prices, required confidentiality, and restricted resale of diamonds in certain markets.

$-$ Legal Issues: In the late $1990$s and early $2000$s$,$ De Beers faced antitrust lawsuits in the United States. The lawsuits alleged that De Beers unlawfully monopolized the diamond market, leading to inflated diamond prices globally.

$-$ Specific Allegations: The plaintiffs argued that De Beers' control over supply and its contracts with sightholders constituted a restraint of trade and were in violation of U$.$S$.$ antitrust laws $($specifically the Sherman Act$).$

Assignment:

$1.$ Contract Analysis:

$-$ Examine the elements of the contracts between De Beers and its sightholders. Identify any clauses that could be problematic under contract law.

$-$ Discuss how these contracts contributed to De Beers' market control and the implications for suppliers and consumers.

$2.$ Defenses to Contract Formation:

$-$ Evaluate potential defenses to the formation of these contracts, such as duress, undue influence, or unconscionability.

$-$ Assess whether any elements of illegality or public policy concerns might render these contracts void or voidable.

$3.$ Antitrust Law Implications:

$-$ Analyze the application of U$.$S$.$ antitrust laws to De Beers' business practices, focusing on issues of market monopolization and price$-$fixing.

$-$ Discuss how De Beers' control over diamond supply could constitute a violation of the Sherman Antitrust Act.

$4.$ Legal Outcome and Ethical Implications:

$-$ Research the legal outcome of the antitrust lawsuits against De Beers.

$-$ Reflect on the ethical considerations of monopolistic practices in international trade.

$5.$ Recommendations for Future Practice:

$-$ Suggest ways companies can avoid antitrust violations in international markets.

$-$ Discuss the importance of ethical considerations in contract formation and business operations.

Deliverables: