Tightest of All

Of all the world's tight trade combinations, the British-controlled diamond cartel is the best textbook example of how to control production and fix prices. U.S. businessmen have long been aware that if this cartel could be splintered, diamonds might become cheap enough to: 1) weigh down their wives' fingers; 2) drastically cut the cost of diamond drills, grinding wheels and other industrial tools. Impressed by these facts, Attorney General Francis Biddle last week set out to break up the cartel.

In Manhattan, he brought antitrust charges against famed De Beers Consolidated Mines Ltd., its diamond-selling subsidiary, Diamond Trading Co. Ltd., Belgium's "Diamang" and "Forminiere," world's biggest diamond miners, and five other British, Belgian and Portuguese companies. Together they supply 95% of the world's diamonds.

Bigwigs of these corporations live in the far corners of the earth, well beyond the Biddle reach. So he had to content himself with individual charges against seven officials or stockholders near at hand in Manhattan, including Solomon R. Guggenheim, aged (84) copper magnate and art collector, and Clendenin J. Ryan, lieutenant commander in the Navy and grandson of the late Thomas Fortune Ryan.

Commander Ryan promptly said that he owned only a small block of stock, that he had nothing to do with running the companies. Another defendant, Herbert H. Vreeland of Manhattan, director of Diamang and Forminiere (also board chairman of Royal Typewriter Co. Inc.), died two days after the charges were filed.

The rest met the charges in the same fashion which the cartel reserves for all complaints--a dignified silence. If De Beers was disturbed by the charges of price fixing, control of production, quotas for diamond merchants, etc., it was comforted by the belief that Biddle has no more chance of denting the cartel than of cleaving a diamond with a butter knife.

All or None. The Lord of Diamonds is Sir Ernest Oppenheimer, chairman of De Beers and Diamond Corp. (which together own Diamond Trading Co.), and understudy of the late Empire-building Cecil Rhodes. Now living on his spacious ranch outside Johannesburg, Sir Ernest makes only occasional visits to the little grey building in London from which the cartel rules.

There Diamond Trading Co. buys all the stones from the producers, sells the gem stones to carefully inspected buyers at "sights" held four times a year. The customer must buy all of a lot, or none. Most buyers suspect, as Biddle charged, that those who do not buy at least $80,000 worth at a sight are not asked back.

Industrial diamonds comprise only 28% of the value (v. 87% of the volume) of diamonds sold in the U.S., the biggest market. With them, the company is less careful. But the cartel permits no stockpiling, carefully sells only what diamonds it judges the market can absorb.

Take It or Leave It. This tight control enabled the cartel to shut off industrial diamonds from the Axis. But it has also irritated the U.S. In 1942 the U.S., worried lest the Nazis grab all of Africa, and its diamonds, tried to stockpile them in the U.S. The Trading Company said no.

Instead, it agreed to set up a stockpile in Canada, with U.S. and British funds, let the U.S. draw on it only when the supply of U.S. stones fell below a certain amount. Then it made sure that the U.S. had no excuse to draw on the pile by shipping directly all the diamonds needed. The company had plenty, simply because it buys up surplus diamond production in slack times to keep stones off the market.

For World War II the corporation voluntarily froze diamond prices at prewar levels, although industrial users grumbled that upgrading of poor stones had actually upped prices. The Trading Company paid as little attention to this as to any complaints from buyers who do not like its rules. Customers pay in advance, take title to the stones in London. Industrial users often buy stones unseen, have them mailed to them from London.

If the stones are unsatisfactory, he can only grit his teeth. All sales are final. Actually, these highhanded arrangements are less the normal workings of a cartel than a shrewd defense against such suits as Biddle's. In effect the cartel, legal in Britain, holds that by selling only in London it does not do business in the U.S.

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