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Diamond jewelry could be a buyer's best friend

Proposed settlement of suits against De Beers would include rebates for purchasers. But hush if you know what's good for you.

January 27, 2008|Howard Witt | Chicago Tribune

HOUSTON — Diamonds may be forever. But how about the price you paid for them?

Millions of Americans who bought diamond rings or other diamond jewelry could be in for a sizable rebate thanks to the pending settlement of a series of class-action lawsuits that accused the giant De Beers diamond company of price-fixing and monopoly practices.

Translation: You got bling? Ka-ching!

There are a few "inclusions," as they say in the diamond business. You must have purchased the diamond between 1994 and early 2006. You need a receipt or other proof of the purchase price. And the amount of the rebate you receive depends on factors such as the value of your diamond and the number of consumers who file claims under the settlement. So don't show this story to your friends.

But you could get refunded 30% or more of the price you paid for that sparkling engagement ring.

Love truly is a many-splendored thing.

"This is nothing but good news for consumers," said Peggy Jo Donahue, director of public affairs for Jewelers of America, a retailers association. "We know consumers love giving and receiving diamonds, and now those who have made diamond purchases in the past may have some money coming back to them."

Notices of the proposed class-action settlement, which in order to go forward must be approved by a federal judge in New Jersey in April, began appearing in national newspapers and magazines in January. Diamond buyers have until May 19 to file a claim by visiting the website.

Under the settlement's terms, De Beers, the South African mining conglomerate that controls 40% of the world's diamond trade, has agreed to pay $295 million, which would be divided among consumers, diamond merchants and resellers.

It doesn't matter whether your diamond came from a De Beers mine in Namibia or a competitor in Russia or Canada -- in fact, no one but a forensic scientist could begin to try to figure out a diamond's source.

The proposed settlement covers all diamonds, whether purchased at a jewelry store in Chicago, Beverly Hills or Pocatello, Idaho. That's because the class-action lawsuits alleged that De Beers, from its dominant position atop the world diamond market, conspired to fix, raise and control the prices of all diamonds.

De Beers officials are quick to point out that they are admitting no wrongdoing in agreeing to the proposed settlement, which is equivalent to roughly six months of the company's earnings.

"Look, I'm not naive," said David Prager, De Beers director of communications in London. "I'm fully aware of the perception that a lot of people have" that De Beers controls the price of diamonds. "But the facts are that it's a very competitive industry.

"The confidence consumers have in their diamonds is the most important thing for us," Prager added. "We haven't accepted the allegations, but we decided to take this step to make sure that consumers still have confidence in the value of their diamonds."

Translation: Just because you might be due a rebate on your diamond doesn't mean you paid too much for it.

The settlement formula sets up a scale for determining the highest potential rebate a consumer could receive. For example, diamond jewelry that cost $1,000 to $5,499 would be eligible for a maximum rebate of 32% of the purchase price, with higher percentages for costlier diamonds and lower percentages for less-expensive stones. On a $2,000 ring, that means you could get a check for $640.

But the more people who apply for a rebate, the less each individual will receive, because there's a cap on De Beers' overall payout.

If every eligible diamond buyer makes a claim, the rebates would amount to about one-tenth of a cent on the dollar -- which would mean just $2 back on that $2,000 ring.

Translation: Definitely don't show this story to your friends.

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