CFI Rules Prohibition Of Relations Between De Beers And Alrosa Disproportionate

The Court of First Instance

(CFI) has annulled the European Commission's decision to accept commitments

proposed by De Beers to stop all purchases of rough diamonds from Alrosa.

Background to the case

In March 2002, De Beers and

Alrosa notified to the Commission an agreement under which De Beers agreed to

purchase rough diamonds from the Russian state-owned company Alrosa. The

Commission reviewed the arrangement under Article 81 EC and also initiated an

investigation into De Beers under Article 82 EC.

The Commission considered

that the agreement restricted competition on the rough diamonds market by

removing Alrosa as a competitor and constituted an abuse of De Beers' dominant

position in the worldwide supply of rough diamonds.

De Beers and Alrosa offered

joint commitments that would progressively reduce the quantities of diamonds to

be purchased from Alrosa. However, in February 2006, the Commission accepted

binding commitments offered solely by De Beers that require the company to

phase out and then cease altogether its purchases of rough diamonds from Alrosa

with effect from 2009. Alrosa lodged an appeal of the Commission's decision the

following June.

The CFI's annulment

decision

On 11 July 2007, the CFI

annulled the Commission's decision. Although the Commission has a margin of

discretion as to whether and how commitments proposed by undertakings are to be

made binding, it is still under an obligation to comply with the principle of

proportionality, irrespective of the voluntary nature of those commitments.

The CFI concluded that in

this case the indefinite complete prohibition of all commercial relations

between De Beers and Alrosa is manifestly disproportionate. It considers that

the termination of the contractual freedom of the companies would only be

justified in exceptional circumstances, such as the existence of...