South African competition law and the diamond "cartel"

Abstract

De Beers Central Selling Organisation is a co-operative marketing agreement its objective is price stabilisation not collusive monopoly gain. Collusive agreements do not last. Nevertheless the CSO has persisted. Cartels can persist if government helps and this may have occurred up to 1950. Today only two (complementary) explanations remain. The "box" and "sight' system is the least-cost method of organising a distribution channel given bargaining and uncertainty and it stabilises prices for a product whose demand depend on a Veblenian mystique. Recent competition law does not allow for the transaction cost and demand analyses which explain this co-operative marketing agreement as non-collusive.