ISG editorial: The RapNet monopoly

International School of Gemology

We got rid of the DeBeers monopoly…but traded it for another…

I have been in this business for just over 43 years. This includes almost 5 years as a Claims Replacement Buyer for USAA insurance, responsible for buying over US$1 million dollars a year in loose diamonds.

Not once have I ever purchased a single diamond based on the Rapaport Report, or has the Rap Sheet ever come into play in the negotiations.

With all of the media coverage of the recent actions by RapNet (who publishes the Rapaport Report) to remove all diamonds graded by the EGL Labs everywhere, I thought it might be important for our ISG Global Community to put this whole Rapaport Report issue in proper perspective.

When the Rapaport Report was first started the whole industry was aghast that anyone would dare to publish what was presented as a New York wholesale diamond price list…and make it available to consumers. This was a sacrilege. This was drinking milk with your veal. The very thought of publishing a wholesale diamond price list was tantamount to someone publishing the actual cost from Ford Motor Company to their dealers, but on a much grander scale. But the folks at Rapaport Report went forward with the effort, and the ensuing fiasco on home town, independent retail jeweler’s business continues to this day.

Along the way, Messrs. Rapaport and Oppenheimer decided that it would be a perfect next step to use their enormous industry clout to turn diamonds into commodities, just like crude oil, soybeans and gold. This did not turn out well, but the effort underlines a long standing effort by the folks at Rapaport to control the world diamond markets by way of this Rapaport Report and RapNet. While the diamond commodity idea did not turn out well, the efforts to control the world diamond prices by way of the Rapaport Report price list has worked out very nicely…..for Rapaport…but not so much for the rest of the industry.

With the recent actions by RapNet to remove all EGL Labs from the RapNet listings, when Rap’s stated issue is with EGL International only, smacks to us of RapNet taking the opportunity to exercise their extreme power improperly. What I find most interesting about this action of RapNet is the article written by Martin Rapaport where he so righteously pounds his chest over the issue of ethics in the diamond grading industry, when it is the Rapaport Report that is at the very heart of the utter collapse of diamond profits for independent, home town retail jewelers around the world.

The bottom line to all of this, in our opinion, is that Rapaport Report has replaced DeBeers as the operating monopoly in the diamond industry. By creating a scenario where RapNet has the power to incur great damage on any lab they choose, and by RapNet….through their Rapaport Report…..exercising undue price influence on the market, RapNet has created a situation where our industry got rid of the DeBeers monopoly…and simply traded it for the RapNet monopoly.

There are legitimate diamond pricing guides out there that are indeed “industry only” reports. We are currently investigating the IDEX price list from the International Diamond Exchange. The main difference we have found so far is simply this: the IDEX report is based on actual diamond transactions, while RapNet attempts to control diamond transactions by controlling lab operations and price levels.

That’s a big difference to us. Reporting actual market sales –v- trying to control how the market sells.

I was in this business before the RapNet monopoly existed, and the world diamond markets were far more profitable and far more viable.

I have been around long enough to see the DeBeers monopoly end.

I hope I am here long enough to see the RapNet monopoly end, also.

When this much unbridled power over an industry gets into one man’s hands, the outcome is never good….going back to our previous comparison of  RapNet to that of Antonio López de Santa Anna.

Remember the Alamo!

Remember doing business before RapNet!

Robert James FGA, GG Président, International School of Gemology

That’s just our opinion, we welcome your thoughts, comments and responses.