In what could be a blow to De Beers’ retail hopes, the European Commission is investigating the proposed venture between the company and LVMH.

In a statement, the Commission said the request was the result of “serious doubts whether [the venture] is compatible with the competition rules in the European single market.” The Commission has four months to investigate and decide whether the new venture should proceed. The EC identified two concerns:

• Because of its knowledge of sightholders’ operations, De Beers could direct its best diamonds toward the new venture and cut out those who sell to competitors.

• By launching a retail brand, De Beers would increase demand for its diamonds and “therefore raise barriers that other competitors have to overcome in order to compete effectively.”

The request was considered bad news for the venture, as it increases the chance that the Commission may block it.

“They are seeking more clarification,” says De Beers spokesman Andrew Lamont. “This is quite a complex application, and they have asked for more time. We are quite happy to give them the assurances they require. Considering all the action on the De Beers front, it’s not surprising.