On Friday, March 20th Rapnet released its diamond price list and slashed the prices on its price list across the board by an average of 7%. While diamonds don’t trade according to the list prices, the price list does affect sentiment of buyers and sellers, with buyers often asking for lower prices when the price list goes down, and sellers agreeing to lower prices for fear of further reductions and loss to their inventory.

As a result, there has been a great deal of uproar from diamond sellers who list on the website since they have been already operating on razor thin margins for most categories of diamonds. Also, with businesses closed and hit hard by Covid-19, this is an additional blow to sentiment. Shortly after the price list was revealed, there have been message groups formed to discuss coming together to take listings off of Rapnet in protest, and the Instagram account “Stock_Off_Rapnet” was created to highlight and promote companies that had removed their diamond listings off of Rapnet.

Since then, the value of the diamond listings on Rapnet has gone down from $8.1 billion on March 20th, to $5.4 billion on march 21st, $3.1 billion on march 25th, and $2.4 billion on March 29th. That’s over a 64% reduction in diamond value over the curse of 5 days, a bigger decline in value than even the stock market during the Coronavirus-19 panic that has killed the decade long bull market.

Rapaport has seen this decline and backlash and its propaganda machine has moved fast, spinning the movement against the company as an “attack by diamond suppliers who are opposed to the publication of lower prices in the Rapaport Price List.” The spin is clear here, referring to the dissenters as an isolated “group of suppliers” undergoing an effort to “boycott Rapaport as a way of blackmailing us not to publish lower diamond prices.” While people who hold diamond inventories naturally do not like seeing lower diamond prices, this is not the reason people are so upset. Diamond prices have gone down before without creating such uproar and fury. The reason this was the tipping point is because the price drops were deep and sweeping, in a way that is unprecedented. Almost every category was cut across the board, even certain categories that have low levels of inventory, and where prices have been going up. Thus, the price drop was not backed up by any facts and figures that would make the drop more understandable and justifiable to sellers.

Rapaport has touted in a number of his response statements that “Rapnet supports ethical, transparent, competitive, efficient markets.” If this were the case, then he would welcome all feedback against the price list and back up every price movement with real time price data. However, he has maintained his black box about how the price list is determined, and on March 29th there are reports of users being asked to sign pledges to “not to promote boycotts against RapNet or its members.” For someone who wants transparency he is forcing obedience among his remaining user base, and looking to suppress the voice of those who don’t agree with his views. He has referred to those who disagree with him as “blackmailing Rapaport not to publish lower diamond prices.” He either doesn’t understand what people are upset about or is ignorant to it. Regardless, instead of asking people in his pledge to not blackmail and threaten other members which would be a fair and reasonable request, he is asking them to not promote dissent against Rapnet or its members. These are two very different things. He comes off as a dictator trying to quell an uprising rather by clamping down on free speech and organizing rather than a democratic leader trying to prevent immoral behavior.

In a way, Rapaport has had monopolistic control over multiple parts of the diamond pipeline for decades now. His price list is used as a benchmark for diamond manufacturers, rough buyers, and polished diamond sellers, especially for larger diamonds which are GIA certified. Its trading platform Rapnet has historically also controlled a majority of the worlds larger polished diamonds for sale, letting them command premium prices from subscribers. Rapaport has for decades been trying to commoditize and standardize diamonds in a way that they can be sold on an exchange similar to gold and oil. However, the diamond industry has been challenging that since diamonds are not as homogeneous of a good as gold or oil. Each diamond has its own unique characteristics, and just because two diamonds are graded the same color and clarity does not mean they should be traded at the same price. While commoditization of diamonds would be good for Rapaport since it would allow diamonds to be bought and sold online much easier, it simultaneously also would lower profits further for diamond sellers already struggling with tight margins. Regardless Rapaport has insisted in pushing forward with the initiative, and has been doing everything in his power to control and influence the diamond market in ways that will further his personal views. As much as Rapaport insists that he has altruistic intent, and is looking out for the interests of the industry, it is clear that there is a clear risk of bias and conflict of interest with his company and his price list. A company that is known to regularly buy and sell diamonds and broker transactions for the industry is not one that can pretend to be unbiased or have nothing at stake from influencing its prices.

Rapaport has argued in recent letters to the trade and interviews that “I care about the industry, and I care about its people, and I even care about the people who are trying to boycott. They are under tremendous strain and pressure.” His actions don’t seem to match his words though, since the prices for his trading platform have only gone up in the last few years, while his price list has simultaneously lowered inventory valuations and profits. If he really cared about the diamond industry as much as he states, he would lower the prices for his platform, and would listen honestly to the feedback members are giving him about his actions. Instead of labelling the people who are boycotting his service as blackmailers only looking to serve themselves by artificially propping up prices, he needs to listen honestly to the reasoning. These are the same people who have supported him and allowed his company and influence to grow over the past 40 years. Sellers are not ignorant to price declines, many sellers have been selling their inventory at losses for years as prices have declined. They don’t expect prices to go up in a time of crises, they just don’t see the reasoning or justification for a broad decline across all diamond categories and sizes, especially when markets are currently shut down. The problem is that the market prices diamonds according to changes in the price list. So while Rapaport feels he is simply reflecting changes he sees in the marketplace, his actions tend to have a domino effect and lower prices even further by lowering buyer and seller sentiment.

Now, it looks as though his influence is diminishing drastically. Even if Rapaport survives this coup attempt in the short term, the longer term sentiment against him and his company has come to a boil. Numerous industry leaders have announced they are either ignoring the latest price list or dropping the price list in general. Numerous groups have been created to discuss next steps and to voice complaints about the diamond trading platform and company. The irreparable damage of lost goodwill and approval from the diamond industry will weaken any future business ventures. Companies now realize they are not alone in their disapproval of the way the company has controlled the diamond business for the past 40 years.

Many argue that there isn’t even a need for a diamond price list, as diamonds were bought and sold for centuries before the existence of a price list, and that diamonds smaller than 25pts each are still traded efficiently today with high volumes without any such benchmark price list to govern them. While the price list has become ingrained as part of the diamond business for larger diamonds, this is a learned response and something that can be unlearned in the future.

It will remain to be seen if the industry can drop its price list habit and if the current existing platforms of Polygon, Idex , VDB or a new platform will step up to the plate to fill the void from Rapnet by expanding their outreach and offerings. The diamond world can only rid itself of Rapaport’s tyrannical hold if industry members stay united and resilient.