As Edward Jay Epstein outlined in his 1982 book "The Rise and Fall of Diamonds," N.W. Ayer saw the challenge as one rooted in mass psychology, meticulously researching the attitudes of American men and women about romance and gift giving. From this research, the slogan "A Diamond Is Forever" was born, launching one of the most brilliant, sophisticated and enduring marketing campaigns of all time. Without ever mentioning the name De Beers, the campaign set out to seduce every man, woman and child in America with the notion that no romance is complete without a rock -- and the bigger the rock, the better the romance. That men also now had a way to show the world how much money they made was an added bonus.

With the help of gossip sheets packed with stories of diamond rings and romance, De Beers transformed the United States into the premier market for the world's gem-quality diamonds. Once it conquered the hearts and wallets of America, it set out to conquer Japan and Brazil, and when World War II was over, it began the reconquest of Europe.

The slogan "A Diamond Is Forever" was also designed to convince the purchaser that although a diamond is a good investment, for sentimental reasons no rock should ever be resold. Given the continuous mining of new stones -- not to mention the half-billion or so carats that will never rust, break or wear out walking around on the hands, necks, ears and lapels of hundreds of millions of women -- the last thing De Beers wants is to have previously sold stones coming back onto the market.

De Beers has enough problems dealing with the oversupply of new diamonds. In the mid-1950s De Beers was overwhelmed by a flood of small diamonds pouring out of recently discovered mines in the Soviet Union. After nearly a decade and a half of convincing America of the importance of larger stones, suddenly the company needed to create a virtue out of the previously disparaged small diamonds. To accomplish this, De Beers invented the "eternity ring," a single, unbroken band of up to 25 evenly matched small stones. The ring was introduced in the early '60s as the best way to renew vows in the home stretch of a long marriage and the best way to wear diamonds without the ostentation of big stones. Today, the United States absorbs 50 percent of the world's diamonds, with an estimated 70 percent of American women owning at least one rock.

As it turns out, this ideal of perpetual ownership is a healthy delusion for the owners of all but the rarest and most expensive diamonds. Despite the illusion that it retains its value, a diamond can only be sold for less than its wholesale price, not what one would consider a good return on investment.

Nonetheless, the rock is alive and well as a status symbol in America, and the current cachet of colored diamonds has added an extra degree of elitism to the raging luxury marketplace. Despite what the industry refers to as "competing luxuries" (four-figure handbags, five-figure watches and six-figure cars), this fall's marketing blitz for the rarer-than-rare black diamond will ratchet up the stakes even further.

But manipulating perception isn't the only way De Beers has maintained its control. As has been extensively reported in a number of publications, including the Economist, the Atlantic Monthly and Stefan Kanfer's 1993 book "The Last Empire," De Beers has also manipulated an artificial sense of the diamond's scarcity by buying up new mines, freezing out challengers and mopping up excess supply. Through a web of intricately intertwined businesses, De Beers successfully created a cartel in the strictest sense of the word, staving off dreaded price fluctuations by controlling everything from the stones' removal from the ground to their delivery into the hands of jewelers.

The Central Selling Organization in Europe handles the purchasing and sorting of stones from its far-flung field offices, then sorts and values the stones in preparation for sale. The Diamond Trading Company in London channels first-tier sales through an arcane ritual of "sights," where 125 handpicked buyers, or "sightholders," meet in London 10 times a year for the privilege of purchasing a nonnegotiable, preselected box of assorted unpolished stones on an all-or-nothing basis. The Syndicate in Israel, as well as cutters and polishers in India, Belgium and New York, process the stones for the next tier of buyers.

But now there are new pressures on the horizon for De Beers that are forcing it to back away from abundant supplies of some of the world's finest raw diamonds in order to preserve its image on the battlefield of public perception. Using the phrase "conflict diamonds" or "blood diamonds," Global Witness and the United Nations, among others, are drawing attention to the cost of human suffering associated with diamonds, forcing a level of accountability into an industry that has been notoriously low on disclosure.

By focusing on the carnage associated with conflict diamonds these groups have forced De Beers to distinguish between diamonds mined in peaceful countries controlled by legitimate governments and diamonds harvested at gunpoint by rebel forces in places like the Congo, Sierra Leone and Angola, where endless battles have turned some of the world's most minerally rich countries into what the United Nations Children's Fund has called the worst places on Earth to be a child. The money generated from the sale of conflict diamonds goes to buy more guns, which perpetuate the battles over control of the diamond mines. Until this recent pressure, De Beers admitted in its public statements and annual reports that it was the purchaser of a large portion of Angolan stones.

In an ironic twist on De Beers' longstanding ability to control perceptions, the company is now attempting to transform its discomfort into a marketing virtue, seizing this moment to develop a consumer brand identity out of its previous anonymity. De Beers announced earlier this year that it intends to embargo all conflict diamonds and provide a certificate of each stone's origin with each sale. To ensure compliance, the company announced its intention to hold its sightholders to the same standard. In doing this, De Beers is hoping to establish itself in the public's mind as the dividing line between the forces of good and the forces of evil, a self-appointed clearinghouse that will prevent buyers from bloodying their hands in the simple pursuit of luxury. From now on, you'll know if that big rock your fiancé just put on your finger was dug out of the ground by brutalized children or waddled out of a war zone in a smuggler's rectum.

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