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AMERICA’S FTC FLEXES ITS MUSCLES IN THE DIAMOND TRADE

The Federal Trade Commission (FTC), the U.S. government agency charged with protecting the interest of consumers and promoting competition, is evolving into one of the most influential players in the worldwide diamond trade, in part because of the size of American market, both also because of its readiness to the place itself at the center of the debate about how to describe man-made diamonds and the differentiate them from their natural counterparts.

At the beginning of April, FTC staff sent eight letters to American-based jewelry marketers, warning them that some of their online advertisements of jewelry made with simulated or laboratory-created diamonds may deceive consumers. This the FTC noted was in violation of the FTC Act.

The letters noted that in July 2018 the agency had issued updated edition of its Guides for the Jewelry, Precious Metals, and Pewter Industries, which provide marketers with information on how to make non-deceptive representations about jewelry and related products, including mined, lab-created and simulated diamonds.

Failure of American companies to follow the guides, the FTC warned in its letters, may result in enforcement actions if the FTC determines the companies engaged in unfair or deceptive acts or practices. Such actions could result in civil penalties if the company engaged in practices knowing that the commission has already deemed them deceptive in earlier litigation.  

 

FTC CRITICIZES ADVERTISING THAT BLURS REALITY 

In particular the FTC expressed its concern that companies’ advertising is resulting in the deception consumers, who may be convinced that they are buying product different to the one they have purchased or are considering purchasing. Specifically, the FTC pointed out examples where the advertising might imply that a simulated diamond is a lab-created or mined diamond, or that a lab-created diamond is a mined diamond.

 

Hands holding a diamond

The FTC has warned makers of synthetic diamonds against labeling their merchandise as “eco-friendly,” “eco-conscious,” or “sustainable,” saying that such terms can be interpreted to imply certain specific environmental benefits.


The letters cautioned the eight companies them not to use the name of any precious stone, including diamonds, to describe a simulated or lab-created stone, unless the name is immediately proceeded by a clear and conspicuous disclosure that the product is not a mined stone. The staff also encourages companies selling simulated diamonds to avoid describing their products in a way that may falsely imply that they have the same optical, physical, and chemical properties of mined diamonds.

Several of the letters also noted that the companies have advertised their jewelry as “eco-friendly,” “eco-conscious,” or “sustainable,” and that such terms can be interpreted to imply certain specific environmental benefits. Sellers must have a reasonable basis for making such claims for any products and the claims should be adequately qualified to avoid deception, the FTC stated, and in these specific cases it is highly unlikely that they can substantiate all reasonable interpretations of these claims.

 

GIA FALLS IN LINE WITH FTC GUIDES

One of the more controversial elements in the FTC guides for the jewelry industry published in July 2018 was its recommendation that the term “laboratory-grown diamonds” be used instead of the terms “synthetic diamonds.” While it did not forbid the use of the descriptor “synthetic,” which is technically remains accurate, it did accept the contention of man-made diamond producers that consumers may interpret the word to mean that the diamonds are fake. 

While members of the industry expressed their reservation over the FTC’s recommendation, many nonetheless have fallen in line with its finding.

The latest organization to do so is the Gemological Institute of America, which has just published details about the grading reports it is issuing for man-made diamonds. Beginning in July 2019, they will now be called GIA Laboratory-Grown Diamond. The reason it was doing so, GIA said in a statement, was “to align the report with recent revisions to the U.S. Federal Trade Commission (FTC) Jewelry Guides.”

But GIA says that measures are being taken meant to ensure that a grading report for a man-made diamond will be clearly different from those issued for natural stones. 

The GIA Laboratory-Grown Diamond Report will to use the terms “Flawless,” “Internally Flawless,” “Very Very Slightly Included,” “Very Slightly Included,” “Slightly Included” and “Included” to report the clarity grades for laboratory-grown diamonds, rather than VVS1 and VVS2; VS1 and VS2; SI1 and SI2; and I1, I2 and I3 used to report the clarity grades for natural diamonds.

Furthermore, the GIA Laboratory-Grown Diamond Report will use “Colorless,” “Near Colorless,” “Faint” and “Very Faint” to report the color grades for laboratory-grown diamonds, rather than the letters used to report the color grades for natural diamonds.

The GIA Laboratory-Grown Diamond Report will also includes the following statement: “This is a man-made diamond produced by CVD (Chemical Vapor Deposition) or HPHT (High Pressure High Temperature) growth processes and may include post-growth treatments to change the color.”

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