FTC Warning Sent To “Re-Mined” Lab-Grown Diamond Companies Of Rules
Washington, DC—Jewelers and diamantaires upset by the Federal Trade Commission’s decision to remove the word “natural” from its definition of diamond in the revised Guides For The Jewelry, Precious Metals, And Pewter Industries should be gratified to know that the FTC is still watching synthetic diamond growers carefully to be sure they’re not advertising deceptively, either about the diamonds’ origins or their environmental impact. And it’s not afraid to slap an errant wrist--or eight--when needed.
(Left: A still from video shows colored synthetic diamonds on display at De Beers' International Institute of Diamond Grading and Research in Maidenhead, England, in 2016. Image: REUTERS/Reuters TV)
This week FTC staff sent warning letters to eight lab-grown diamond jewelry companies to “re-mined” them what the rules of advertising are. Although the Feds didn’t disclose which companies were cited, a Reuters reporter says one of the letters went to Diamond Foundry, the California company partly owned by Leonardo DiCaprio. A redacted sample of the FTC’s letter can be seen here.
The letters warned that some of those companies’ advertisements for jewelry made with simulated or laboratory-created diamonds may deceive consumers, in violation of the FTC Act. The updated Guides for the Jewelry, Precious Metals, and Pewter Industries (published July 2018) provides marketers with information on how to make non-deceptive representations about jewelry and related products, including mined, lab-created, and simulated diamonds--including both their manufacture and their impact on the environment.
The Diamond Producers Association issued the following statement in response to the FTC letters: “The DPA welcomes the FTC’s warning to synthetic diamond manufacturers against misleading consumers with their marketing tactics. This warning is an important step toward transparency and consumer protection.
It is now crystal clear that synthetic diamond manufacturers cannot use the word “diamond” without qualifying it with an unambiguous descriptor about the manufactured origin immediately before the word “diamond.” It is also clear that the FTC will not tolerate unsubstantiated claims that synthetic diamonds are environmentally friendly in violation of the FTC’s Green Guides.
DPA will continue to support the FTC’s efforts to ensure consumers are protected.”
Failure to follow the Guides, the FTC staff warns, 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 staff said some of the companies’ advertising and/or social media posts fail to conform to the current version of the Guides, and may therefore deceive consumers; specifically, 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, or where required disclosures about the source of the diamonds are not proximate to the individual product descriptions.
The letters warn companies 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.
The letters also note that similar non-deceptive disclosures are required when advertising jewelry containing any other simulated or lab-created precious stones besides diamonds, including pearls. The Guides put it this way: “It is unfair or deceptive to use the word ‘ruby,’ ‘sapphire,’ ‘emerald,’ ‘topaz,’ or the name of any other precious or semi-precious stone, or the word ‘stone,’ ‘birthstone,’ ‘gem,’ ‘gemstone,’ or similar term to describe a laboratory-grown, laboratory-created, [manufacturer name]-created, synthetic, imitation, or simulated stone, unless such word or name is immediately preceded with equal conspicuousness by the word ‘laboratory-grown,’ ‘laboratory-created,’ ‘[manufacturer name]-created,’ or some other word or phrase of like meaning, or by the word ‘imitation’ or ‘simulated,’ so as to disclose clearly the nature of the product and the fact it is not a mined gemstone.”
Unsubstantiated “eco-friendly” and “sustainable” claims also nixed. Letters to several companies who have advertised their jewelry as “eco-friendly,” “eco-conscious,” or “sustainable,” also noted 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 those claims should be adequately qualified to avoid deception. The letters admonish the companies not to use unqualified claims such as “eco-friendly,” “eco-conscious,” or “sustainable,” as it is highly unlikely that they can substantiate all reasonable interpretations of these claims.
Although it was almost an afterthought on page three of the FTC’s letter, this might in fact be the most impactful part of the FTC's warning. Eco-friendly claims are a key part of lab-grown diamond marketing and of the stones’ appeal to Millennials, who index very high for social and ethical concerns about products they buy. Lab-grown diamond companies have grabbed the eco-friendly/ethical narrative (as evidenced in this video), while the industry is still struggling to overcome damage done by its slow reaction to the conflict diamonds issue in the early 2000s. (Further reading on lab-grown diamond companies' eco-friendly claims can be found here.)
Each company that received a letter was asked to respond to the FTC within 10 days of receipt, advising of the steps they plan to take to revise their marketing so that it follows the Jewelry Guides and is compliant with the FTC Act.
GIA Introduces New Diamond Country of Origin Reports; Tweaks Lab-Grown Diamond Reports
Carlsbad, CA—Changes are afoot for GIA (Gemological Institute of America) natural and synthetic diamond reports.
For natural diamonds, starting at the end of this month, the GIA Diamond Origin Report service will be introduced to confirm the country of origin of polished diamonds; while terminology will change slightly on GIA’s lab-grown diamond reports. To be eligible for the new country-of-origin service for natural diamonds, the original rough diamonds and resulting polished diamonds must be submitted to GIA for analysis so that they can be matched to each other and to confirm the origin information provided by the participating mining company.
The new report will include the country of origin, a full 4Cs quality analysis of each diamond, and a report number inscription. More information about the country of origin and diamond formation will be available for each Diamond Origin Report in GIA’s online Report Check service, accessible at GIA.edu or through the QR code printed on each report.
“In recent years, there has been a growing demand for transparency and traceability in the diamond industry. Consumers want to know the origin of products and their socio-economic and environmental impact,” said Susan Jacques, GIA president and CEO. “The GIA Diamond Origin Report fits perfectly with GIA’s mission of educating and protecting the public, and ensuring their trust in gems and jewelry. Consumers purchasing one of Mother Nature’s greatest treasures, a natural diamond formed more than a billion years ago, will now know more about their diamond’s journey and the positive impact it has on the communities in the countries where diamonds are discovered.”
GIA worked with mining companies, manufacturers, and retailers to identify their traceability needs, and conducted consumer research which showed that 69% of U.S. bridal consumers prefer to buy a diamond with an origin story. The Diamond Origin Report service is built on GIA’s decades of scientific research into the formation and characteristics of natural diamonds, and the Institute’s gemological examination of tens of millions of diamonds in its grading laboratories.
“When eligible polished diamonds are submitted to GIA for grading, they can be matched to the original submitted rough using physical measurements and other scientific data,” said Tom Moses, GIA executive vice president and chief laboratory and research officer. “If the data from the polished diamond and the rough match, GIA will confirm the country of origin provided by the mining company, and include that information on the Diamond Origin Report.”
GIA has already processed thousands of rough diamonds ranging from 0.15 carats up to more than 100 carats. A growing number of miners, manufacturers, and retailers are participating in the Diamond Origin Report program, including Alrosa, which joined the program in October 2018.
The new service will be supported by digital and print marketing, including high definition images of the original rough and the resulting polished diamond, allowing retailers to convey the unique story of each diamond to the consumer. GIA will provide descriptive brochures explaining the discovery and transformation of rough crystals to polished diamonds, and relating the social and economic benefits of the industry in each country.
Separately, GIA also is updating education materials and grading reports for lab-grown diamonds. The changes align with the updated FTC Jewelry Guides, released in July 2018.
Beginning July 1, GIA’s identification and evaluation reports for manmade diamonds will no longer use the term ‘synthetic,’ in accordance with the new FTC guides. The Guides still permit use of the term but removed it from its suggested descriptors of lab-grown diamonds after growers argued that consumers confuse “synthetic” with “simulated,” equating lab-grown diamonds with other substances like moissanite and CZ.
Apart from the change in terminology, GIA’s reports for lab-grown diamonds will remain relatively unchanged, but they have always been different from natural stones’ reports and those differences will remain in place. For instance, color is detailed descriptively instead of with the Institute’s famed letter grading scale, although comparisons are made.
The new GIA Laboratory-Grown Diamond Report (formerly Synthetic Diamond Report) will feature the same visual representation of the scales for color, clarity and cut as GIA’s grading reports for natural diamonds, and the updated reports will continue to use descriptive terms for color and clarity (such as Near Colorless and Very Slightly Included), as shown on the scales.
The report will also include a QR code linking to GIA’s online Report Check service with more information about the growth processes of laboratory-grown diamonds. All detected clarity treatments will be disclosed. The comments section will include the 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.
“Over the past few years, there has been an incredible advancement in the technology by which laboratory-grown diamonds are made. With the increased availability of man-made diamonds in commercial qualities, sizes and quantities, and with greater consumer awareness of and desire for this product, GIA is making these changes to align with the revised FTC Guides and changes in the market,” said Jacques. “Our mission is to ensure the public trust in gems and jewelry; these updated reports will give consumers buying laboratory-grown diamonds confidence in their purchases.”
Since the FTC revision in July 2018, GIA has been reviewing and revising its education materials and procedures to ensure consistency in nomenclature across the Institute. GIA is conducting significant research, including consumer focus groups, to learn what the public expects from GIA reports for laboratory-grown diamonds. These focus groups indicate that there is still confusion about the product and the differences between natural diamonds and laboratory-grown diamonds. There are also mixed views on what format GIA reporting on laboratory-grown diamonds should take, and on whether grading reports are needed at all for man-made diamonds, but Institute will continue to survey consumers with the goal of providing them with information that clearly describes the product and informs them in making their purchase decisions.
The updated reports will be available beginning July 1. Any GIA Synthetic Diamond Report issued since January 1, 2018 may be returned and exchanged for the new Laboratory-Grown Diamond Report at no cost.
De Beers Group Offers Enhanced Transparency With “Diamonds From DTC” Provenance Claim
Gaborone, Botswana—De Beers Group will introduce a “diamonds fro DTC” source of origin claim to support the diamond trade in providing enhanced transparency regarding diamonds purchased from its sightholder sales. The claim will serve as a factual statement about provenance for both sightholders and accredited buyers to use for diamonds purchased from De Beers sights.
Beginning with the third sight of 2019 (subject to license agreement) sightholders and accredited buyers will be able to apply the claim to their sight-sourced diamonds and pass it on to their customers along the value chain. In turn, subject to meeting certain criteria, trade participants will be able to use the “diamonds from DTC” provenance claim through the value chain down to the consumer level, and will be able to guarantee validity through certifying the claim under the Responsible Jewellery Council standards or through an independent third-party audit.
The “diamonds from DTC” provenance claim will offer greater significance than many other industry provenance claims, says De Beers, as it not only states corporate provenance, but is also supported by the provision of sustainability performance and transparency information on each of the mines of origin via a refreshed www.dtc.com website. De Beers Group CEO Bruce Cleaver said, “We are proud of where our diamonds are discovered, how we recover them responsibly, and the role our activities play in building thriving communities. By enabling our customers to share the source of origin of our diamonds, we hope to drive further transparency throughout the diamond value chain.”
More information on “diamonds from DTC” and the provenance claim is available on www.dtc.com.
(Note: In Canada, the term “diamonds from Diamond Trading Company” will be licensed for use instead of “diamonds from DTC.”)
Separately, De Beers’ Lightbox brand of lab-grown jewelry is adding more one-carat stones to its website. The catch: they’re laser-drilled with a tiny hole (like a briolette would be) so they’re limited to being worn as a dangle style.
Lightbox has added pierced diamonds to its product line. A small laser-drilled hole at top allows the stone to dangle.
De Beers caused an industry uproar last spring when it announced plans to launch Lightbox, a linear-priced line of lab-grown jewelry with one-carat stones topping out at $800. But since its actual launch last September, the Lightbox website—at present the only sales channel—has been pretty consistently sold out of one-carat goods.
“It’s a magic number,” Lightbox CMO Sally Morrison told JCK.
Big Stones In Hot Demand: ALROSA NY Auction Nets $11.8 million
New York, NY—Russian diamond miner ALROSA realized a total revenue of $11.8 million at its first New York diamond auction of this year. The company offered a range of special size diamonds (over 10.8 carats), and in total sold 107 stones with a total weight of 1900 carats. Over 30 firms from the largest international trade centers, such as the USA, Israel, Belgium, India, and the UAE participated in the auction.
"We held the first auction this year in the United States, selling almost 90% of the auctioned stones,” said Evgeny Agureev, Member of the Management Board, Director of the United Selling Organization at ALROSA. “Today this is the highest revenue from single auction since we resumed the operations of our USA office, which is now headed by Rebecca Foerster."
The market today is experiencing an increase in activity and interest in ALROSA products maintains stable, he continued. “We invited about 20 American companies to this auction and some of them participated. The overall sales exceeded the total opening bid by 50%, amounting to $11.8 million.”
Last year, ALROSA resumed its operations in New York and held two diamond auctions there, with overall revenue amounting to $18.3 million. The company's auction schedule for 2019 includes four auctions in the United States.