Diamantaires Practice Self-Regulation

July 1999


Diamantaires Practice Self-Regulation

Recent diamond disclosure initiatives by Lazare Kaplan International and the World Federation of Diamond Bourses show the industry is no longer waiting for the FTC to do the regulating

General Electric and Lazare Kaplan International's recent voluntary decision to inscribe the girdles of their GE-processed diamonds so labs, jewelers and consumers can recognize them is the most recent example of the diamond world's self-regulation (see "Doing the Right Thing," p. 23). This follows another case of self-regulation a year ago, when the World Federation of Diamond Bourses passed bylaws mandating disclosure of laser drilling despite the Federal Trade Commission's decision the process is permanent and need not be disclosed.

The GE process alters a diamond's natural color and brilliance. The decision to inscribe the diamonds that go through this process followed a firestorm of protest from industry leaders. The FTC Guides for the Jewelry Industrysparked the storm – the ambiguous language that defines which gem treatments require disclosure make it difficult to determine where the GE process fits in, especially because details of the treatment are proprietary. GE and LKI say the process is permanent, so initially they stood behind the FTC Guides allowing them not to disclose a permanent treatment.

Beyond the FTC
Industry leaders objected that decision. Consumers who find out their gems have been enhanced feel cheated regardless of FTC rules, they said, and the industry needs to shore up consumer confidence.

And while the FTC Guidesmay not require disclosure, some state business and consumer laws do. New York's general business law, for example, says anyone knowingly selling "any diamond which shall have been artificially colored or tinted by coating, irradiating, heating, nuclear bombardment or by any other means without disclosing in writing ... that such diamond has been artificially colored or tinted, or without disclosing in writing that the artificial coloring or tinting of such diamond is not permanent, if that be the fact, shall be guilty of a misdemeanor." Unlike the FTC Guides, New York's law requires written disclosure of non-permanent treatments as well as permanent treatments.

Rarity's the Reason
Disclosure of enhancements goes to the heart of diamond's mystique – rarity. Any diamond is rare, so larger, cleaner diamonds are more rare and, consequently, more valuable. Enhancing a diamond fiddles with the notion of rarity and value.

Enhancements bring an acceptable tier of products to customers who appreciate but can't otherwise afford the rarest gems. But the customers should be made aware of the enhancement, say industry leaders.

Self-regulation by the jewelry industry is essential when federal laws miss their mark, they add. Otherwise, withholding information could devastate the mystique and allure of diamonds, say industry leaders, just as it has seriously marred the reputations of colored gemstones such as emeralds and rubies in the past few years.

– by Robert Weldon, G.G.

Copyright © 1999 by Bond Communications.


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