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.