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October 1999

For Your Staff: Selling Treated Gemstones

Disclosing GE POL

You can do the job positively, whether you're selling a GE POL diamond or simply informing all diamond customers about this currently undetectable process

The announcement in March that a secret and as– yet undetectable process is being used to whiten a small number of diamonds presents a new challenge to retailers. How can you disclose this process to customers when the trade doesn't know what it entails?
In truth, you can protect your store and your customer by disclosing positively even while details of the process remain unknown.

Background

Pegasus Overseas Limited, a subsidiary of Lazare Kaplan International Inc., both of New York City, distributes the color– altered diamonds under an exclusive agreement with General Electric, which developed and owns the technology behind the process. The whitening is being referred to as a process and not a treatment because it differs from traditional treatments such as lasering or irradiating, the company says. LKI also says the process is irreversible and non– detectable.
The Gemological Institute of America is studying the diamonds for identifying features and can't confirm or deny LKI's assertions at this time. However, GIA persuaded LKI that to discourage fraud, it should send each processed diamond to the GIA Gem Trade Laboratory for a laser inscription (GE POL) on the girdle. GIA also logs into its database each GE POL diamond's identifying features.

However, reports have surfaced in the U.S. and abroad that some of the GE POL diamonds have had the inscription partially or completely polished off. As a result, it's possible a GE POL
diamond could make its way to your showcase and you wouldn't be able to detect it by checking for the inscription.

If you sell a GE POL diamond without discussing the process with a consumer and GIA eventually develops a way to detect the process, the consumer could sue you. You have no way to be sure your diamonds haven't been through the GE POL process, so it's safest to discuss the process with all diamond customers. The box on p. 201 explains one way to do this. The same caution applies to retailers who choose to offer GE POL diamonds because so far they're selling for about 15% less than similar unprocessed ones (though LKI is trying to sell them at no reduction).

Introducing GE POL– Processed Diamonds

LKI suggests that the whitening process could appeal to the curiosity of customers with a high– tech background. Here is a product from the earth that scientists have been able to finetune by eliminating lessdesirable brownish tones in a highly sophisticated way. You can emphasize rarity because not only are diamonds rare themselves, the whitening process works on only a small number of diamonds.

You also might consider showing your customer two natural diamonds of like color: one GE POL, one not.

Show the diamond's girdle under magnification so the customer can read the GE POL inscription. Then show the GIA report that accompanies each GE POL diamond and describes the laser inscription. Write the same information on the sales invoice and ask the customer to sign it.
If the customer wants to know how GE whitens diamonds, simply explain GE doesn't reveal this information to prevent other diamond manufacturers from copying it. GE's stance angers gemologists, appraisers and gem labs, but it's much less likely to offend consumers. They understand many products are made using proprietary processes.

Special Care

LKI says GE POL diamonds require no special care or handling. But if the diamond is being recut, be sure the inscription is not removed. After recutting, send the diamond to GIA for a new report, even if the inscription remains intact.

Other Legal Considerations

Even though GE and LKI say the GE POL process is permanent and undetectable, it's still wise for you to disclose that such a process exists to all diamond customers. Certain state consumer laws allow customers to sue if they feel you did not disclose material facts about a gemstone. If it became known later you sold a color– altered diamond without disclosing it, this qualifies as a material fact.
Even more importantly, not knowing whether a diamond underwent the GE POL process is not a legitimate defense. If you can't prove a diamond was not subjected to the GE POL process and you can't at this time you are obliged to explain the process because you know it exists. This knowledge itself is a material fact.

Legal Considerations

Here is what the FTC Guides say about disclosure relating to gemstones: "It is unfair or deceptive to fail to disclose that a gemstone has been treated in any manner that is not permanent or that creates special care requirements, and to fail to disclose that the treatment is not permanent, if such is the case. The following are examples of treatments that should be disclosed because they usually are not permanent or create special care requirements: coating, impregnation, irradiating, heating, use of nuclear bombardment, application of colored or colorless oil or epoxy– like resins, wax, plastic, or glass, surface diffusion, or dyeing. This disclosure may be made at the point of sale, except that disclosure should be made in any solicitation where the product can be purchased without viewing (e.g., direct mail catalogs, on– line services), and in the case of televised shopping programs, on the air. If special care requirements for a gemstone arise because the gemstone has been treated, it is
recommended that the seller disclose the special care requirements to the purchaser."

[Editor's Note: At press time, the FTC was reviewing this paragraph and proposing that sellers be required to reveal any enhancement that changes the value of a gem. If this goes into effect, the FTC Guides would require disclosure of the GE POL process because the few GE POL diamonds in the marketplace so far sell at prices below those of similar ones that haven't undergone the GE POL process.]

Disclosing GE POL to All Diamond Buyers

Until gemologists can detect the GE POL process by means other than the inscribed girdle, retailers should protect themselves with a general disclosure on all diamond sales. The disclosure would state that gemologically undetectable diamond processes such as GE POL exist.

This can protect your reputation from possible damage in case a diamond you sold as unaltered is identified later as having gone through the GE POL process or any process that altered its appearance.

It also could help to avert a lawsuit in which a consumer charges you failed to disclose material facts as required under state consumer protection laws. Courts have defined "material" as any fact that would reasonably affect a consumer's decision to buy. An undetectable colorenhancing process qualifies as a material fact (see Professional Jeweler, September 1999, p. 130 for a full discussion of material facts).

Here's a sample of how a disclosure might read:

Though extremely rare, there are a few diamonds that have had their color whitened by a technologically sophisticated process developed by General Electric. Our store pledges never to sell a diamond that has undergone the GE POL process or any other process that alters its color without full disclosure because we recognize you trust us to be honest.

We are careful to examine the diamonds in our store so we can assure you they haven't been altered or discuss it with you if they have been altered. But there is a remote possibility a diamond could enter our inventory with an alteration we can't detect gemologically.

If gemological detection becomes possible and you're unsure about a diamond you bought here, our trained gemologist can examine it or send it to a gem laboratory for independent verification. If we sold the diamond as unaltered and it's found to be altered, we'll refund your money or replace the diamond with an unaltered one.

by Robert Weldon, G.G.

This 1.16– ct. diamond with VVS2 clarity received a color grade of E after the GE POL process; it reportedly started out a much lower color. Courtesy of Lazare Kaplan International and Pegasus Overseas Ltd., New York City.
The GE POL laser inscription (in white rectangle) on the faceted girdle.



Copyright © 1999 by Bond Communications.



 

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