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October 1999

Gemstones & Pearls News

FTC Guidelines Revisited

Gem dealers react as the FTC takes a new look at treatment disclosure

T he question of how much to disclose about colored gem enhancement was under consideration this summer as the Federal Trade Commission sought input on its proposal to update the FTC Guides for the Jewelry Industry.

Under the 1996 revision of the FTC Guides, enhancements that are considered permanent and don't require special care are exempt from disclosure. This opens the door to misrepresentation by the unknowledgeable and deception by the unscrupulous, and this could cause problems with consumers. For example, a consumer who buys a sapphire and finds out later it was enhanced might easily feel cheated about its true value.

Does Value Count?
Value is at the core of the proposed changes. The FTC posted the following information in the Federal Register, Vol. 64, No. 109, and invited industry comment until Aug. 31:

"The [FTC] seeks comment on whether paragraph 23.22 of the Jewelry Guides should be revised to advise that permanent treatments that do not require special care should be disclosed if the treatment has a significant effect on the stone's value, and if a consumer acting reasonably under the circumstances could not ascertain that the stone has been treated."

Some dealers agree the FTC Guides should change, but they question value considerations. The American Gem Trade Association board discussed the issue with members and intended to submit comment by the Aug. 31 deadline, according to Roland Naftule of Nafco Gems Ltd., Scottsdale, AZ, who chairs the AGTA Industry Rules Committee. "Speaking for myself, I believe we must strive for full disclosure of any gem enhancement," he says. "But I believe the FTC's approach to value could confuse consumers because no two gems are alike. I would just say treated gems of any kind need to be disclosed – period."

The word "significant" in the proposal worries some dealers. "Does that mean a 1% price differential is OK and a 100% differential is not?" asks Dana Schorr of Schorr Marketing and Sales, Santa Barbara, CA. "Who will make those determinations and how?"

Schorr says the FTC should focus on disclosure of all enhancements rather than price differences between natural and enhanced gems. "I don't feel I have the responsibility to inform customers of every option that exists on the market," he says. "But I do have the obligation to inform them fully of enhancement of the gem they want to buy, regardless of value."

Big Value Differential
The FTC may have focused on value because it's the basis of so much fraud. For example, fine natural-color rubies are coveted as true rarities and cost much more than similar-looking color-enhanced rubies. Should customers be aware of the choices? "You bet," says Gerry Manning of Manning International, New York City. "You're entitled to ask more for natural-color gems, and customers are entitled to know why."

With some gems, value considerations are irrelevant because almost no unenhanced counterparts exist. Blue topaz, for example, is inexpensive and nearly always color-enhanced. Natural blue topaz is rare and generally lacks saturated color, so there's no market data for comparison, and it's almost impossible to determine whether the color is natural. Tanzanite is brown and unsalable until heated to a purplish blue. No market data exist for comparison with unenhanced tanzanite.

Advocates of full disclosure and legal experts agree that whatever the FTC decides, retailers should err on the side of caution and disclose all enhancements in writing. State laws almost always protect consumers who feel they have been materially aggrieved.

by Robert Weldon, G.G.

This natural-color blue sapphire, cut by John Bradshaw, is more valuable than a similar looking one that owes its color to heat enhancement or diffusion treatment.



Copyright © 1999 by Bond Communications.


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