Your Business Online | Professional Jeweler



November 8, 1999
Deceptive Trade Practices On-Line
Be careful to follow state and federal consumer protection rules when marketing and selling on your Web site

On-line advertising and e-commerce are new frontiers, and to look at some of the advertising practices used, you might think the Web is as lawless as the old West.

Not so, according to experts. All laws that apply to advertising in traditional media apply to the Internet, says Elaine Kolish, associate director of the Federal Trade Commission's Division of Enforcement. The FTC Guides for the Jewelry Industry provide extensive guidelines concerning what you can and can't say about the jewelry you sell, in person and in your advertising. And not only do state and local consumer advertising laws apply to Internet sales, you're also subject to laws where your customer lives – which, with the Internet's wide-scope, could be just about anywhere. If you sell or advertise on-line, you may be answering to the toughest consumer protection laws in the country.

Last December, the FTC conducted a search of 100 Web sites belonging to major jewelry chains, small retailers and on-line auction companies. The study, a look at ads for pearl, diamond and gemstone jewelry, found violations of the FTC Guides on a significant number of sites. Among the findings:

  • Of 62 retailer sites showing ads for diamond jewelry with weight representations, only 42% appeared to be advertising the weights correctly.
  • Of 64 retailer sites selling colored gemstone jewelry on-line, 95% failed to disclose enhancements to consumers prior to the sale.
Kolish said there was a good chance the FTC would conduct a similar study this holiday season, although she wouldn't confirm any plans to do so.

When Disclosing On-Line
The navigational structure of Web sites makes them different in some ways from other advertising media. There are additional requirements of which you should be aware.

Set up your Web site so consumers see important information before they decide to purchase a product. Place disclosure information and other language required by the FTC Guides and consumer protection laws in a conspicuous location, using a legible type size. If someone could argue convincingly that you designed your Web site to bury important information, having the information there may not help you if the FTC or an angry customer brings an action against you.

Most importantly, use hyperlinks to lead customers to additional information, labeling each link with a description of what's available on each page. Links that point to disclosure information aren't sufficient. They must clearly state that they link to information about treatments or use similar language.

For guidance on proper disclosure in your advertising, the FTC publishes a business guide called In the Loupe: Advertising Diamonds, Gemstones and Pearls. Copies are available from the FTC, (202) 382-4357, www.ftc.gov.

Warning Customers
Advise customers planning to shop on-line to look out for several red flags, says Cecilia Gardner, executive director and general counsel for the Jewelers Vigilance Committee, New York City.

For instance, some sites show a picture of an item, then state elsewhere on the page that the product consumers receive may not be the same item pictured. This is particularly true with the sale of loose diamonds, one of the most successful areas of Internet sales, according to Gardner.

Customers should also look out for forged lab and appraisal certificates, which will often say they're issued by reputable labs such as the Gemological Institute of America's Gem Trade Lab. If customers have doubts about a certificate's legitimacy, tell them to contact the organizations to check the certificate number and information.

Gardner says she believes most jewelry companies doing business on the Web try to do so honestly, and that many violations are unintentional oversights rather than fraudulent intent.

Despite that, advise your customers to take care when dealing with unfamiliar companies on-line. It's especially important to cite the above warnings when customers tell you they can buy the same diamond on the Web for half (or less) the price you're selling it for.

- by William H. Donahue Jr.