[Forbes] What The FTC Diamond Ruling Means For Consumers And Diamond Marketers

The Federal Trade Commission recently amended its Jewelry Guides to help prevent deception in jewelry marketing. With new guidance for the jewelry industry, its wide-ranging ruling is a welcome relief to the man-made diamond industry and a migraine-sized headache for the mined-diamond industry. At the end of the day, it’s consumers who will benefit most from the new ruling.

The FTC based its decision in favor of scientific facts, not the mined-diamond industry lobby, giving consumers real information on which to make informed diamond purchasing decisions.

The ruling is simplicity itself. A diamond is a diamond no matter whether it is grown in a lab or comes out of the ground.

A diamond is pure crystalized carbon

The most sweeping change in the FTC’s ruling is removing the previously specified “natural” origin from the definition of a diamond. The old FTC definition stated a diamond was “a natural mineral consisting essentially of pure carbon crystalized in the isometric system.” Now the word “natural” has been erased.

“The Commission no longer defines a ‘diamond’ by using the term ‘natural’ because it is no longer accurate to define diamonds as ‘natural’ when it is now possible to create products that have essentially the same optical, physical, and chemical properties as mined diamonds,” the FTC ruled.

This brings much needed clarity to consumers who have been confused by the convoluted language previously specified by the FTC to market man-made diamonds. Before it was necessary for laboratory diamond marketers to precede the word diamond with terms like “laboratory-grown,” “laboratory-created” or worse “synthetic.”

“The revised guides have now excluded ‘synthetic’, a clearly misleading term from the prescribed qualifiers,” stated International Grown Diamond Association (IGDA) Secretary General, Richard Garard.

Carbon crystalized in the isometric system with a hardness of 10 on the mohs scale, a specific gravity of 3.52 and a refractive index of 2.42 produced through a manufacturing process is a real diamond, not a fake synthetic.

“Synthetic is a scientifically inaccurate term for a man-made diamond,” says Jason Payne, CEO of Ada Diamonds. “Why? Because you can’t synthesize an element. There is no such thing as synthetic gold or platinum or carbon or diamond.”

Simulants prohibited from referencing diamonds

The ruling also brings further clarity to consumers confused by simulants, like cubic zirconia and moissanite, positioned as synthetic diamonds. “It is clear simulants may not be referred to as a diamond by any qualifier,” explains Amish Shah, president of ALTR Created Diamonds. “For example, moissanite may not be called synthetic diamond, created diamond or any other variant incorporating the word diamond.”

While hard data is lacking on exactly how many consumers have bought simulants thinking they are actual diamonds, Ada Diamonds reports that 27.1% of the supposed lab-grown diamonds it receives from the public through its purchase program are in fact simulants.

“We have received a steady stream of deceived individuals seeking to sell their ‘lab diamonds’ that are in fact CZs, or coated CZs. This despite the fact that we clearly state we do not purchase cubic zirconias, simulants, hybrids, or moissanite,” Payne says.

A diamond is a gemstone, no matter the origin

Another change giving fits to the mined-diamond industry is now laboratory-diamonds can call their products gems or gemstones. Previously banned words for lab-grown diamonds also included stone, real, genuine and birthstone. The FTC calls their previous guidelines in this regard, “circular, inadequate guidance that relied on highly subjective judgments.”

“The mined-diamond industry has, in the past, successfully lobbied the FTC to ban these words from the lab diamond lexicon. Now the FTC has reversed that decision,” Payne applauds.

A diamond can be cultured

Without a doubt, the most significant change for marketing lab-grown diamonds is now the man-made diamond industry can call its products cultured. This has been the term the mined-diamond industry has fought hardest against, since it drew direct references from something consumers clearly understand – cultured pearls – rather than obfuscating consumers with complicated and confusing terminology.

The parallels between cultured pearls and cultured diamonds are precise. A lab-grown diamond requires a crystalize diamond seed to grow, just like a seed is manually placed in an oyster to grow a cultured pearl.

“Much like the concept of cultured pearls has been widely adopted and accepted by mainstream consumers as simply ‘pearls,’ lab grown/cultured diamonds are headed in the same direction,” Payne contends. It is said that about 99% of all pearls sold today are cultured.

Consumers win, mined-diamond industry loses

Thanks to the new ruling, consumers ultimately are the biggest winners, the mined-diamond industry the biggest losers. Lab-grown diamond marketers can now communicate to consumers clearly, effectively and in simple language what their product is and how it is as good or even better than diamonds that are mined out of the ground through rape and pillage methods.

“Retailers can now educate consumers based upon guidelines provided by a federal body, rather than trade associations with their own agendas to push. No one can mislead consumers,” says Shah.

“The consumer is ultimately who matters and they are the ones the FTC has done right by. The FTC has provided much needed clarity for consumers thereby ensuring transparency and increased confidence. It will create a marketplace where consumers can exercise their right to choose with full transparency,” he continues.

Since lab-grown diamonds are now about 30% cheaper than mined-stones, the benefits to the consumers, and pain for the diamond establishment, is clear. With the door open wide for lab-grown diamond companies to effectively market their products as real diamonds, and as manufacturing technology scales, the supply of diamonds will increase and the price of diamonds, both mined and lab-grown, are bound to drop.

“Only time will tell; however, Econ 101 says that the price per carat will fall and the total number of carats sold each year will increase, and I don’t see any reason to disagree with basic economic principles,” comments Payne.

Mined-diamond industry push back

With their livelihood and profit margins threatened, the mined-diamond establishment is pushing back, but likely it won’t get too far. The World Federation of Diamond Bourses(WFDB) for one will try to persuade the FTC to rethink its decision. It contends that the new guideline will cause “confusion in the sector,” Ernie Blom, president of WFDB said in a statement, pointing to the fact that the FTC now gives lab-grown diamond marketers “too much latitude” in describing their product.

The sector I suspect he is referring to above is the diamond industry itself, not consumers, who I believe will immediately get the new definition. While the FTC specifies that man-made diamonds must continue to be sold using qualifying language, such as cultured diamond, not simply as a diamond, Blom contends the FTC did not take the views of the “natural-diamond industry sufficiently into account.”

While Blom, the WFDB, De Beers and the mined-diamond interests may believe the FTC ruling was “biased toward the lab-grown diamond sector,” the FTC serves the interests of the consuming public, not those of any industry or trade association. Consumers will gain the most from the new ruling, while it will indisputedly give the lab-grown industry a boost in the process.

No matter where they come from or how they are grown, a diamond is a diamond. And it will be nice to see more consumers enjoying the beauty and brilliance of these sparkling gemstones as their prices drop and they become more affordable. Jewelry retailers should be rejoicing. More diamonds for the masses.

Source: Forbes