FTC warns Lab-grown diamond companies – Misleading Ads or honest mistakes?

Lab-grown
[Image Courtesy: The Peak Singapore, SPH Magazines]

 

Recently, US FTC (Federal Trade Commission) issued warnings to eight Lab-grown diamond companies for violations of nomenclature code of Lab-grown diamond in various advertisements. Apparently, Diamond Foundry, Ada Diamonds, MiaDonna & Co. are among these eight companies that received the letters. FTC has not disclosed the names of these companies yet. All these companies are required to respond to FTC within ten days of receipt of letter, on the plan to revise their marketing so that it complies with new FTC guidelines, failing which can result in enforcement actions or penalties.

 

 

 

Warning letters are a wake-up call to be more careful

 

The primary point in the warning letters being these Lab-grown diamond companies did not “clearly and conspicuously” disclose in their marketing campaigns that the diamonds are Lab-grown. In its latest ruling, FTC guidelines while removing the term ‘natural’ from definition of mined diamonds and usage of term ‘Synthetic’ to describe Lab-grown diamonds, also recognized that a clear distinction between mined diamonds and Lab-grown diamonds is necessary and hence required usage of qualifiers like “Laboratory-created”, “Laboratory-grown”, “[manufacturer name]-created”, or some other word or phrase of like meaning conveying that the product is not mined. Not adhering to these guidelines is a violation and hence these warning letters, which should not be taken negatively. On the contrary, these should be viewed as a wake-up call by at least some of the Lab-grown diamond marketers to be more careful in their advertising. FTC’s action is in favour of consumers.

 

 

 

But were these violations to deceive consumers or were honest mistakes?

 

Traditional factions of the industry tend to believe and have claimed, through media, that these advertisements and acts of entire Lab-grown diamond segment are misleading consumers. However, reactions from the Lab-grown diamond sector suggest otherwise.

 

Jason Payne of Ada Diamonds, one of the companies that received the warning letter from FTC said “I think it’s fantastic that the FTC has clarified their position”. FTC has taken an issue with three ads (out of thousands that are in full compliance with new FTC guidelines) of Ada diamonds that featured “#labdiamonds” but was not deemed to be a significant enough disclosure, being not having FTC approved terms in the non-hashtag portion.

 

Jason says that “Prior to last week, the FTC had not specified that hashtags were not proper disclosure, so we were not in violation [of] any public guidance.” He adds “… [We] have the following disclaimer at the bottom of every page of our website: All diamonds offered by Ada Diamonds™ are proudly laboratory-grown and can be referred to as lab created diamonds, grown diamonds, synthetic diamonds, man-made diamonds, cultivated diamonds, or cultured diamonds.”

 

Moreover, Ada Diamonds also require their clients to acknowledge the origin of diamonds purchased during checkout process – “I acknowledge that I am purchasing laboratory-grown diamonds that are proudly created by scientists above the Earth, not extracted or mined out of the Earth.”

 

Amish Shah – President, ALTR Created Diamonds of R.A. Riam Group, mentions “The FTC issues warnings all the time with the intent to curb overreaching statements and reign in businesses and advertisers. We believe in truth in advertising and that truth generally is a far more valuable commodity, even than diamonds (irrespective of origin)… The FTC warning protects its new ruling, outlining specific guidelines on what a diamond is and isn’t, and ensures that consumers are not being misled… However we want all our industry partners to adhere to FTC guidelines and this is precisely because of our optimism about increased demand for lab-grown diamonds, we think industry transparency is the best choice.”

 

Anna-Mieke Anderson of MiaDonna & Co. in an interview mentions that they got into the business almost 15 years ago, long back before the term ‘Lab-grown Diamond’ started becoming popular. Lot of guidelines have changed over time and US FTC’s guidelines came only few months back, she adds. Though ignorance or time to adapt to new regulations cannot be an excuse, but clearly the intention does not seem to mislead consumers.

 

Lab-grown diamond industry distinguishes itself from mined diamonds, over several benefits. Besides, FTC itself mentioned in the warning letters that these marketers mention on some of their webpages that they sell Lab-grown diamonds, have used qualifier terms like Lab-grown in hashtags in their ads etc. Then it becomes difficult to imagine that these marketing campaigns are deceitful, but seems more like honest mistakes or interpretation differences, of having not used the qualifier terms in close proximity of the word ‘diamond’.

 

 

 

However, claims of being ‘Eco-friendly’ are not wrong, just needs to be quantified

 

The FTC’s warning letters however also criticizes the Lab-grown diamond companies for making claims of being “Eco-friendly”, “Eco-conscious” or “Sustainable” over mined diamonds, on the basis that it cannot be easily substantiated. While such claims by Lab-grown diamond companies are not wrong, but just needs to be quantified.

 

Companies like Diamond Foundry prides in having its 100% energy requirements met by solar. If this is not ‘sustainable’, then one wonders what is!! Limited studies have already revealed that environmental impact of mined diamonds is alarming and Lab-grown diamonds seems to be the sustainable solution.

 

Alex Weindling – Founder, Clean Origin, a Lab-grown diamond company that did not receive a warning letter from FTC, lamblasts FTC over this issue “I happen to believe that when you dig a crater that is visible from space that it is less environmentally thoughtful than growing a diamond — just my opinion”

 

Alan Frampton – Jewelry Director at Cred saysAccording to a study by Princeton University the carbon footprint of a lab grown is 18-22% of a mined diamond. Some manufacturers are now carbon neutral.

 

A Frost & Sullivan study established that mined diamonds have 7 times more environmental impact than Lab-grown diamonds.

 

 

 

But, traditional industry may misuse these incidents

 

As Amish Shah of ALTR Created Diamonds says “Moreover, we remain concerned that other competitive parties may be instigating these issues publicly to denigrate the lab grown segment collectively for other business motives. Our goal from the onset has always been to offer consumers and our partners’ clarity on products at all times, with the intent to offer the customer and honest, reliable choice between lab-grown and mined diamonds.”

 

According to Alex Weindling – Clean Origin “the warnings would bolster the mining companies’ interests to denigrate lab-grown diamonds… We are about 1% of the [diamond] industry, but we are about 90% of their focus.”

 

The tone of statements issued by mined diamond industry including DPA (Diamond Producers Association) and others indicate so. A close read at various media reports on this news, including from some noted reporters, reveals that the terms of ‘Synthetics’ to describe Lab-grown diamonds and ‘Naturals’ for Mined diamonds are still being used – also a clear violation of the FTC guidelines.

 

 

 

Nevertheless, Lab-grown diamond industry, which believes in educating and empowering consumers, should henceforth be more careful in their marketing ads to ensure correct interpretations of the new FTC guidelines. Jason Payne – Ada Diamonds has already edited the 3 Instagram captions to completely adhere to the clarifications in FTC Warning letters.

 

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