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FTC gives mixed ruling on 'cultured' gems

July 22, 2008

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Washington, D.C.—The Federal Trade Commission (FTC) rejected a petition from the Jewelers Vigilance Committee (JVC) and nine other trade associations requesting that the commission use its industry guides to crack down on the use of the term "cultured" to describe laboratory-created gemstones.

Lab-grown diamond manufacturer Gemesis is among those that use the word cultured to describe its products.

"After reviewing the petition and the consumer perception surveys on which it relies, the commission has declined to amend the [FTC] guides to state that it would be unfair or deceptive to use the term 'cultured' to describe gemstones created in a laboratory," the FTC press release issued on Tuesday said. "The commission concluded that there is insufficient evidence to establish that the qualified use of the term 'cultured diamonds' is deceptive or unfair."

The FTC Guides for the Jewelry, Precious Metals and Pewter Industries are federal guidelines that regulate the gem and jewelry industry, and are designed to protect consumers. The guides include numerous mandates for the industry, and include such edicts as requiring retailers to inform consumers when they are buying a gemstone that has been treated. Violating the FTC guides exposes jewelry companies to penalties.

The JVC and other groups in the coalition had argued that using the word "cultured" to describe diamonds made in a lab is either "deceptive" or "unfair," and they sought an amendment to the FTC guides labeling the term as such, "even when the man-made gemstones possess essentially the same optical, chemical and physical properties of natural, mined gemstones," the FTC release said.

The FTC release went on to say that even if it is demonstrated "that the unqualified use of the term 'cultured' to describe laboratory-created gemstones is misleading, there is no evidence to suggest that the use of the qualifying language set forth in the guides fails to render the term non-deceptive."

The JVC issued a press release on Tuesday describing the ruling as at least a partial victory.

Cecilia Gardner, president, CEO and general counsel of the JVC, pointed out that in its response, the FTC stated that although the use of the word "cultured" to describe man-made gemstones is not in itself deceptive, if a marketer were to use that term, it couldn't use it solo. It would also be required to use the term "laboratory created," "laboratory grown" "[manufacturer-name] created" or "synthetic."

"The trade associations that signed the petition...universally took the position that the term 'cultured' ought to be added to the list of terms that are deceptive and unfair when describing synthetic gemstones," Gardner said in the release. "The FTC agreed with us that the use of the word 'cultured' alone to describe synthetic gemstones would be insufficient to protect consumers. Their ruling that marketers be required to include one of the four clear terms already obligatory under the guides that disclose the true nature of the product will go far to protect against consumer deception."

The groups that had signed on to the petition included the JVC, American Gem Society, American Gem Trade Association, CIBJO (World Jewellery Confederation), Cultured Pearl Association, Diamond Council of America, Diamond Manufacturers and Importers Association of America, Jewelers of America, Manufacturing Jewelers and Suppliers of America and World Federation of Diamond Bourses.

The commission concluded that its staff will continue to evaluate advertising using the term "cultured diamonds" on a case-by-case basis and recommend enforcement action when appropriate.

A copy of the FTC decision can be viewed by visiting the JVC Web site, JVCLegal.org.
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