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Keep it legal with appraisals based on fact
By Suzan R. Flamm, Esq.
January 11, 2009
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| Suzan R. Flamm, Esq., is assistant general counsel of the Jewelers Vigilance Committee (JVCLegal.org), which provides general educational resources and jeweler-specific advice. |
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While many jewelry appraisals are accurate and reliable, those that are not erode consumer confidence and hurt the industry, to say nothing of the fact that they break the law. The Jewelers Vigilance Committee (JVC) case study below demonstrates the damage that can result from inflated appraisals.
Facts: The JVC received complaints from several consumers who purchased engagement rings online from a retailer that also operates a physical store. In each case, the purchaser received an official-looking embossed appraisal estimating the ring's value at two to three times the actual purchase price, accompanied by the following text: "We estimate the value as listed for insurance or other purposes at the present current market value."
Each of the consumers subsequently had the ring independently appraised, and each was told that the value of their ring was close to the actual purchase price, but nowhere near the "appraised" value.
Initial Steps: After reviewing the complaints, checking for prior allegations against the company and reviewing the store's Web site, the JVC called the jeweler to seek an explanation. A representative sounded surprised to learn that appraisals were being sent to online consumers.
As every seller knows, consumers love finding good buys, and businesses that can provide those bargains benefit from word-of-mouth marketing. But sellers who can't actually offer such bargains should not use false "discount" gimmicks.
The Federal Trade Commission (FTC), the nation's consumer protection agency, is charged with preventing fraud and deception in the marketplace. The FTC guidelines against deceptive pricing address the issues raised by phony discount advertisements and offer practical tips on staying within the law. The guides specify that if a company's ads claim it offers lower prices than competitors, that advertiser should be "reasonably certain" of being correct.
The FTC enforces these laws by imposing penalties and filing civil actions against violators.
Like the FTC guidelines, the federal Lanham Act also prohibits false advertising and allows competitors to sue violators and seek reimbursement for damages. If the estimated value on an appraisal proves baseless and this misleads consumers and injures competitors, it is grounds for a lawsuit.
Individuals who rely on erroneous appraisals, including original buyers and third parties who make purchases based on false appraisals, can sue the appraiser for damages.
Next step, proper appraisals: Since inflated appraisals violate federal law and expose jewelers to legal liability, appraisals should neither be offered lightly nor deployed as a tool to help drive sales.
Appraising what you sell is simple: The appraisal value usually matches the selling price. If a jeweler sells something at a discount, the difference between the selling price and the appraised price should be disclosed on the invoice. The first clue that a jeweler is trying to close a sale rather than provide an accurate assessment of value on a piece is an appraisal that is higher than the purchase price, with no documentation of the discrepancy.
In the case described above, the JVC found that the appraisals provided by the seller were being used to persuade customers that they were getting a good deal and securing a better price on the rings than they would from competing jewelers in the area. However, the purchase price was close to the independent appraiser's estimate of value. Thus, the customers paid a fair price, but they did not pay a discounted price.
Conclusion: The JVC let the offending jeweler know about the violations, and the retailer agreed to stop the practice of using inaccurate appraisals to drive online sales. The JVC also suggested that the jeweler take the Jewelry Appraisal Basics class offered by the Jewelers Board of Appraisal Review (JBAR). This at-home course teaches professional appraisal standards and basic appraisal methods while also providing information on best practices to avoid legal liability in the appraisal of jewelry.
Those who pass the JBAR exam can let their customers know that they have successfully completed the course.
To comply with laws related to marketing and appraisal, jewelers and their staff members should stay up to date on all applicable regulations. The JVC can help retailers via its general educational resources and jeweler-specific advice. To take the JBAR course or to receive a copy of any JVC publication, visit JVC's Web site, JVCLegal.org and click on the "For the Trade" section.
Editor's note: Suzan Flamm's "Industry Insight" column first appeared in the July 2008 print edition of National Jeweler in the Your Store section. In an occasional series of articles, the JVC offers advice on how industry members can avoid litigation as part of an effort to benefit both the parties to a dispute and the industry. The advice is strictly the opinion of the JVC.
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