[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Proposed Rules]
[Pages 30448-30450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14505]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 64, No. 109 / Tuesday, June 8, 1999 /
Proposed Rules
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FEDERAL TRADE COMMISSION
16 CFR Part 23
Guides for the Jewelry, Precious Metals and Pewter Industries
AGENCY: Federal Trade Commission.
ACTION: Proposed rule; request for public comments.
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SUMMARY: In response to a petition from the Jewelers Vigilance
Committee and the Diamond Manufacturers and Importers Association of
America, jewelry trade associations, the Federal Trade Commission
(Commission) is requesting public comments on proposed revisions to two
sections of the Guides for the Jewelry, Precious Metals and Pewter
Industries (Jewelry Guides or Guides) to provide for the disclosure to
consumers of laser-drilling of diamonds. One section addresses
disclosure of treatments to diamond jewelry products. The other section
addresses disclosure of treatments to gemstone jewelry products.
DATES: Written comments will be accepted until July 8, 1999.
ADDRESSES: Comments should be directed to: Secretary, Federal Trade
Commission, 600 Pennsylvania Avenue, NW, Room H-159, Washington, DC
20580. Comments about these proposed changes to the Guides should be
identified as ``Guides for the Jewelry, Precious Metals and Pewter
Industries--16 CFR Part 23--Comment.''
FOR FURTHER INFORMATION CONTACT: Robin Rosen Spector, Attorney, Federal
Trade Commission, Washington, DC 20580, (202) 326-3740,
<[email protected]>.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Guides for the Jewelry, Precious Metals and Pewter Industries,
16 CFR Part 23, address claims made about precious metals, diamonds,
gemstones and pearl products. The Guides also provide guidance as to
when certain disclosures should be made about certain products if the
failure to make such disclosure would be an unfair or deceptive trade
practice.\1\ On May 30, 1996 (61 FR 27212), the Commission announced
comprehensive revisions to the Jewelry Guides. These revisions included
new sections providing for the disclosure of certain treatments to
diamond jewelry products (Sec. 23.13) and the disclosure of certain
treatments to gemstone jewelry products (Sec. 23.22).\2\
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\1\ The Federal Trade Commission issues industry guides to
provide guidance for the public to conform with legal requirements.
Industry guides are administrative interpretations of the laws the
FTC administers. Industry guides explain how to describe products
truthfully and non-deceptively and identify practices the Commission
considers unfair or deceptive.
\2\ Diamond and gemstone jewelry products are often treated or
enhanced to improve their beauty or durability.
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On December 9, 1998, the Jewelers Vigilance Committee (JVC), a
jewelry trade association, in conjunction with the Diamond
Manufacturers and Importers Association of America (DMIA), petitioned
the Commission to revise Sec. 23.13 to provide for the additional
disclosure of a diamond treatment called laser-drilling.\3\ The Guides
currently state that it is not unfair or deceptive to fail to disclose
this treatment. The Commission solicits comment on proposed changes to
this provision of the Guides. The Commission also solicits comment on
proposed changes to Sec. 23.22 of the Guides that addresses gemstone
treatments.
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\3\ This petition is on the public record and copies are
available by contacting the Public Reference Branch, Room 130,
Federal Trade Commission, Washington, DC 20580. A copy of the
petition also has been posted on the Commission's website at
<www.ftc.gov>.
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II. Proposed Changes to Sec. 23.13
The JVC petition requests an amendment to Sec. 23.13 of the Guides
to provide for disclosure of laser-drilling of diamonds. Laser-drilling
involves the use of a laser beam to improve the appearance of diamonds
having black inclusions. The laser beam is directed at the black
inclusion and then acid is forced through the tunnel made by the laser
beam to remove the inclusion or alter it so it is not visible to the
naked eye. The Commission determined, based on the record before it in
1996, that the failure to disclose laser-drilling was not unfair or
deceptive. Therefore, Sec. 23.13 of the Guides, which discusses diamond
treatments, does not provide for disclosure of laser-drilling.
The JVC petition asserts that the Guides should be amended to
provide for disclosure of laser-drilling for several reasons. Although
previously various segments of the industry held different views
regarding the appropriateness of disclosure, there is now industry
consensus in favor of disclosure. Sixteen trade associations joined the
JVC in endorsing mandatory disclosure.\4\ In addition, according to the
petition, the jewelry industry has adopted policies requiring the
disclosure of laser-drilling at all levels of the transaction up to the
point of sale to the consumer. Because of these policies, disclosure of
laser-drilling to consumers would not be costly for retailers and would
not inhibit advertising or result in additional costs passed on to
consumers. Although industry self-regulation could also address
consumer disclosure, the petition asserts that providing for disclosure
in the Guides is important because, due to industry reliance on the
guides, it would promote greater industry compliance.
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\4\ The trade associations that joined the petition are: World
Federation of Diamond courses; Diamond Manufacturers and Importers
Association of America; International Diamond Manufacturers
Association; Diamond Promotion Services; Diamond Dealers Club of New
York; Gemological Institute of America; International Society of
Appraisers; Jewelers of America; American Gemstone Society; American
Gem Society; United States Carat Club; International Confederation
of Jewelry, Silverware, Diamonds, Pearls and Stones; American
Gemstone Trade Association; Manufacturing Jewelers and Suppliers of
America; International Standards Organization; and Diamond High
Council.
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The JVC petition explains that laser-drilling technology has
improved in recent years making it increasingly difficult for consumers
to detect the process, especially when diamonds are mounted in
jewelry.\5\ In addition, according to the petition, the majority of
diamonds sold are smaller stones, from .35 to .75 carats, and laser-
drilling is especially difficult to detect in such stones. Further,
smaller stones such as these are typically sold without grading reports
that might otherwise reveal any laser drilling.
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\5\ New technology results in smaller, shorter, thinner tunnels
that are far harder to detect under a loupe, which a consumer might
use to examine a stone.
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According to the petition, consumers may suffer economic injury
from the
[[Page 30449]]
purchase of laser-drilled stones. The petition explains that laser-
drilling affects the diamond's value, and a laser-drilled stone is
worth less than a non-treated stone of the same clarity rating. The
petition explains that because laser-drilling is not being disclosed,
some consumers may falsely believe that a laser-drilled stone is as
valuable as a non-treated stone of the same clarity rating.
Finally, the petiton notes that the Guides provide for disclosure
of other permanent process because they are non-natural, artificial
procedures that affect the value of the product. For example, the
Guides provide that cultured pearls be identified as such. A cultured
pearl is created by a mollusk, but with human intervention. As a result
of this human intervention, cultured pearls are worth less than natural
pearls and the fact that the pearl is cultured must be disclosed. The
petition asserts that the Guides should recognize the same distinction
between untreated and laser-drilled diamonds.
The Commission has tentatively concluded that the petition
demonstrates, contrary to the record before the Commission in 1996,
that the failure to disclose laser-drilling is an unfair or deceptive
trade practice. The Commission therefore proposes revising Sec. 23.13
of the Jewelry Guides to provide that it is unfair or deceptive to fail
to disclose laser-drilling. The Commission also proposes adding a
phrase to Sec. 23.13 regarding the permanence of the treatments
enumerated in the section that should be disclosed. Currently,
Sec. 23.13 provides that certain treatments should be disclosed and the
fact that the treatment ``is or may not be permanent'' also should be
disclosed. The Commission therefore proposes adding the phrase ``if
such is the case'' after ``permanent'' in this section. If this phrase
is not added the Guides would provide for disclosure that laser-
drilling is not permanent, when in fact it is permanent.
III. Proposed Changes to Sec. 23.22
Section 23.22 of the Guides provides that it is unfair or deceptive
to fail to disclose that a gemstone has been treated in any manner that
is not permanent or that creates special care requirements and to fail
to disclose that the treatment is not permanent, if such is the case.
In light of the petition's evidence about laser-drilling, the
Commission is seeking public comment on whether consumers may be
injured by non-disclosure of permanent gemstone treatments that do not
create special care requirements in the same manner that they may be
injured by nondisclosure of laser-drilling. The Commission is seeking
comment on whether there are treatments that create a disparity in the
value of treated stones as compared to non-treated stones, and, whether
consumers, acting reasonably under the circumstances, can detect such
treatments.
The Commission seeks comment on whether Sec. 23.22 of the Jewelry
Guides should be revised to advise that permanent treatments that do
not require special care should be disclosed if the treatment has a
significant effect on the stone's value, and if a consumer, acting
reasonably under the circumstances, could not ascertain that the stone
has been treated.
IV. Request for Comment
The Commission seeks public comment on the proposed changes to
Secs. 23.13 and 23.22 of the Guides discussed above. The Commission
also requests comment on the following specific questions:
1. Is it a prevalent practice in the jewelry industry to require
disclosure of laser-drilling at all levels of the transaction up to the
point of sale to the consumer?
2. Would a provision in the Jewelry Guides to disclose laser-
drilling to consumers inhibit advertising or create additional costs
for retailers that could be passed on to consumers in the form of
significantly higher prices?
3. Is there a disparity in value between a laser-drilled diamond
and a non-treated diamond of the same clarity rating?
4. Should the Jewelry Guides provide guidance as to how laser-
drilling should be disclosed to consumers? If so, what guidance should
be provided?
5. Gemstone treatments that are permanent and do not create special
care requirements currently do not have to be disclosed under the
Jewelry Guides. Is there a disparity in value between a gemstone
treated in a manner that is permanent and does not require special care
and one that is not treated? How many different gemstones and gemstone
treatments fall into this category?
6. Does industry policy provide for disclosure of permanent
gemstone treatments that do not create special care requirements?
7. Would guidance in the Jewelry Guides calling for disclosure of
permanent gemstone treatments that do not require special care inhibits
advertising or create additional costs for retailers that could be
passed on to consumers in the form of significantly higher prices?
Would this guidance adversely impact competition in the jewelry
industry in any way?
List of Subject in 16 CFR Part 23
Advertising, Labeling, Trade practices, Watches and jewelry.
The Commission proposes to amend Chapter I of Title 16 of the Code
of Federal Regulations as follows:
PART 23--GUIDES FOR THE JEWELRY, PRECIOUS METALS, AND PEWTER
INDUSTRIES
1. The authority citation for part 23 continues to read as follows:
Authority: Sec. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.
2. Revise Sec. 23.13 to read as follows:
Sec. 21.13 Disclosing existence of artificial coloring, infusing, etc.
If a diamond has been treated by artificial coloring, tinting,
coating, irradiating, heating, by the use of nuclear bombardment, by
the introduciton or infusion of any foreign substance, or by laser-
drilling, it is unfair or deceptive not to disclose that the diamond
has been treated and that the treatment is not or may not be permanent,
if such is the case.
3. Revise Sec. 23.22 to read as follows:
Sec. 23.22 Deception as to gemstones.
It is unfair or deceptive to fail to disclose that a gemstone has
been treated in any manner that is not permanent or that creates
special care requirements, and to fail to disclose that the treatment
is not permanent, if such is the case. The following are examples of
treatments that should be disclosed because they are usually not
permanent or create special care requirements: coating, impregnation,
irradiating, heating, use of nuclear bombardment, application of
colored or colorless oil or epoxy-like resins, wax, plastic, or glass,
surface diffusion, or dyeing. This disclosure may be made at the point
of sale, except that disclosure should be made in any solicitation
where the product can be purchased without viewing (e.g., direct mail
catalogs, on-line services), and in the case of televised shopping
programs, on the air. If special care requirements for a gemstone arise
because the gemstone has been treated, it is recommended that the
seller disclose the special care requirements to the purchaser.
Permanent treatments that do not create special care requirements
should be disclosed if the treatment has a significant effect on the
stone's value, and if a consumer, acting reasonably under the
circumstances, could not ascertain that the stone has been treated.
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By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 99-14505 Filed 6-7-99; 8:45 am]
BILLING CODE 6750-01-M