WASHINGTON/LONDON (Reuters) - The U.S. Federal Trade Commission, which investigates allegations of deceptive advertising, has sent warning letters to eight companies to insist they distinguish in advertisements between diamonds from mines and those made in laboratories, it said on Tuesday.
The FTC said it had found instances where the eight companies advertised diamond jewelry “without clearly and conspicuously disclosing that the diamonds are laboratory-created,” according to the letter.
The agency declined to identify the recipients of the letters. An unredacted version of one of the letters seen by Reuters identified that recipient as Diamond Foundry, a California company that makes laboratory diamonds.
Diamond Foundry declined to discuss whether the letter would lead to changes in its marketing. “We pride ourselves on being a lab-grown diamond producer and this point of differentiation is what our success is built on,” CEO Martin Roscheisen said in an emailed statement.
Analysts say increased production of laboratory-grown diamonds has lowered their price.
The Diamond Producers Association (DPA), which represents mining companies including De Beers, Rio Tinto and Alrosa, welcomed the FTC insistence that companies distinguish between mined diamonds and those made in laboratories.
“The DPA has for several months expressed serious concerns about misleading marketing communication and unsubstantiated eco claims coming from many laboratory grown diamond marketers,” said DPA Chief Executive Jean-Marc Lieberherr.
Alrosa, the world’s biggest diamond producer in carat terms said it welcomed “FTC initiatives that protect consumers from unfair or deceptive marketing practices”.
“Diamonds and synthetic diamonds are aiming for different consumers and can co-exist as two different products,” it said in an email.
The world’s biggest diamond producer by value De Beers, part of Anglo American, said it was pleased by the move, adding the two kinds of diamonds were “distinct product categories.”
De Beers has responded to pressure from laboratory-grown diamonds by tearing up its decades-old policy of only selling natural diamonds in jewelry and beginning to sell synthetic stones.
It sells the lab-made diamonds for less than rivals to emphasize the difference between what it sees as fun, fashion jewelry and natural diamonds created in the earth and with a high re-sale value.
The FTC, in its letters, also asked the companies to review the use of “eco-friendly” or similar terms to describe diamonds made in a laboratory. “It is highly unlikely that they can substantiate all reasonable interpretations of these claims,” the FTC said in its release.
The first lab-made diamond was produced in 1955 and larger crystals were made in 1970, but the first synthetic diamonds for purchase were not made until 1970s, Dr. James Shigley, research fellow at the Gemological Institute of America, said.
“These lab-grown diamonds are diamonds. They have the same physical and chemical properties. We’re not talking about an imitation,” he said, noting that many diamonds are sold for grinding or other industrial purposes.
Reporting by Diane Bartz; Editing by Sandra Maler and Louise Heavens