United States: National advertising division investigates advertising claims related to lab-grown diamonds
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Key points to remember:
- FTC jewelry guides require traders to make clear and visible disclosures to accurately represent the origin of lab-grown diamonds and gemstones (i.e. compliance considerations).
- Advertising claims for lab-grown diamonds and gemstones are subject to scrutiny by regulators, competitors (including adverse trade associations) and consumers, so companies should consult with legal counsel when developing. such claims.
The National Advertising Division (NAD) recently issued recommendations to diamond companies in response to two challenges regarding advertising claims for diamonds that are created in a lab, rather than mined from the earth (commonly referred to as âlab-grown diamondsâ or “LGDs”).
The Natural Diamond Council (an association of diamond companies accounting for about 75% of the world’s natural diamond production) and Diamond Foundry, Inc. (a producer of lab-grown diamonds) have each challenged the other’s advertising claims in two cases. Recent NADs. Specifically, the Natural Diamond Council first challenged Diamond Foundry’s advertising of LGDs as âdiamonds,â without sufficiently clear disclosure that its LGDs are created in a lab. Diamond Foundry then took issue with the Natural Diamond Council’s advertising claims, which touted the benefits of mined natural diamonds over LGDs, including those related to carbon emissions, the scarcity of mined diamonds, and the resale value of mined diamonds. compared to artificial diamonds.
These challenges resulted in a recommendation from NAD that Diamond Foundry change its advertising to more clearly disclose the origin of its lab-made diamonds, followed by a separate recommendation from NAD that the Natural Diamond Council stop certain unsubstantiated advertising claims comparing them. benefits of natural diamonds mined. compared to lab-grown diamonds. Here are some takeaways from NAD recommendations:
- FTC standards require disclosure when diamonds are grown in the lab. In both decisions, NAD relied on FTC guidelines for determining whether diamond-related advertising is misleading, including both the FTC jewelry guides and the FTC Dot Com Disclosure business guidelines. In particular, jewelry guides require marketers to make meaningful and effective disclosures to accurately represent the origin of lab-grown diamonds and gemstones, and to distinguish mined diamonds and gemstones from lab-made substitutes.
- The word “Laboratory” or “Lab” must appear in close proximity to “Diamond”. In Diamond Foundry, Inc., NAD found that advertisers should disclose near the word “diamond” (with equal visibility) that stones are not mined naturally. For example, NAD found that Diamond Foundry’s placement of the word “lab” well below the diamond description (for example, requiring scrolling down on a mobile device) was not sufficient to make it clear that it was a lab grown diamond and not a mined natural diamond.
- Claims of environmental benefits and value must be sufficiently substantiated. In Natural Diamond Council USA, the NAD found that there was not enough evidence that mined diamonds are better for the environment than lab-grown diamonds and recommended that the claim be terminated. Likewise, NAD found that some messages related to “resale value” (for example, “A lab-created diamond has no resale value and its price drops rapidly”) were not supported and was recommended that the Natural Diamond Council end these claims.
- The use of the word ârealâ to describe lab-grown diamonds is probably misleading. In Diamond Foundry, Inc., in accordance with the FTC Jewelry Guides’ ban on using “true” to describe “any industry product that is artificially manufactured or produced”, the NAD found that, without further context than the diamond was created in a laboratory, the word ârealâ indicates that the product is a natural mined diamond.
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