US government warns ads for lab-grown diamonds must be crystal clear

The U.S. Federal Trade Commission, which investigates allegations of deceptive advertising, said on Tuesday that it has sent warning letters to eight companies insisting that they distinguish in advertisements between diamonds that come from mines and those made in laboratories.

The FTC declined to identify the recipients of the letters. An unredacted version of one letter viewed by Reuters identified the recipient as Diamond Foundry, a California company that makes laboratory diamonds. Diamond Foundry did not immediately respond to a request for comment.

The agency said that it had found instances in which the eight companies advertised diamond jewellery "without clearly and conspicuously disclosing that the diamonds are laboratory-created," according to the letter. Analysts say increased production of laboratory-grown diamonds will lower the price of the stones.

The Diamond Producers Association (DPA), which represents mining companies like De Beers, Rio Tinto and Alrosa, welcomed the FTC insistence that companies distinguish between diamonds that are mined and those that are 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. 

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De Beers, a unit of Anglo American, said it was pleased by the move, saying the two kinds of diamonds were "distinct product categories." De Beers has responded to pressure from lab diamonds by tearing up its decades-old policy of only selling natural diamonds in jewellery 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 jewellery and natural diamonds created in the earth and with a high re-sale value.

Since it began selling synthetic gems as jewellery it said the cost of synthetic`s stones has plunged. 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 made in 1955 and larger crystals were made in 1970, but the first synthetic diamonds for purchase were not made until 1970s, according to Dr. James Shigley, research fellow at the Gemological Institute of America. "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.