Along with TV station WSMV and the Nashville class action bar, Martin Rapaport and his RapNet trading network deserve much credit for putting the issue of different lab grading standards front and center this year—even if not everyone liked how he went about it. Last week, his network announced an ambitious plan to maintain grading standards on its site—and it may prove just as controversial.
On Dec. 24, RapNet sent out a notice, credited to network chief operating officer Saville Stern stipulating the following:
Communication of diamond quality on RapNet is based on GIA grading standards. Members cannot use GIA terminology while applying non-GIA standards that overgrade diamonds…
“[O]vergraded diamonds” [are] defined as diamonds that are more than one color, clarity or fluorescence grade above the GIA verification grade. [See update.]
Let us pause for a second to consider this seemingly new concept—the “GIA verification grade.” According to Rapaport, this means that if a grading dispute arises, the GIA lab will make the final call. This goes beyond calling the GIA scale the industry standard. It establishes the GIA lab as the final arbiter.
Rapaport argues that courts regularly accept GIA grades, so why shouldn’t he?
“The GIA owns the system,” he says. “If we are grading according to GIA, they are the keeper of the standard.”
That said, the network won’t police diamond grades, but if a member files for a dispute, that is how it will be resolved.
The notice also says:
Members listing over-graded diamonds…may be subject to suspension with full public disclosure of their name and the reason for their suspension…
Buyers may require sellers to cancel transactions, accept return of the diamond and provide a full refund in the event they are sold over-graded diamonds.
This means that traders now need to stand behind the grades they post on the network, even if they came from a lab.
“You the seller are responsible for what you sell,” Rapaport says. “If Christie’s sells a fancy pink, and it turns out it is treated and it wasn’t disclosed, Christie’s has to take responsibility for that. It’s the same here. [Overgrading] is misrepresentation, no different than listing a synthetic as natural.”
The notice continues:
Two points here. While it’s no suprise the network will honor court requests, I wondered why that point was juxtaposed with the notice reiterating the ban on EGLs. Rapaport says this was done in case class action suits are filed targeting reports from certain EGL-branded labs. “We want people to know we will give the court the information,” he says.
Second, there have been ongoing murmurs that diamonds with EGL reports continue to be listed on RapNet, despite the Oct. 31 ban. From what I hear, it is now customary to list the diamond without reports and then include the EGL name in the comments.
One member sent me as an example the following screenshot, which shows a stone with an EGL Israel report, as an example:
Rapaport doesn’t deny this happens.
“I am for free speech,” he says. “People can write whatever they want. I am not going to stop a stone being listed based on the comments, as long as there is no misrepresentation.
“This is not about EGL. It is about the honesty and integrity of RapNet members,” he continues. “Today, they call the lab EGL. Tomorrow they might call the lab something else. This fundamentally needs to be dealt with.”
“When you overgrade, you are poisoning the well of the industry,” he continues. “If you list a diamond as an F based on its report, and it’s a K, that is not acceptable behavior on RapNet. Like we say don’t sell Marange diamonds. You can sell them in India but not on RapNet. That is the whole idea of having a trading network. We want sellers held to a higher standard.”
UPDATE: It turns RapNet sent out two versions (I don’t subscribe); the second added the words “more than” to the definition of overgraded diamonds. The version online has the right language, but I had used the first version for this post. That has been corrected.