Diamonds / Industry / Legal

Watchdog: Diamond Foundry Ads Could Confuse Consumers

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BBB National Programs’ National Advertising Division (NAD) has recommended that Diamond Foundry modify some of its advertising, to better communicate that its diamonds were grown in a lab.

Diamond Foundry—which just disclosed it has raised $200 million in funding in an SEC filing—said it will comply with the recommendations. The Santa Clara, Calif.–based company manufactures and sells lab-grown diamonds through an office in Dubai, United Arab Emirates, and via e-tail subsidiary Vrai.

In its decision, released March 30, the NAD, responding to a complaint from the Natural Diamond Council (NDC), found that certain Diamond Foundry and Vrai ads could “create confusion” about the origin of their diamonds.

In particular, the NAD took issue with some of Diamond Foundry’s and Vrai’s social media ads and posts, which label its products as “diamonds” without accompanying modifiers or descriptors.

The NAD advised Diamond Foundry to make “clear and conspicuous disclosures [about the diamonds’ origin] immediately preceding, with equal conspicuousness, the word diamond,” as prescribed by the Federal Trade Commission’s Guides for the Jewelry Industry.

It also recommended that Diamond Foundry and Vrai not describe products as “created diamonds,” “diamonds created aboveground,” “sustainably created,” “sustainably grown,” and “world positive,” as those terms “do not sufficiently communicate that the diamonds are laboratory-grown.”

The NAD acknowledged that the Diamond Foundry and Vrai sites feature “clear messaging” about their diamonds’ origin, citing the slogan “Just diamond. No mining.” Yet it warned that consumers “may not be exposed to that general messaging.”

The group also expressed concern about a webpage where Diamond Foundry called its diamonds “real.”

The company should “discontinue social media claims that its LGDs are ‘real’ diamonds or modify the claims to make clear that its LGDs are not mined diamonds,” the NAD said. “[W]ithout context explaining that ‘real’ diamonds are created in a laboratory and not mined, consumers may reasonably take away the unsupported message that Diamond Foundry’s diamonds are mined diamonds.”

The NAD did swat down the NDC’s objection to the term Diamond Foundry–created. That term, it said, is “not misleading.”

It’s somewhat surprising that NDC objected to that particular phrase, as [manufacturer name]-created is one of three descriptors the FTC recommends in its Guides. The other two are laboratory-grown and laboratory-created.

The NAD noted that nothing in its decision precludes Diamond Foundry from using the phrase diamonds created aboveground if it appears in a context that clearly discloses the diamonds are man-made. It can also use the phrase world positive “if it is tied to a specific benefit or feature of Diamond Foundry’s LGDs, when accurately disclosing the diamonds’ origin,” it said.

Diamond Foundry said it will heed the NAD’s counsel “out of respect for the self-regulatory process.” It also told the NAD it disagreed with certain aspects of its decision.

The company added: “We are pleased with NAD’s observation that ‘Diamond Foundry’s advertising on its website is replete with clear messaging as to the man-made nature of its diamonds and often plainly contrasts its products with mined diamonds…in advertising for both the Diamond Foundry manufacturing brand and the Vrai retail brand.’ ”

This is not the first time Diamond Foundry has faced controversies about its advertising.

In 2019, the FTC sent warning letters to Diamond Foundry and seven other companies about how they described their diamonds.

“The FTC staff is concerned that some of your advertising fails to conform to the Jewelry Guides and therefore may deceive consumers,” read its letter to Diamond Foundry. “The term aboveground real diamonds does not clearly and conspicuously disclose that the diamonds are laboratory-created.”

Prior to that, the Jewelers Vigilance Committee complained of fuzzy descriptors in Diamond Foundry’s collaborations with Barneys New York and Jennifer Fisher.

“There have been prior warnings,” says JVC president and CEO Tiffany Stevens. “In the digital environment we’re in, it’s particularly important that advertising be truthful and accurate. We know there is continued interest from the FTC in looking at advertising practices in the jewelry sector.”

David Kellie, CEO of the Natural Diamond Council, which has said it is taking a less confrontational stance toward lab-grown gems, tells JCK that while the group’s focus remains on promoting natural diamonds, it does seek “to protect the integrity of our industry on behalf of the businesses and tens of millions of employees, their families, and communities whose livelihoods depend upon diamonds and diamond jewelry. Unfortunately, this means that from time to time we need to raise issues of concern and seek resolution and remedy through appropriate channels.”

In related news, Diamond Foundry is being sued in Canadian court by Ofer Mizrahi Diamonds (OM), for allegedly poaching its people and stealing its secrets.

The complaint, filed March 16 in the Supreme Court of British Columbia, charged that, in August 2019, one of OM’s Canadian employees left the company for a position as vice president of Diamond Foundry. Four other OM employees subsequently joined her, it said.

According to the complaint, the move may have violated the woman’s employee agreement, which forbade her from accepting a job with a competitor, or inducing other employees to leave for six months after her departure. OM is part owner of Green Rocks, a lab-grown diamond company.

The complaint alleged that the ex-employees gave Diamond Foundry access to OM’s customer database as well as other confidential information. It charged breach of contract, unjust enrichment, and other counts, and seeks $5 million in damages.

Diamond Foundry tells JCK, “We’re proud of our sales team and while they may be the envy of others, our attorneys do not see any merit in the claims made.”

(Photo: Getty)

 

 

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By: Rob Bates

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