With more and more reports of synthetic melee being sold undisclosed as natural, the diamond industry seems on the verge of a possible crisis—and a situation that could grow worse if we are not careful. 

There is currently a 20 percent or more price differential between lab-grown diamonds and naturals. So cheating is profitable—and with most dealers unable to differentiate synthetics from naturals, it can be tough to spot the cheaters.

What possible solutions present themselves? De Beers has developed a lab-grown melee detector—which is currently being tested with sightholders. (CORRECTION: The previous version of this post said that De Beers plans to sell its detector to the industry at large. That looks like it isn’t the case. More on this in a future post.)

A New York City lab, Analytical Gemology and Jewelry (AG&J), has developed a “batch testing” system for melee, which can apparently detect both treatments and synthetics. Other labs need to develop similar services.

Down the road, big vendors will likely insist on a tighter chain of custody. When we deal with issues like Marange, trade members have traditionally said they can’t tell where a diamond comes from. That may no longer be an acceptable answer. The idea, still held by some in this industry, that retailers do not have a right to know exactly where the products they sell originate from is looking pretty out-of-date in this new world. 

And of course, everyone has to recommit themselves to dealing with only people they trust 100 percent. Companies that do break the rules need to be named, shamed, banished from the trade, and subject to prosecution.

What’s the alternative? If this situation gets any worse, we could soon see dealers just offer “diamonds”—and it wouldn’t matter if they are grown by a lab or in nature. (We are talking mainly about the smaller sizes that are at issue here. Most larger-sized diamonds are sent to labs, which can differentiate the lab-grown from the natural.)

Of course, in the United States, the Federal Trade Commission requires every lab-grown diamond be disclosed for what it is. Trade rules require this as well. But big chains could sell, say, a diamond bracelet, and then add a proviso that it is likely to include both natural and lab-grown diamonds.

As Martin Rapaport told me the other day, this means that natural melee and pointers would eventually take a price hit, and their level would sink to that of man-made stones. This could be a dangerous game, as the more diamond-growing technology improves, the more the price of the lab-grown stones could drop.

But Rapaport argues: “Lower prices aren’t a disaster. Dealers make money on the margins.”

It would, of course, hurt mining companies. But he doesn’t see that as terrible either. “The fact that they are not helping the ability to differentiate its product, and are not promoting the product by generic means, means they don’t deserve to make a great margin.”

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