Vegas Blogging: The Problem With Diamond Certs

Some thoughts on the Rapaport diamond certification conference, which, like his conference last year, was a worthwhile event spotlighting a conversation the trade needs to have:

– That different labs often have wildly divergent standards is not exactly a secret; at the forum’s outset, organizer Martin Rapaport put up a slide that compared how different labs were valued on his RapNet trading network, as compared to GIA. One lab traded at 46 percent of the value of GIA, meaning its reports are basically worth nothing.

So, one could argue, the business has enacted a self-correcting mechanism. But actually, the market has failed here. Consumers don’t realize the extent of this problem, and it’s probably asking too much of diamond shoppers—most of whom are still learning what a G VS1 is—to suddenly comprehend the difference between GIA and XYZ. As Don Palmieri of GCAL correctly put it, if companies were marking 18k gold as 14k, the industry would be infuriated. And yet, every day, people are sold diamonds “upgraded” by two or three grades, because a respectable-looking piece of paper says it’s so. A while ago, the trade was rightly incensed over the reports of bribery at the GIA lab. But today, some labs have basically turned bribery into a business model.

This is not about a one-grade difference. That’s natural. When a lab is two or three grades off, that is a little harder to justify.   

– A lot of possible solutions having been suggested, including having an outside organization examine grading institutions—basically, calling in a third party certifier for the third party certifiers. (Such groups do exist, such as, L-A-B, the Laboratory Accreditation Bureau.) Rapaport talked about “industry self-policing,” getting the big diamond groups involved to set standards.

Another possible outcome here is to have machines do the grading. This technology is still in its beginning stages: There are devices that measure cut and color, and talk of new gizmos that could judge clarity. But, as of yet, there is no universally accepted method of this.

Eventually, there may be. This won’t necessarily put the labs out of business—they will still be needed to keep one step ahead of the treaters. I recently took a tour of the GIA lab in Carlsbad, and its procedures to determine if a stone is treated or lab-grown are extensive and impressive. But while getting machines involved would standardize things markedly, that may not entirely solve the problem. Just as you now have “bad” labs and “good” labs, you could have bad machines and good machines. After all, having grading labs was meant to standardize things in the first place.

– This recession has caused many jewelers to do things they ordinarily wouldn’t—such as buying gold, or stocking silver. At the AGS Conclave in San Francisco, one noted retailer told me he had begun selling stones with reports from a controversial lab. He had become sick of competitors making unfair comparisons using that lab, and figured, if you can’t beat them, join them. Being ethical, he always informs consumers that that particular organization has “looser” grading standards. But he said, most customers don’t care. They think they are getting a deal.

And maybe that is the way forward for jewelers who want to do the right thing but are caught on the wrong side of this. Just as they have to disclose if they are selling something treated, should they now have to have to disclose that the G they are selling is probably not really a G? That might be a short-term Band-Aid, but it’s hard to see how that—or any of this—makes our industry look good in the long run.

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JCK News Director