Gem Controversies Awaiting You in the New Millennium

The much-heralded new year has arrived, and once everyone gets used to the big calendar change, the hype will go away. What’s likely not to go away are several burning issues that continue to confound the jewelry industry and undoubtedly have entered the consciousness of some savvy customers. There is no easy way to resolve these questions, but one good way to start is by reading what follows.

Is the “Ideal cut” really the ideal cut? When the American Gem Society opened a grading laboratory in Las Vegas in 1996, non-AGS jewelers began using it, hoping to obtain the coveted “0” grade that indicates an Ideal cut. Why? Because diamonds with an AGS 0 sell for 15% to 20% more than those of comparable color and clarity that don’t meet AGS’s criteria for Ideal cut.

Ideal-cut diamonds follow a formula based on proportions, angles, and percentages that mathematician Marcel Tolkowsky developed in 1919. Those proportions, angles, and percentages supposedly produce the greatest combination of brilliance and dispersion. But in 1999, 80 years after Tolkowsky, the Gemological Institute of America published alternative findings. According to GIA’s report, shallower crown angles and larger table percentages can sometimes create as much brilliance as Tolkowsky proportions. The GIA researchers also hypothesize that other variations produce equal or greater brilliance.

Diamond cutter Richard von Sternberg at Eight Star Diamond Company in Santa Rosa, Calif., cuts diamonds according to his own standards, and his stones have been determined by some to have the most brilliance of any diamonds cut today. He speaks about “ideal” only in relation to light output, not to any particular set of measurements. Facet angles and symmetry are important, but because each diamond affects light in a different way, von Sternberg adjusts the faceting accordingly. Such mutability can’t be translated into an easy formula, so the question of which cut (or cuts) produces an ideal diamond may remain controversial for some time.

While jewelers may be aware of the differences in Ideal-cut theory, most are concerned—understandably—only with customer reaction. By using the marketing power of the various branded Ideal cuts, they undoubtedly can increase business. Some companies selling the branded cuts also use the AGS lab to supplement the branded name with a report verifying proportions. Since the AGS Ideal cuts carry a premium, the report and the branded name combined create a powerful marketing tool.

Is the General Electric-Lazare Kaplan diamond “process” a treatment? Do we need to disclose it? How do we identify a GE/POL diamond if its inscription is polished off? Lazare Kaplan International, in partnership with General Electric, is turning “champagne” diamonds into colorless diamonds. The metamorphosis is accomplished through heat and pressure in a procedure that LKI and GE call a “process”—they take care to avoid the word “treatment.” But many in the diamond industry take the view that no matter what term one uses to describe it, the process/treatment should be disclosed.

Most of the diamonds being processed are fancy shapes ranging in color from D through M and in clarity from Flawless to I2. Sizes range from .30 ct. to 10 cts. LKI expects sales to hit $30 million the first year and grow to as much as $100 million over time. Sales of $100 million may represent only a small fraction of the overall diamond business, but the figure is large enough to make people nervous.

In a panel discussion in New York last summer, LKI president Leon Tempelsman discussed the new process. He said the company chose to embrace technological developments in what he calls a “responsible way.” Thus, LKI is laser-inscribing all its processed diamonds with “GE-POL” on the girdle. (POL stands for Pegasus Overseas Ltd., the LKI subsidiary in Antwerp that’s marketing the stones.) But inscriptions can be removed, as GIA’s Gem Trade Laboratory discovered this past summer. GIA says its lab will detect de-inscribed GE-POL diamonds, but such stones can be submitted to other labs or sold without lab reports. That means some of these processed stones could wind up being sold as untreated.

Positive identification eventually may resolve this issue. Gary Roskin, JCK’s gemstone editor, presented a possible identification technique in the November 1999 issue of the magazine (pages 57-58). He describes a linen-like graining that may tip you off to a GE-POL diamond. GIA, meanwhile, is working to find a more definitive test. Until one is discovered, the issue will keep simmering.

Will we need certs to sell stones? As more consumers become aware of independent laboratory reports and as enhancements and synthetics continue to proliferate, established gem labs are doing land-office business, and new labs are springing up to serve particular niches.

In diamonds, the new kid on the block is the AGS facility in Las Vegas, which has grown steadily since opening in 1996. Its specialty, as mentioned earlier, is cut grading. In the colored gemstone arena, the new player is the American Gem Trade Association lab in New York. It opened in the fall of 1998 to meet a growing need for reports offering information on enhancements and country of origin. Other labs dealing with colored gem identification, enhancement, and origin include the American Gemological Laboratories (AGL), the European Gemological Laboratory (EGL), GIA’s Gem Trade Lab, Gübelin, the International Gemmological Institute (IGI), and the Swiss Gemmological Institute (SSEF).

Obviously, there’s no shortage of labs. And a good thing, too. They are the ones that can quality-grade cut and identify enhancements and country of origin. As more labs pump out more certs, more consumers will hear about them, leading to more business for the labs. Such an upward spiral may be inescapable.

When it comes to treatments, what is the best way to disclose? In the early days, the jewelry industry didn’t disclose at all. Few jewelers even knew about treatments. “Enhancements” were done at the mines or in backroom laboratories. No one talked; no one cared.

When the Federal Trade Commission first issued its Guides for the Jewelry Industry in 1958, they were considered a suggested way of doing business. Though somewhat open to interpretation, the most recent version calls for disclosure of gem enhancements that aren’t permanent. Heat is permanent, so a heated ruby or sapphire shouldn’t have to be disclosed. Oil in emeralds isn’t permanent, but fearing they might lose a sale, few jewelers disclosed oil treatments.

Then jeweler and well-known gem author Fred Ward was sued over a damaged emerald. Although there was never a doubt that the plaintiff hit the emerald ring on her countertop, doubt surrounded the disclosure issue. There were questions about the filler, and the specter of the dread Opticon was raised. The case drew national attention, Ward lost, and the jewelry industry hasn’t been the same since.

FTC is considering major revisions to the 1996 version of the Guides, which would address not only Opticon and other colored gem treatments but also laser drilling, clarity enhancement, and the new LKI-GE color enhancement of diamonds. These issues have drawn the attention of Jewelers Vigilance Committee executive director Cecilia Gardner. Gardner, a lawyer, is working to persuade FTC to adopt stronger Guides. She favors full disclosure and strict ethics.

General Electric is asking FTC to exempt it from disclosure requirements, but the new Guides may not allow it. One proposed change would require disclosure of any treatment that significantly affects the value of a gemstone. That would apply to the GE-POL diamonds, which reportedly sell for about 15% less than comparable untreated diamonds. (GE contends it’s too early to predict prices for its processed stones, and Leon Tempelsman said during his panel discussion that there might be no price differential.) The reality is that any treatment affects the value of any gemstone. Price differential is not the issue. If something is done to a gem, it should be disclosed.

Many treatments are difficult or impossible to detect, especially without sophisticated gem-testing equipment. Will it be enough for a jeweler to disclose that an emerald is treated (always a safe bet) without disclosing the specific treatment? The short answer is no. The type of treatment matters because of durability and stability issues. But definitive answers to treatment questions may be a long time coming.

Will man-made diamonds destroy the natural diamond market? It’s only a matter of time before gem-quality synthetic diamonds are commercially available at a fraction of the price of natural diamonds. Experiments begun in Russia in the 1980s have already evolved into the production of colored diamonds at the University of Florida (JCK, October 1999, p. 15). And over the past year, the Morion Co. in Brighton, Mass., has been sending out a list of synthetic diamonds it offers. The list is small—typically two dozen rough—because production is limited, but the company hopes eventually to sell thousands of carats a month.

The primary issue surrounding synthetic diamonds is the difficulty of identification. Most jewelers can’t spot them. They’re waiting for a foolproof diamond tester. Meanwhile, teaching more than 30,000 retail jewelers to identify synthetic diamonds is a monumental task.

The industry also worries what effect commercially affordable synthetic diamonds will have on the prices of natural diamonds. One can assume it will be similar to the impact that synthetic emerald, ruby, and sapphire had on their natural-market counterparts: virtually none. Nevertheless, we’ll be watching the market carefully.

Can you find a natural gem to sell, or are they all treated? Will demand for natural gems push prices up? If treatments and disclosure become big issues, it follows that consumers will develop greater appreciation for natural gems. The question is, can the supply of natural gems keep pace? Lack of a consistent supply of natural gems will drive up prices. Richard Hughes of Pala International, the author of Ruby & Sapphire, asks, “How will you sell a natural gem if your customer wants one and you can’t get it? And if you do, what will be the price?”

Some gems aren’t treated because traditional treatments don’t work on them. Garnet is an example. The fact that garnets can be sold as natural might influence pricing. “Consumers will begin to have a greater appreciation for gems that aren’t enhanced in any way,” says Hughes. “We expect that this will increase demand for gems such as garnet.”

Can we learn enough to stay ahead? Education is the key to success. The jeweler who fails to educate himself and his staff runs a serious risk of losing business. Gemological education is especially critical. GIA soon will offer advanced gemological training that addresses new treatments and synthetics. The American Gem Society, IGI, AGL, and Jewelers of America all offer continuing education in gemological topics.

Another way to stay on top of the industry is through local involvement. GIA Alumni & Associates offers educational programs through local chapters, and many other industry trade groups have local representation.

Educational opportunities are out there. Jewelers who don’t take advantage of them may not survive.