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UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

________________________________________

)

In the Matter of )

) FILE NO. 962-3118

ZALE CORPORATION, )

) AGREEMENT CONTAINING

a corporation ) CONSENT ORDER

)

________________________________________)

The Federal Trade Commission has conducted an investigation

of certain acts and practices of Zale Corporation, a corporation

("proposed respondent"). Proposed respondent, having been

represented by counsel, is willing to enter into an agreement

containing a consent order resolving the allegations contained in

the attached draft complaint. Therefore,

IT IS HEREBY AGREED by and between Zale Corporation, by its

duly authorized officers, and counsel for the Federal Trade

Commission that:

1. Proposed respondent Zale Corporation is a Delaware

corporation with its principal office or place of business at 901

W. Walnut Hill Lane, Irving, Texas 75038-1003.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft complaint.

3. Proposed respondent waives:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain

a statement of findings of fact and conclusions of law;

and

c. All rights to seek judicial review or otherwise to

challenge or contest the validity of the order entered

pursuant to this agreement.

4. This agreement shall not become part of the public record of

the proceeding unless and until it is accepted by the Commission.

 If this agreement is accepted by the Commission, it, together

with the draft complaint, will be placed on the public record for
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a period of sixty (60) days and information about it publicly

released. The Commission thereafter may either withdraw its

acceptance of this agreement and so notify proposed respondent,

in which event it will take such action as it may consider

appropriate, or issue and serve its complaint (in such form as

the circumstances may require) and decision in disposition of the

proceeding.

5. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondent that the law has

been violated as alleged in the draft complaint, or that the

facts as alleged in the draft complaint, other than the

jurisdictional facts, are true.

6. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn

by the Commission pursuant to the provisions of Section 2.34 of

the Commission's Rules, the Commission may, without further

notice to proposed respondent, (1) issue its complaint

corresponding in form and substance with the attached draft

complaint and its decision containing the following order in

disposition of the proceeding, and (2) make information about it

public. When so entered, the order shall have the same force and

effect and may be altered, modified, or set aside in the same

manner and within the same time provided by statute for other

orders. The order shall become final upon service. Delivery of

the complaint and the decision and order to proposed respondent

by any means specified in Section 4.4 of the Commission s Rules

shall constitute service. Proposed respondent waives any right

it may have to any other manner of service. The complaint may be

used in construing the terms of the order. No agreement,

understanding, representation, or interpretation not contained in

the order or in the agreement may be used to vary or contradict

the terms of the order.

7. Proposed respondent has read the draft complaint and consent

order. It understands that it may be liable for civil penalties

in the amount provided by law and other appropriate relief for

each violation of the order after it becomes final.

ORDER

DEFINITIONS

For the purposes of this order, the following definitions

shall apply:
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1. "Clearly and prominently" shall mean as follows:

A. In a television or video advertisement, the disclosure

shall be presented simultaneously in both the audio and

video portions of the advertisement. The audio

disclosure shall be delivered in a volume and cadence

sufficient for an ordinary consumer to hear and

comprehend it. The video disclosure shall be of a size

and shade, and shall appear on the screen for a

duration, sufficient for an ordinary consumer to read

and comprehend it.

B. In a radio advertisement, the disclosure shall be

delivered in a volume and cadence sufficient for an

ordinary consumer to hear and comprehend it.

C. In a print advertisement, or on any in-store sign or

display, the disclosure shall be in a type size, and in

a location, that are sufficiently noticeable so that an

ordinary consumer will see and read it, in print that

contrasts with the background against which it appears.

 In multipage documents, the disclosure shall appear on

the cover or first page.

D. On a product label, the disclosure shall be in a type

size, and in a location on the principal display panel,

that are sufficiently noticeable so that an ordinary

consumer will see and read it, in print that contrasts

with the background against which it appears.

Nothing contrary to, inconsistent with, or in mitigation of the

disclosure shall be used in any advertisement or on any label.

2. Natural Pearl shall mean a calcareous concretion

consisting essentially of alternating concentric layers of

carbonate of lime and organic material formed within the body of

certain mollusks, the result of an abnormal secretory process

caused by an irritation of the mantle of the mollusk following

the intrusion of some foreign body inside the shell of the

mollusk, or due to some abnormal physiological condition in the

mollusk, neither of which has in any way been caused or induced

by humans.

3. Cultured Pearl shall mean the composite product created

when a nucleus (usually a sphere of calcareous mollusk shell)

planted by humans inside the shell or in the mantle of a mollusk

is coated with nacre by the mollusk.
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4. Imitation Pearl shall mean a manufactured product composed

of any material or materials that simulate in appearance a

natural pearl or cultured pearl.

5. Unless otherwise specified, "Respondent shall mean Zale

Corporation, a corporation, its successors and assigns, and its

officers, agents, representatives and employees.

6. Commerce shall mean as defined in Section 4 of the Federal

Trade Commission Act, 15 U.S.C. 44.

I.

IT IS ORDERED that respondent, directly or through any

corporation, subsidiary, division, or other device, in connection

with the manufacturing, labeling, advertising, promotion,

offering for sale, sale, or distribution of imitation pearl

jewelry, in or affecting commerce, shall not represent that

imitation pearls are cultured pearls.

II.

IT IS FURTHER ORDERED that respondent, directly or through

any corporation, subsidiary, division, or other device, in

connection with the manufacturing, labeling, advertising,

promotion, offering for sale, sale, or distribution of imitation

pearl jewelry, in or affecting commerce, shall not represent that

such product is or contains one or more pearls unless respondent

discloses, clearly and prominently, and in close proximity to

such representation, that the product is comprised of one or more

imitation pearls, by describing such product as artificial,

imitation, or simulated, or with another word or phrase of

like meaning.

III.

IT IS FURTHER ORDERED that respondent, directly or through

any corporation, subsidiary, division, or other device, in

connection with the manufacturing, labeling, advertising,

promotion, offering for sale, sale, or distribution of cultured

pearl jewelry, in or affecting commerce, shall not represent that

such product is or contains one or more pearls unless respondent

discloses, clearly and prominently, and in close proximity to

such representation, that the product is comprised of one or more
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cultured pearls, by describing such product as cultured or

cultivated, or with another word or phrase of like meaning.

IV.

IT IS FURTHER ORDERED that respondent, directly or through

any corporation, subsidiary, division, or other device, in

connection with the manufacturing, labeling, advertising,

promotion, offering for sale, sale, or distribution of any

jewelry product composed partially or entirely of natural pearls,

cultured pearls, or imitation pearls, shall not misrepresent the

composition or origin of such product.

V.

IT IS FURTHER ORDERED that, for a period of three (3) years

from the date of service of this order, respondent, directly or

through any corporation, subsidiary, division, or other device,

shall make available, in a place and manner calculated to attract

the attention of consumers, an information sheet in the form set

forth in Appendix A to this order at each store that offers for

sale any jewelry product composed partially or entirely of

natural pearls, cultured pearls, or imitation pearls.

VI.

IT IS FURTHER ORDERED that respondent, and its successors

and assigns, shall, for five (5) years after the date of issuance

of this order, maintain and upon request make available to the

Federal Trade Commission for inspection and copying, business

records demonstrating its compliance with the terms and

provisions of this order, including but not limited to:

A. All advertisements and promoti onal materials for

jewelry containing one or more natural pearls, cultured

pearls, or imitation pearls;

B. All brochures, hang tags or other in-store displays

relating to jewelry containing one or more natural

pearls, cultured pearls, or imitation pearls; and

C. All invoices and order forms relating to jewelry

containing one or more natural pearls, cultured pearls,

or imitation pearls.
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VII.

IT IS FURTHER ORDERED that respondent, and its successors

and assigns, shall deliver a copy of this order, or a summary in

the form set forth as Appendix B to this order, to all current

and future principals and directors; to all current and future

officers and managers with responsibilities or duties affecting

compliance with the terms of this order; and to all current and

future employees, agents, and representatives having

responsibilities with respect to the subject matter of this

order. Respondent shall deliver this order, or a summary in the

form set forth as Appendix B to this order, to current personnel

within thirty (30) days after the date of service of this order,

and to future personnel within thirty (30) days after the person

assumes such position or responsibilities.

VIII .

IT IS FURTHER ORDERED that respondent, and its successors

and assigns, shall notify the Commission at least thirty (30)

days prior to any change in the corporation that may affect

compliance obligations arising under this order, including but

not limited to a dissolution, assignment, sale, merger, or other

action that would result in the emergence of a successor

corporation; the creation or dissolution of a subsidiary, parent

or affiliate that engages in any acts or practices subject to

this order; the proposed filing of a bankruptcy petition; or a

change in the corporate name or address. Provided, however ,

that, with respect to any proposed change in the corporation

about which respondent learns less than thirty (30) days prior to

the date such action is to take place, respondent shall notify

the Commission as soon as is practicable after obtaining such

knowledge. All notices required by this Part shall be sent by

certified mail to the Associate Director, Division of

Enforcement, Bureau of Consumer Protection, Federal Trade

Commission, Washington, D.C. 20580.

IX.

IT IS FURTHER ORDERED that respondent shall, within sixty

(60) days after the date of service of this order, and at such

other times as the Federal Trade Commission may require, file

with the Commission a report, in writing, setting forth in detail

the manner and form in which it has complied with this order.

X.
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This order will terminate twenty (20) years from the date of

its issuance, or twenty (20) years from the most recent date that

the United States or the Federal Trade Commission files a

complaint (with or without an accompanying consent decree) in

federal court alleging any violation of the order, whichever

comes later; provided, however , that the filing of such a

complaint will not affect the duration of:

A. Any Part in this order that terminates in less than

twenty (20) years;

B. This order's application to any respondent that is not

named as a defendant in such complaint; and

C. This order if such complaint is filed after the order

has terminated pursuant to this Part.

Provided further , that if such complaint is dismissed or a

federal court rules that the respondent did not violate any

provision of the order, and the dismissal or ruling is either not

appealed or upheld on appeal, then the order will terminate

according to this Part as though the complaint had never been

filed, except that the order will not terminate between the date

such complaint is filed and the later of the deadline for

appealing such dismissal or ruling and the date such dismissal or

ruling is upheld on appeal.

Signed this day of , 199_.

ZALE CORPORATION

By: 

 

Counsel for Respondent
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 MATTHEW D. GOLD

Counsel for the Federal Trade Commission

APPROVED:

 

JEFFREY KLURFELD

Regional Director

San Francisco Regional Office
APPENDIX A

Your Guide to

 Pearls 

 

Natural Pearls

A pearl formed in the wild by the random intrusion

of a natural irritant into a mollusks shell, without

the intervention of man. There are few natural

pearls on the general consumer jewelry market

today.

Cultured Pearls

A cultured pearl is also grown by nature but with the

assistance of man. This patented process involves

the insertion of a "nucleus" into the oyster. The

oyster is then carefully nurtured for the desired type

of pearl. The quality of cultured pearls varies and is

judged by the pearls lustre, surface, shape, color

and size.

 

Imitation Pearls

A manufactured product composed of any material

or materials that simulate in appearance a natural

pearl or cultured pearl.
APPENDIX B

[To be printed on Zale Corporation letterhead]

[date]

Dear Zale employee:

This letter is to inform you that Zale Corporation recently

settled a civil dispute with the Federal Trade Commission ("FTC")

regarding certain alleged claims for our "Ocean Treasures" line

of imitation pearl jewelry. We deny the FTC s allegations, but

in order to avoid protracted litigation we have entered into a

settlement agreement. As part of that settlement, we are

required to summarize the requirements of the settlement for our

directors and officers, and for employees and others who sell our

products to consumers.

The FTC alleged that Zale advertisements falsely claimed,

expressly or by implication, that Ocean Treasures jewelry was

composed of cultured pearls. Our settlement with the FTC

contains the following requirements:

1. Zale may not represent that i mitation pearls are

cultured pearls. 

2. Zale may not represent that imitation pearl jewelry

contains pearls unless we specifically describe the

jewelry as "artificial," "imitation," "simulated," or

with another word or phrase of like meaning.

3. Zale may not represent that cultured pearl jewelry

contains pearls unless we specifically describe the

jewelry as "cultured" "cultivated," or with another

word or phrase of like meaning.

4. Zale may not misrepresent the composition or origin of

any jewelry product composed partially or entirely of

natural pearls, cultured pearls, or imitation pearls.

5. Zale must make available to consumers for a period of

three years, in each store that offers for sale natural

pearl, cultured pearl, or imitation pearl jewelry, an

information sheet that describes the difference among

natural pearls, cultured pearls, and imitation pearls.

 This information sheet, which we are providing to each

store, must be made available in a place and manner

that is calculated to attract the attention of

consumers.
Requirements 1-4, above, apply to all representations made

in advertising, labeling, promotion, offering for sale, sale and

distribution, including individual sales transactions.

Thank you for your assistance. If you have any questions

about the requirements contained in this letter, please call 

 .

Sincerely,

[Zale Official]

[Title]
UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

________________________________________

)

In the Matter of )

)

ZALE CORPORATION, ) DOCKET NO.

)

a corporation )

________________________________________)

COMPLAINT

The Federal Trade Commission, having reason to believe that

Zale Corporation, a corporation ("respondent"), has violated the

provisions of the Federal Trade Commission Act, and it appearing

to the Commission that a proceeding by it in respect thereof

would be in the public interest, alleges:

1. Respondent Zale Corporation is a Delaware corporation with

its principal office or place of business at 901 W. Walnut Hill

Lane, Irving, Texas 75038.

2. Respondent operates the country's largest chain of retail

jewelry stores with more than 1,200 locations throughout the

United States, Guam, and Puerto Rico.

3. Respondent has manufactured, advertised, labeled, offered

for sale, sold, and distributed the Ocean Treasures line of

imitation pearl jewelry, and numerous other lines of cultured

pearl jewelry, to the public. These lines of jewelry have

included bracelets, earrings, pendants, rings and strands. None

of respondent s jewelry products has included natural pearls.

4. Federal Trade Commission industry guides are administrative

interpretations of laws administered by the Commission for the

guidance of the public in conducting its affairs in conformity

with legal requirements. The Federal Trade Commission s Guides

for the Jewelry, Precious Metals, and Pewter Industries, 16

C.F.R. Part 23, 61 F.R. 27212 (May 30, 1996), state as follows:

A. 23.2 Misleading Illustrations. It is unfair or

deceptive to use, as part of any advertisement, packaging

material, label, or other sales promotion matter, any visual

representation, picture, televised or computer image,

illustration, diagram, or other depiction which, either alone or
2

in conjunction with any accompanying words or phrases,

misrepresents the type, kind, grade, quality, quantity, metallic

content, size, weight, cut, color, character, treatment,

substance, durability, serviceability, origin, preparation,

production, manufacture, distribution, or any other material

aspect of an industry product.

B. 23.20 Misuse of terms such as "cultured pearl,"

"seed pearl," "Oriental pearl," "natura," "kultured," "real,"

"gem," "synthetic," and regional designations. It is unfair or

deceptive to use the term "cultured pearl," "cultivated pearl,"

or any other word, term, or phrase of like meaning to describe,

identify, or refer to any imitation pearl.

C. 23.19 Misuse of the word "pearl." (c) It is unfair

or deceptive to use the word "pearl" to describe, identify, or

refer to an imitation pearl unless it is immediately preceded,

with equal conspicuousness, by the word "artificial,"

"imitation," or "simulated," or by some other word or phrase of

like meaning, so as to indicate definitely and clearly that the

product is not a pearl.

5. The acts and practices of respondent alleged in this

complaint have been in or affecting commerce, as "commerce" is

defined in Section 4 of the Federal Trade Commission Act.

6. Respondent has disseminated or has caused to be disseminated

advertisements for its Ocean Treasures imitation pearl jewelry

products, including but not necessarily limited to the attached

Exhibits A through B. These advertisements contain the following

statements and depictions:

A. "ZALES THE DIAMOND, SEMI-PRECIOUS AND PEARL STORE TM

Ocean Treasures TM Fine Jewelry

Created by nature, enhanced by man."

[Depictions of necklace, earrings, rings, and pendants,

all of which appear to contain pearls or cultured

pearls](Exhibit A)

B. "Ocean Trea sures TM Fine Jewelry

Created by nature, enhanced by man."

[Depictions of necklace, earrings, and pendant, all of

which appear to contain pearls or cultured pearls]

(Exhibit B)
3

7. Through the means described in Paragraph 6, respondent has

represented, expressly or by implication, that the Ocean

Treasures line of jewelry is composed of cultured pearls.

8. In truth and in fact, the Ocean Treasures line of jewelry is

not composed of cultured pearls, but rather is composed

exclusively of imitation pearls. A cultured pearl is a pearl

formed by a mollusk as a result of an irritant placed in the

mollusk s shell by humans. An imitation pearl is a manufactured

product that is designed to simulate in appearance a pearl or

cultured pearl. Therefore, the representation set forth in

Paragraph 7 was, and is, false or misleading.

9. The acts and practices of respondent as alleged in this

complaint constitute unfair or deceptive acts or practices in or

affecting commerce in violation of Section 5(a) of the Federal

Trade Commission Act.

 THEREFORE, the Federal Trade Commission this day of 

 , , has issued this complaint against respondent.

By the Commission.

Donald S. Clark

Secretary

SEAL:

[Exhibits A and B attached to paper copies of complaint, but not

available in electronic form.]
1

ANALYSIS OF PROPOSED CONSENT

ORDER TO AID PUBLIC COMMENT

The Federal Trade Commission has accepted an agreement,

subject to final approval, to a proposed consent order from Zale

Corporation, (hereinafter Zale ). Zale is the largest retailer

of fine jewelry products in the United States.

The proposed consent order has been placed on the public

record for sixty (60) days for the reception of comments by

interested persons. Comments received during this period will

become part of the public record. After sixty (60) days, the

Commission will again review the agreement and any comments

received and will decide whether it should withdraw from the

agreement and take other appropriate action or make final the

agreement's proposed order.

The proposed complaint alleges violations of Section 5 of the

Federal Trade Commission Act. This matter focused on Zale s

advertisements for the "Ocean Treasures" line of imitation pearl

jewelry. The advertisements depicted Ocean Treasures earrings,

necklaces, rings and pendants, and described them as follows: 

"Ocean Treasures Fine Jewelry. Created by nature, enhanced by

man." The advertisements also included the following statement: 

"Zales. The Diamond, semi-precious and pearl store." The

proposed complaint alleges that, through these depictions and

statements, Zale violated Section 5 of the Federal Trade

Commission Act by falsely claiming that the Ocean Treasures line

of jewelry is composed of cultured pearls. 

 The Federal Trade Commission recently revised its Guides for

the Jewelry, Precious Metals, and Pewter Industries, 16 C.F.R.

Part 23, 61 F.R. 27212 (May 30, 1996)(the "Jewelry Guides"). The

previous version of the Guides as well as the revised Guides

address various advertising practices in the jewelry industry,

including those employed by Zale. See, e.g. , 23.2 ( Misleading

Illustrations ); 23.20 ( Misuse of terms such as "cultured pearl,"

"seed pearl," "Oriental pearl," "natura," "kultured," "real,"

"gem," "synthetic," and regional designations ); 23.19 ( Misuse of

the word "pearl" ); and 23.18 ( Definitions of various pearls ). 

These industry guides are administrative interpretations of laws
2

administered by the Commission for the guidance of the public in

conducting its affairs in conformity with legal requirements. 

While the Guides are referenced in the complaint, they do not

create a separate cause of action.

Part I of the proposed order would require that Zale not

represent that imitation pearls are cultured pearls. Part II

would prevent Zale from representing that imitation pearl jewelry

is or contains one or more pearls unless Zale designates the

jewelry as "artificial," "imitation," "simulated," or by some

other word or phrase of like meaning. Part III would prevent Zale

from representing that cultured pearl jewelry is or contains one

or more pearls unless Zale designates the jewelry as "cultured" or

"cultivated," or by some other word or phrase of like meaning. 

Part IV would prohibit the company from misrepresenting the

composition or origin of any jewelry product composed partially or

entirely of natural pearls, cultured pearls, or imitation pearls.

Part V of the proposed order would require Zale, for a period

of three years, to make available, at each of its stores that

sells natural, cultured or imitation pearls, a brief fact sheet

entitled "Your Guide to Pearls." This fact sheet briefly defines

the differences among the three general categories of pearls.

The proposed order also would require Zale to maintain

materials related to its advertising of pearl, cultured pearl, and

imitation pearl jewelry. The proposed order would also require

Zale to provide a copy of the consent agreement to all employees

or representatives with duties affecting compliance with the terms

of the order; to notify the Commission of any changes in corporate

structure that might affect compliance with the order; and to file

one or more reports detailing compliance with the order.

The purpose of this analysis is to facilitate public comment

on the proposed order, and it is not intended to constitute an

official interpretation of the agreement and proposed order, or to

modify in any way their terms.