[Federal Register Volume 61, Number 105 (Thursday, May 30, 1996)]
[Rules and Regulations]
[Pages 27178-27222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13524]




[[Page 27177]]


_______________________________________________________________________

Part V





Federal Trade Commission





_______________________________________________________________________



16 CFR Parts 19 and 23



Guides for the Metallic Watch Band Industry and the Jewelry Industry, 
Final Rules; and Guides for the Jewelry, Precious Metals, and Pewter 
Industries, Proposed Rule

Federal Register / Vol. 61, No. 105 / Thursday, May 30, 1996 / Rules 
and Regulations

[[Page 27178]]



FEDERAL TRADE COMMISSION

16 CFR Part 23


Guides for the Metallic Watch Band Industry and Guides for the 
Jewelry Industry

AGENCY: Federal Trade Commission.

ACTION: Final guides.

-----------------------------------------------------------------------

SUMMARY: The Federal Trade Commission (``Commission'') announces that 
it has concluded a review of its Guides for the Metallic Watch Band 
Industry (``Watch Band Guides'') and Guides for the Jewelry Industry 
(``Jewelry Guides''). The Commission rescinds the Watch Band Guides in 
a document published elsewhere in this issue of the Federal Register. 
The Commission is consolidating certain provisions of the Watch Band 
Guides with the Jewelry Guides. The Commission is renaming the Guides 
for the Jewelry Industry the Guides for the Jewelry, Precious Metals 
and Pewter Industries. The Commission also revises the Jewelry Guides 
by defining the scope and application of the Guides and adding new 
provisions regarding the use of the terms ``vermeil'' and ``pewter.'' 
The Commission is also making substantive changes to the existing 
provisions of the Jewelry Guides, as discussed in detail herein. The 
Commission is not making any changes to the provisions regarding the 
use of the word ``platinum'' at this time and will request additional 
comment on possible revisions to this section in a separate Federal 
Register notice.

EFFECTIVE DATE: May 30, 1996.

ADDRESSES: Requests for copies of this document should be sent to the 
Public Reference Branch, Room 130, Federal Trade Commission, 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Constance M. Vecellio, Attorney, 202-
326-2966, or Laura J. DeMartino, Attorney, 202-326-3030, Division of 
Enforcement, Federal Trade Commission, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The Commission revises the Guides for the Jewelry Industry and the 
Guides for the Metallic Watch Band Industry (``Guides''), 16 CFR Parts 
23 and 19, respectively, as described in detail below. The Commission 
will announce the results of its review of the Guides for the Watch 
Industry, 16 CFR Part 245, which was conducted at the same time as the 
review of the other Guides, in a separate notice. The Commission 
published a Federal Register Notice (``FRN'') soliciting public comment 
on amendments to the Guides on June 12, 1992, in response to a petition 
from the Jewelers Vigilance Committee, Inc. (``JVC'').\1\ The comment 
period, as extended, ended on September 25, 1992.\2\
---------------------------------------------------------------------------

    \1\ 57 FR 24996 (June 12, 1992). The JVC, located at 401 East 
34th Street, NY, NY 10016, is a trade association that was formed in 
1912 to promote ethical practices in the jewelry industry. Its 
initial petition is dated April 15, 1986; additional proposed 
revisions were submitted on February 20, 1989.
    \2\ 57 FR 34532 (Aug. 5, 1992).
---------------------------------------------------------------------------

    The FRN solicited comment on the JVC's proposal to revise the 
Guides.\3\ The FRN summarized the major amendments proposed by the JVC, 
as well as revisions that Commission staff was proposing. In addition 
to requesting comment on the proposed revisions generally, the FRN 
asked for comment on 34 questions.
---------------------------------------------------------------------------

    \3\ Because of its 71-page length, the JVC proposal was not 
published. But, the proposal, and a document showing how the current 
Guides would be changed by the JVC proposal, was placed on the 
public record for inspection and is available in the Public 
Reference Room of the Commission.
---------------------------------------------------------------------------

    The Commission received 263 comments. In the remainder of this 
notice, the comments are cited to by an abbreviation of the commenter's 
name and the document number assigned to the comment on the public 
record. A list of the commenters, including the abbreviations and 
document numbers used to identify each commenter, is attached as an 
Appendix.\4\
---------------------------------------------------------------------------

    \4\ In summary, the comments are from 19 trade associations, 85 
diamond dealers, 53 colored stone dealers, 37 retail jewelers, 10 
synthetic gemstone manufacturers, 12 pewter manufacturers, 10 watch 
manufacturers, 9 general manufacturers, 5 gemologist/appraisers, 7 
precious metals firms, 3 catalog houses, 2 manufacturer 
representatives, 2 writing implement manufacturers, 3 pearl dealers, 
and one each from: The Canadian Government, the U.S. Postal Service, 
the National Association of Consumer Agency Administrators, a 
scientist who works with laser technology and crystal growth, an 
economics professor, an importer, a retired trade association 
executive, and an editor of Jewelers Circular-Keystone, and a trade 
magazine.
---------------------------------------------------------------------------

    The revisions are discussed section-by-section by category.\5\ 
Below, Part II addresses the standard regulatory review questions that 
were included in the FRN. Part III discusses general issues regarding 
the proposed revisions to the Guides. Part IV analyzes the proposed 
revisions to the Jewelry Guides section-by-section (including the Watch 
Band Guides, now consolidated with the Jewelry Guides).
---------------------------------------------------------------------------

    \5\ Various sections of the Guides that pertain to particular 
subject areas are referred to as ``categories,'' in the Appendix to 
the current Guides, i.e., Category I: Jewelry industry products in 
general; Category II: precious metals; Category III: diamonds, 
genuine and imitation; Category IV: pearls, genuine, cultured and 
imitation; Category V: gemstones, genuine, synthetic and imitation.
---------------------------------------------------------------------------

II. Regulatory Review and Related Questions

    As part of the Commission's ongoing program to review all of its 
rules and guides periodically, the FRN included questions about the 
Guides' economic impact and continuing relevance, any compliance 
burdens, changes needed to minimize their economic impact, their 
relation to other federal or state laws or regulations, and the effect 
of any changed conditions since the Guides were issued. The Commission 
also solicited comment on general issues regarding the Guides, such as 
whether the JVC's proposed provisions accurately reflect accepted 
practices, technology or nomenclature used in the trade; whether 
proposed changes would result in a lessening of competition or 
increased prices; and whether the JVC's petition to revise should be 
rejected and the current Guides retained. Because these questions 
concern fundamental issues about whether the Guides should be retained, 
deleted or revised, the Commission addresses them first.

A. Summary of the Comments

    All but one of the 37 comments specifically addressing the economic 
impact of the Guides stated that any compliance costs are far 
outweighed by the benefits to the industry and to consumers.\6\ None of 
the comments provided any figures or estimates of the monetary costs 
incurred in complying with the Guides.
---------------------------------------------------------------------------

    \6\ E.g., Fasnacht (4) p.1 (the Guides have a positive economic 
impact by creating a level playing field); Schwartz (52) (the Guides 
have a positive impact on the industry by establishing standards 
that offer consumers protection without undue cost); JMC (1); Thorpe 
(7); King (11); Gold Institute (13); Honora (15); Argo (17); AGS 
(18); AGTA (49); Estate (23); G&B (30); Jabel (47); Skalet (61); 
Handy (62); Lannyte (65); Newhouse (76); GIA (81); Nowlin (109); 
McGee (112); ArtCarved (155); Bales (156); Bridge (163); LaPrad 
(181); IJA (192); CPAA (193); Mark (207); Canada (209); Bedford 
(210); JVC (212); Matthey (213); Bruce (218); Service (222); MJSA 
(226); Preston (229); Timex (239); and Sheaffer (249).
    Service (222) agreed with regard to the current Guides, but 
thought that the compliance costs associated with the proposed 
revisions outweighed the benefits.
---------------------------------------------------------------------------

    Thirty-eight comments specifically addressed the continuing need 
for the Guides and all agreed that there is a continuing need, with 
most stating that the Guides protect consumers and industry.\7\ One 
comment stated,

[[Page 27179]]

``Without the guides to serve as a reference manual, every manufacturer 
or producer would have their own interpretation [of what constitutes 
fair industry practices].'' \8\
---------------------------------------------------------------------------

    \7\ The commenters are the same as in footnote 6 supra, with the 
addition of Eisen (91). With regard to the current Guides, Best 
(225) stated, at p.2, that the Guides ``are well developed and 
provide protection to consumers and to reputable jewelers against 
otherwise false and deceptive practices. The Guides offer a great 
measure of certainty to jewelers' business practices as historical 
application and interpretation have better defined the parameters of 
acceptable conduct. This certainty has value because it contributes 
to an efficient and free flow of information to consumers in the 
marketplace.'' AGTA (49), at p.2, stated: ``If consumers cannot be 
confident that what they are paying for is what they have been told 
it is, our trade cannot survive. The FTC guides provide a structure 
upon which our industry has built regulations for the consumer's 
protection, which is ultimately our own as a trade. Therefore, AGTA 
endorses their continued existence, timely revision, and a strong 
enforcement.''
    \8\ Skalet (61) p.1.
---------------------------------------------------------------------------

    Twenty-nine comments specifically addressed the burdens of 
complying with the Guides. Seven comments stated there are no 
compliance burdens.\9\ Three also stated that, if everyone complies, 
the burdens of compliance are evenly distributed and will not benefit 
one business at the expense of another.\10\ Ten comments stated that 
the burdens are minimal \11\ and six thought the burdens were ``worth 
it.'' \12\ The seven comments that itemized the burdens (``testing and 
planning,'' ``monitoring suppliers,'' ``controls,'' ``measurements,'' 
``record keeping,'' ``time,'' and ``personnel''), concluded that the 
costs are acceptable because of the benefits received.\13\ None of the 
comments identified the extent of the costs in money or in time.
---------------------------------------------------------------------------

    \9\ Fasnacht (4); Honora (15); G&B (30); Lannyte (65); Newhouse 
(76); CPAA (193); and Bedford (210).
    \10\ Honora (15); G&B (30); and Newhouse (76).
    \11\ JMC (1); King (11); AGS (18); Estate (23); Schwartz (52); 
Handy (62); Nowlin (109); Bridge (163); MJSA (226); and Preston 
(229).
    \12\ Argo (17); AGTA (49); Bales (156); LaPrad (181); Mark 
(207); and Matthey (213).
    \13\ Jabel (47); Skalet (61); McGee (112); ArtCarved (155); IJA 
(192); Canada (209); and MJSA (226).
---------------------------------------------------------------------------

    Although 29 comments responded to the question regarding changes 
needed to minimize the economic effect of the Guides, they did not 
offer detailed explanations or suggestions. Fifteen comments stated 
that no changes are necessary.<SUP>14 Six comments stated that the 
changes proposed by the JVC are sufficient to minimize their economic 
effects.<SUP>15 Two comments recommended simplifying the Guides to 
avoid misunderstandings (e.g., about the proper use of 
terminology).<SUP>16 Canada stated that harmonizing standards with 
Canada would minimize the economic effect on entities subject to the 
Guides' requirements, reduce costs and promote international trade, by 
not requiring manufacturers to mark products for domestic use 
differently than those made for foreign use.<SUP>17
---------------------------------------------------------------------------

    \14\ JMC (1); Fasnacht (4); Thorpe (7); Honora (15); Argo (17); 
Estate (23); G&B (30); Jabel (47); Schwartz (52); Skalet (61); Handy 
(62); McGee (112); LaPrad (181); IJA (192); and Mark (207).
    \15\ AGTA (49); GIA (81); Bridge (163); Bedford (210); JVC 
(212); and Preston (229).
    \16\ ArtCarved (155) and Matthey (213).
    \17\ Comment 209, p.1.
---------------------------------------------------------------------------

    Twenty-seven comments addressed the relation of the Guides to 
federal, state or local laws or regulations. Twenty-one comments 
specifically stated either that there is no conflict or overlapping or 
that they are unaware of any.<SUP>18 Six stated that if there was any 
duplication, it should not deter the Commission from approving 
comprehensive guidelines.<SUP>19 (No examples of duplication were 
provided.) However, the Postal Service stated that the Guides ``overlap 
with Postal authority, sometimes undermining our position in false 
representation and fraud actions.'' <SUP>20 The Postal Service stated 
that the Guides do not adequately address the situation where the 
consumer purchases jewelry before actually seeing it. The Postal 
Service proposed changes to the Guides to help remedy this 
problem.<SUP>21 As discussed below, the Commission has revised the 
Guides to mitigate this problem.
---------------------------------------------------------------------------

    \18\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15); 
Argo (17); Handy (62); Lannyte (65); GIA (81); NACAA (90); McGee 
(112); ArtCarved (155); Bridge (163); IJA (192); Phillips (204); 
Bedford (210); JVC (212); Matthey (213); Best (225); MJSA (226); and 
Preston (229).
    \19\ Estate (23); G&B (30); Jabel (47); AGTA (49); LaPrad (181); 
and CPAA (193).
    \20\ Comment 244, p.1. The Postal Service enforces 39 U.S.C. 
3005, which prohibits persons from obtaining mail or property 
through the mail by means of false representation. The Postal 
Service also brings actions under the criminal mail and wire fraud 
statutes, 18 U.S.C. 1341, 1342 & 1345. Id.
    \21\ Comment 244, pp.1-3.
---------------------------------------------------------------------------

    Thirty-one comments discussed economic or technological changes 
since the Guides were issued and the effect on the Guides. Three 
comments <SUP>22 stated that economic and technological changes have 
had no effect on the Guides and 28 comments stated that such changes 
have had an effect on the Guides.<SUP>23 The changes the commenters 
specified, which they thought should be reflected in the Guides, are 
new gemstone enhancement techniques,<SUP>24 laser treatment of 
diamonds,<SUP>25 fracture-filling of diamonds,<SUP>26 new methods of 
metal plating,<SUP>27 diffusion-treated sapphires,<SUP>28 advanced 
testing techniques,<SUP>29 new synthetic gemstones,<SUP>30 and possible 
new platinum products.<SUP>31
---------------------------------------------------------------------------

    \22\ JMC (1); Handy (62); and McGee (112).
    \23\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15); 
Argo (17); AGS (18); Estate (23); AGTA (49); Lannyte (65); Newhouse 
(76); GIA (81); Eisen (91); McGee (112); ArtCarved (155); Bales 
(156); Bridge (163); LaPrad (181); IJA (192); CPAA (193); Mark 
(207); Canada (209); Bedford (210); Matthey (213); MJSA (226); 
Preston (229); Timex (239); and Sheaffer (249).
    \24\ AGS (18); AGTA (49); GIA (81); Eisen (91); ArtCarved (155); 
LaPrad (181); and IJA (192).
    \25\ Fasnacht (4); Thorpe (7); Honora (15); ArtCarved (155); and 
Preston (229).
    \26\ Thorpe (7); Estate (23); ArtCarved (155); IJA (192); and 
Preston (229).
    \27\ Newhouse (76); ArtCarved (155); Canada (209); and Preston 
(229).
    \28\ Thorpe (7); Honora (15); and Preston (229).
    \29\ ArtCarved (155); LaPrad (181); and Preston (229).
    \30\ Honora (15) and ArtCarved (155).
    \31\ ArtCarved (155).
---------------------------------------------------------------------------

    On the economic side, Richard C. Mark commented on the dramatic 
increase in the price of gold since the Guides were most recently 
revised, which, he stated, increases the significance of any rules 
dealing with gold.<SUP>32 Another comment stated that greater economic 
advantage to the trade would occur if national and international 
standards are uniform.<SUP>33
---------------------------------------------------------------------------

    \32\ Comment 207, p.2. In 1957, when the Guides were last 
revised, gold cost $35 an ounce. The current price fluctuates 
between $350 and $400 per ounce.
    \33\ Matthey (213) p.1 (stating that ``Competition on a global 
as well as a national basis make the establishment of standards and 
clear definitions of terminology even more critical'').
---------------------------------------------------------------------------

    Twenty-four comments addressed whether proposed provisions 
accurately reflect accepted practices, technology or nomenclature used 
in the trade. Fourteen comments stated that there are no requirements 
in the JVC proposal that do not fairly and accurately reflect trade 
practices.<SUP>34 Some comments, however, identified parts of the 
proposed Guides that they contended are contrary to accepted industry 
practices. Specifically, Best and Service Merchandise stated that the 
JVC's proposed diamond weight tolerances, restrictions on the use of 
the term ``point,'' and proposed disclosures regarding gemstone 
enhancement do not conform with accepted trade practices.<SUP>35 Other 
responses to this question were not directly responsive because they 
did not contend the JVC's proposals were out of step with current trade 
practices, but instead proposed adding new terms and standards to the 
Guides.<SUP>36
---------------------------------------------------------------------------

    \34\ JMC (1); Fasnacht (4); Argo (17); Capital (19); Estate 
(23); Jabel (47); Skalet (61); Handy (62); Newhouse (76); GIA (81); 
McGee (112); ArtCarved (155); IJA (192); and Bedford (210).
    \35\ Best (225) p.4 and pp.7-8 and Service (222) p.1 and 5 of 
letter and p.3 of comment. See also MJSA (226) p.7 (opposing 
proposed diamond weight tolerances as contrary to industry 
practice).
    \36\ For example, AGTA (49) suggested banning certain terms in 
use that relate to synthetic gemstones and plated gold jewelry. See 
also Lannyte (65); Eisen (91); CPAA (193); and Matthey (213). (Their 
proposals are discussed under the appropriate categories infra.)
---------------------------------------------------------------------------

    Thirty-one comments directly responded to the question regarding

[[Page 27180]]

whether any proposed changes to the Guides would result in a lessening 
of competition, barriers to entering the industry or increased prices 
to consumers. Twenty-five answered ``no'' or ``probably not.'' <SUP>37 
But, numerous comments regarding the JVC's proposed weight tolerances 
for diamonds believed a narrow tolerance requirement (as the JVC 
proposed) would increase costs to consumers.<SUP>38 Jabel stated that 
paperwork and the printing of definitions and descriptions the JVC 
proposed as new requirements may increase consumer prices.<SUP>39
---------------------------------------------------------------------------

    \37\ JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); King (11); 
Honora (15); Argo (17); AGS (18); Estate (23); G&B (30); AGTA (49); 
Schwartz (52); Skalet (61); Handy (62); Lannyte (65); GIA (81); 
Nowlin (109); McGee (112); ArtCarved (155); IJA (192); CPAA (193); 
Mark (207); Canada (209); Bedford (210); and Matthey (213). In 
addition, most of the 72 comments supporting a different tolerance 
for diamond weights indicated that requiring the merchant to state 
more accurately the weight or weights of diamonds would result in 
increased costs to consumers.
    \38\ E.g., Service (222) and Best (225) (implementation of the 
JVC proposal would result in lessened competition and higher prices, 
particularly for low margin jewelry retailers, which would be passed 
on to consumers). The comments opposing the proposed diamond weight 
tolerance and alleging consequential costs are listed and examined 
in detail in the discussion of diamonds below.
    \39\ Comment 47, p.2.
---------------------------------------------------------------------------

     Preston commented that, although he was not specifically aware of 
any proposals that would lessen competition, produce barriers to entry 
or increase prices to consumers, he thought these results could occur 
on a modest scale.<SUP>40 Thorpe stated, on the other hand, but without 
giving any reasons, that the JVC proposal would increase competition 
based on quality, value and service, and that the proposal would lower 
prices to consumers by allowing them to shop and compare ``on a level 
playing field.'' <SUP>41 Bales recommended that the Guides allow 
products of less than 10 karat gold to be sold as a karat gold product 
because it would increase competition in the industry.<SUP>42 Other 
comments, while not specifically responding to this question, stated 
that the JVC's proposal to prohibit the use of the term ``gemstone'' to 
describe synthetic or imitation products would be 
anticompetitive.<SUP>43
---------------------------------------------------------------------------

    \40\ Comment 229.
    \41\ Comment 7, p.2.
    \42\ Bales (156) suggested that a quality mark be permitted on a 
product called Balesium that is 4\1/2\ karat gold. See discussion 
below regarding the 10 karat minimum standard for karat gold.
    \43\ Service (222) p.1 and p.4; Best (225) p.3; AGL (230) p.3; 
NRF (238) pp.1-2; Kyocera (242) p.1; River (254) p.1. Dealers in 
synthetics, which are materials made in a laboratory that have the 
same chemical, physical and optical properties as a natural 
gemstone, contend they should be able to describe their products as 
gemstones with appropriate qualification to indicate that they are 
laboratory made.
---------------------------------------------------------------------------

    One hundred eighty-one comments responded to the question of 
whether the JVC's petition to revise should be rejected and the current 
Guides retained. Many comments stated that the petition to revise 
should not be rejected.<SUP>44 For example, AGTA affirmatively favored 
revising the Guides and 56 AGTA members filed individual comments 
endorsing the AGTA position. Twenty three other comments did not 
respond specifically to Question 34, but endorsed revision of the 
Guides.<SUP>45
---------------------------------------------------------------------------

    \44\ E.g., JMC (1); Fasnacht (4); Thorpe (7); King (11); Gold 
Institute (13); Argo (17); AGS (18); Capital (19); Estate (23); G&B 
(30); Jabel (47); AGTA (49); Schwartz (52); Skalet (61); Handy (62); 
GIA (81); Nowlin (105); McGee (112); ArtCarved (155); Bales (156); 
LaPrad (181); IJA (192); CPAA (193); Mark (207); Canada (209); 
Bedford (210); Matthey (213); and Preston (229).
    \45\ JMC (1); Littman (2); JA (3); Overstreet (8); Kennedy (9); 
Collins (12); Von's (16); Jeffery (21); Stanley (83); General (88); 
APG (89); NACAA (90); Eisen (91); Alie (106); AWI (116); USWC (118); 
Krementz (208); JVC (212); WGC (223); MJSA (226); Swiss Federation 
(232); AWA (236); and ISA (237A).
---------------------------------------------------------------------------

    Service Merchandise and Best recommended rejecting the petition to 
revise in favor of retaining the current Guides.<SUP>46 Service 
Merchandise stated that the proposed revisions are anti-competitive and 
offer insufficient benefit to the affected industries or their 
consumers to justify the additional efforts and costs that they allege 
will result.<SUP>47 Additionally, 72 comments recommended rejecting the 
JVC proposal and retaining the current Guides, apparently because of 
their objection to the JVC's proposal regarding diamond weight 
tolerances.<SUP>48
---------------------------------------------------------------------------

    \46\ Comment 222 and Comment 225.
    \47\ Comment 222, p.1.
    \48\ These 72 comments, mostly using one of four form letters, 
also urged that all proposed changes be rejected. One writer from 
this group indicated that he had a change he would like to suggest 
but stated ``my understanding is that it [the JVC proposal] must be 
accepted in whole or rejected in total.'' Comment 60, p.1. Staff 
contacted this commenter, Richard Goldman, president of Frederick 
Goldman, Inc., who indicated that the group to which he belongs was 
advised, by a person he did not identify, that the JVC proposal had 
to be accepted or rejected in its entirety. Thus, this group's 
opposition to all other proposed revisions appears to be based on a 
false premise.
    These 72 commenters are: London Star (20); Luria (28); Armel 
(32); Mendelson (33); Fashion (35); Courtship (36); MAR (37); NY 
Gold (39); Aviv (40) and (41); TransAmerican (43); Saturn (46); 
Faleck (50); Alarama (51); Fabrikant (53); Light Touch (54); Disons 
(55); Astoria (56); PanAmerican (57) and (101); Odi-Famor (58); 
Black Hills (59); Goldman (60); Almond (63); Brilliance (68); Oroco 
(69); Fargotstein (70); Simmons (71); Mikimoto (72); Evvco (73); 
Renaissance (74); Harvey (75); JGL (77); Raphael (78); AMG (79); 
Vijaydimon (80); Philnor (93); Orion (94); Flyer (95); Classique 
(96); Vardi (97); K's (98); Diastar (99); Foster (100); Fame (102); 
Cheviot (104); M&L (105); Kurgan (107); Rosy Blue (108); NEI (110); 
Leer (114); Majestic (115); Imperial (117); Schneider (119); 
Precision (121); New Castle (122); Stern (157); Consumers (158); 
Ultra Blue (160); DeMarco (161); Little (164); Golden West (179); 
Stanley (180); Mastro (190); Capitol Ring (191); Bogo (201); 
Schaeffer (211); Suberi (214); Impex (220); Landstrom's (241); 
Ultimate (243); and Murrays (264).
---------------------------------------------------------------------------

B. Conclusion

    The comments largely favor retention of the Guides and state that 
there is a continuing need for the Guides. The comments indicate that 
the benefits of the Guides outweigh the costs, and present no 
persuasive evidence that the Guides have outlived their usefulness or 
impose substantial economic burdens. Accordingly, the Commission is 
retaining the Guides.
    Many comments recommended that the Guides be revised to reflect 
changed technologies, and the Commission has considered these comments 
in amending the specific provisions of the Guides, discussed below. The 
comments that favored rejecting the JVC proposal and retaining the 
Guides as they exist now usually did so because of a particular JVC 
recommendation. The objections to those proposals also are addressed as 
they occur in the different Guide categories.

III. Changes to the Form of the Guides

A. Legal Language Used in the Guides

    The legal language in the Guides has been revised to conform to the 
Commission's view on deception and unfairness as expressed in its 
Policy Statements on Deception and Unfairness.<SUP>49 Specifically, the 
phrase ``it is an unfair trade practice,'' generally has been revised 
to state ``it is unfair or deceptive to * * *.''
---------------------------------------------------------------------------

    \49\ Statement on Deception, appendix to Cliffdale Assocs., 
Inc., 103 F.T.C. 110, 1734-84 (1984) and Statement on Unfairness, 
appendix to International Harvester Co., 104 F.T.C. 949, 1072 
(1984).
---------------------------------------------------------------------------

B. Consolidation of the Guides

    Detachable metallic watch bands are the subject of the Guides for 
the Metallic Watch Band Industry (``Watch Band Guides''), 16 CFR Part 
19. Metallic watch bands that are permanently attached to the watch are 
included in the Guides for the Watch Industry, 16 CFR Part 245. The JVC 
proposed combining the Watch and Metallic Watch Band Guides with the 
Jewelry Guides and the FRN solicited comment on this proposal. Thirty 
comments addressed this issue, and 22 stated the Guides should be 
consolidated.<SUP>50 Most

[[Page 27181]]

of those who gave reasons for favoring consolidation mentioned the 
Watch Band Guides rather than the Watch Guides.<SUP>51
---------------------------------------------------------------------------

    \50\ JMC (1); Fasnacht (4); Gold Institute (13); Benrus (22); 
Estate (23); G&B (30); Jabel (47); Skalet (61); Lannyte (65); 
Newhouse (76); Nowlin (109); McGee (112); ArtCarved (155); Bales 
(156); Bedford (210); Bridge (163); IJA (192); Canada (209); Matthey 
(213); Bedford (210); MJSA (226); and Leach (258).
    \51\ E.g., Bedford (210) commented, at p.3, that ``as watch 
bands are mostly sold and fitted by jewelers, it would seem 
appropriate * * * that they be combined with the jewelry 
guidelines.'' However, no commenters identified themselves as 
watchband manufacturers.
---------------------------------------------------------------------------

    Six of the eight comments opposing consolidating the Guides were 
from watch manufacturers or trade associations.<SUP>52 The reasons 
given for opposition were primarily related to the consolidation of the 
Watch Guides, not the Watch Band Guides. The American Watch Association 
stated that the Guides correctly reflect the fact that watches and 
jewelry are different products, ``by imposing substantially different 
definitions and standards for watches and jewelry.'' <SUP>53 For 
example, the minimum thickness in the Watch Guides for gold 
electroplated watches is about 100 times thicker than the minimum 
thickness for gold electroplated jewelry in the Jewelry Guides.<SUP>54
---------------------------------------------------------------------------

    \52\ USWC (118); JCWA (216); NACSM (219); Best (225); Citizen 
(228); Swiss Federation (232); AWA (236); and Timex (239). Only one 
comment from the affected industry, Benrus (22), favored 
consolidation of the Watch Guides.
    \53\ Comment 236, p.1. See also Swiss Federation (232) p.1 (the 
industries are separate and consolidating the Guides would make use 
of the Guides difficult) and Citizen (228) p.5 (watches and jewelry 
are dissimilar and should not be combined).
    \54\ See also JCWA (216) p.4 (favoring separate Guides because 
the application of materials and quality demands differ for watches 
and jewelry); Timex (239) pp.9-10 (opposing consolidation if doing 
so would create any additional compliance obligations); Swiss 
Federation (232) p.38 (stating that jewelry, watch and watch band 
companies are separate industries, with separate trade 
associations).
---------------------------------------------------------------------------

    Based on the comments, the Commission has determined not to combine 
the Guides for the Watch Industry with the other two Guides. The Guides 
for the Watch Industry will remain as separate Guides and are discussed 
in another Federal Register notice. However, the Commission has 
determined to consolidate the Guides for the Metallic Watch Band 
Industry with the Jewelry Guides.<SUP>55 The Watch Band Guides 
primarily concern ``fineness'' standards for precious metals, which are 
the same as those contained in the Jewelry Guides.<SUP>56 Thus, unlike 
the Guides for the Watch Industry, the Watch Band Guides share many 
common elements with the Jewelry Guides.<SUP>57 Therefore, 
consolidation of these two Guides eliminates unnecessary 
duplication.<SUP>58
---------------------------------------------------------------------------

    \55\ JCWA (216), Citizen (228), and AWA (236) stated that all 
three Guides should be kept separate, but none of these provide 
reasons for keeping the Watch Band Guides separate.
    \56\ ``Fineness'' refers to the amount of precious metal in an 
article.
    \57\ For example, the provisions for gold electroplated metal 
watch bands in the Watch Band Guides are the same as those for gold 
electroplated metal products included in the Guides for the Jewelry 
Industry.
    \58\ More than half of the material in the Metallic Watch Band 
Guides duplicates material in the Jewelry Guides.
---------------------------------------------------------------------------

IV. Category-By-Category Explanation of Revisions

    This section discusses specific proposed revisions on which the 
Commission sought comment in the FRN and additional issues raised by 
the comments. This discussion includes a summary and analysis of the 
comments on each issue and a discussion of the revisions that the 
Commission has made. (In some instances there were no comments on 
particular proposals.)

A. Pre-Category I--Scope and Application: Sec. 23.0

    Section 23.0 in the current Guides is captioned ``Definitions,'' 
and gives definitions for: ``diamond,'' ``pearl,'' ``cultured pearl'' 
and ``imitation pearl.'' In the JVC proposal, section 23.0 is titled 
``Scope and Application,'' and the definitions appear in the sections 
that specifically address these products. The Commission has determined 
that this organizes the Guides in a more helpful fashion and adopts 
these changes.
    Part (a) of section 23.0, as proposed by the JVC, lists industry 
products to which the Guides apply and part (b) defines industry 
members. The term ``industry products'' is used throughout the Guides, 
but it is not explicitly defined. To avoid any uncertainty about their 
intended coverage, the revised Guides include a definition of 
``industry products.''
    The JVC petition specifically suggested that the term ``industry 
products'' include pens, pencils and optical frames containing gold or 
silver. The FRN sought comment on whether provisions applying to the 
gold or silver content of pens, pencils and optical products should be 
included in the Guides, and whether they should be the same as the 
current provisions for jewelry. Thirty-one comments addressed this 
issue, and 25 favored including these products, including two major 
manufacturers of writing implements, Sheaffer and A.T. Cross.<SUP>59 
The six commenters that opposed the inclusion of these products simply 
stated that they saw no need for the inclusion of these products or 
that they were not ``really'' jewelry products.<SUP>60
---------------------------------------------------------------------------

    \59\ Fasnacht (4); Gold Institute (13); Estate (23); Korbelak 
(27); G&B (30); Jabel (47); Schwartz (52); Skalet (61) p.3 (stating 
that the items are typically sold in jewelry, department and gift 
stores, and thus should be subject to the same standards as jewelry 
sold in the same store); Handy (62); Lannyte (65); Newhouse (76); 
McGee (112); Bales (156); Bridge (163) p.2 (stating that the 
metallic content of the items is more likely to be misrepresented if 
they are not included in the Guides); Cross (165) p.1 (favoring 
inclusion, because the mislabeling of these products, ``especially 
by counterfeiters, has caused confusion by customers and harmed the 
business of legitimate manufacturers''); IJA (192); Tru-Kay (196) 
p.1 (stating that the public would find different standards for the 
metal content of these items as opposed to jewelry confusing); Mark 
(207) p.3 (same as Tru-Kay); Canada (209); Bedford (210); MJSA (226) 
p.3 (stating that without inclusion in the Guides, there may be more 
misrepresentation of metallic content); Preston (229); Sheaffer 
(249) p.2 (favoring inclusion, but objecting to ``unnecessary and 
arbitrary limitations'' on the use of the term `Plate' to describe 
gold electroplated articles); Franklin (250); and Knight (256).
    Although no current manufacturers of eyeglass frames commented, 
Knight (256) stated, at p.2, that ``We at one time owned the largest 
manufacturer of gold filled and rolled gold plate frames in the 
U.S.A. and they followed the jewelry guides.''
    \60\ LaPrad (181); Nowlin (109); ArtCarved (155); Service (222); 
Franklin (250); and NACSM (219).
---------------------------------------------------------------------------

    The comments generally indicate that pens, pencils, and opticals 
made of precious metals are viewed by consumers as similar to jewelry 
because of their metallic content and where they are sold. Thus, 
consumers would tend to expect that claims about such products would be 
guided by the same standards that apply to other industry products. 
Because consumers' expectations about the meaning of terms such as 
``gold'' are likely to be the same for any product, the Commission is 
including these items in the Guides. These products and detachable 
metallic watch bands are now specifically listed in Sec. 23.0(a) of the 
revised Guides. The title of the Guides is now the Guides for the 
Jewelry, Precious Metals, and Pewter Industries to reflect the coverage 
of the Guides.<SUP>61
---------------------------------------------------------------------------

    \61\ See infra for a discussion of the inclusion of items made 
from pewter.
---------------------------------------------------------------------------

    Although the JVC petition did not list hollowware or flatware as 
``covered products,'' section 23.6A of the JVC petition addresses 
sterling hollowware and flatware. The Franklin Mint objected to this 
because these items are not jewelry.<SUP>62 However, these items are 
commonly sold in jewelry stores, and at least one of the commenters 
simply presumed that these items were covered

[[Page 27182]]

by the Guides.<SUP>63 As with pens and pencils made of precious metal, 
the Commission believes that consumers would tend to expect that claims 
about silver or gold hollowware or flatware would be guided by the same 
standards that apply to other industry products. Therefore, these 
products also are included in the list of industry products covered by 
the Guides.
---------------------------------------------------------------------------

    \62\ Comment 250, p.3. The Franklin Mint stated that ``industry 
products'' should be limited to jewelry, which it defined as an 
ornamental item worn on or about one's person for personal 
adornment. (The Franklin Mint primarily markets objects that are not 
used for personal adornment, but which incorporate or are made of 
precious metals or gemstones, so that its proposal would exempt most 
of the products it carries from the application of the Guides.)
    \63\ See Gold Institute (13).
---------------------------------------------------------------------------

    The Guides also refer to ``industry members,'' but do not define 
this term or give examples. The JVC proposed that the Guides state they 
apply to ``every firm (a person, group of persons, or corporation) 
engaged in the business of selling'' industry products. One commenter 
noted that the Guides need to clarify that purchasers at all levels of 
the industry are protected by the Guides, since it is commonly assumed 
by courts that merchants are experts who should know better than to 
rely on suppliers' representations as being accurate.<SUP>64
---------------------------------------------------------------------------

    \64\ ISA (237) p.12 (stating further that the Guides should 
``address all issues of intended disclosure to resellers of jewelry 
products so that this information can accurately and completely be 
passed on to the ultimate consumer'').
---------------------------------------------------------------------------

    The Commission agrees that it would be useful to clarify that 
retailers, as well as consumers, are meant to be protected from 
deceptive practices addressed by the Guides. Therefore, the revised 
Guides state that they apply to persons, partnerships, or corporations 
at every level of the trade.
    The JVC also proposed, in section 23.0(b), including in the 
description of industry members (in addition to sellers) those who are 
engaged in ``identifying, grading, appraising, promoting the sale of or 
counseling the purchase or barter of industry products.'' The FRN 
specifically requested comment on whether the Guides should be expanded 
to include appraisals of jewelry in addition to sales and offers to 
sell jewelry.
    Thirty-five comments addressed this question.<SUP>65 The comments 
generally favored including appraisers of jewelry industry products 
among those subject to the Guides. The main effect of including 
appraisers (or those ``identifying'' and ``grading'' industry products) 
among those covered by the Guides would be to ensure that they would be 
guided by the same definitions and standards as those selling the 
products. To confirm the value of an intended purchase, consumers often 
seek an appraisal because they rarely independently have the knowledge 
to determine the quality or value of jewelry.<SUP>66 The Commission has 
concluded that it would be unfair or deceptive for appraisers to 
ascribe meanings to standard terms that are used in the jewelry 
industry that are different from the meanings attached to those terms 
by the sellers of the products. Thus, appraisers and those 
``identifying'' and ``grading'' industry products are advised to follow 
the admonitions of the Guides.<SUP>67
---------------------------------------------------------------------------

    \65\ E.g., AGS (18); AGTA (49); GIA (81); IJA (192); and ISA 
(237 and 237A).
    \66\ An ``independent'' appraisal is one done by a person who 
has no commercial relationship to the seller and does not sell 
competitive merchandise. In other words, the person who does the 
appraisal does not stand to benefit beyond his appraisal fee.
    \67\ The Commission is omitting from the list those who promote 
the sale, or counsel the purchase or barter, of industry products, 
because this language is unnecessarily specific, and because such 
persons are already covered by the language of the Guides (e.g., 
persons who sell or offer for sale industry products).
---------------------------------------------------------------------------

    However, 29 of the comments also recommended that the content of 
appraisals be covered by the Guides. Fifteen of these stated this 
change should be effective with this revision.<SUP>68
---------------------------------------------------------------------------

    \68\ JMC (1); Sibbing (5); Thorpe (7) p.2 (stating that 
appraisals are sometimes used to make a sale by showing the consumer 
``a signed document stating an inflated value''); King (11); Estate 
(23); G&B (30) p.7 (noting that ``you are going to have to 
understand appraisals are subjective''); Jabel (47); Skalet (61) p.3 
(suggesting that ``appraisers should be certified or licensed and 
should have no connection with those who are making the sale''); 
Lannyte (65) p.4 (proposing that the Guides state that ``an 
appraisal has to be qualified as to the purpose of appraisal and the 
market level of the value quoted''); Eisen (91) p.1 (suggesting that 
the Guides should provide for ``a statement on no conflict of 
interest, disallowance of a percentage fee, and a resume with the 
appraiser's qualifications''); McGee (112); ArtCarved (155); LaPrad 
(181); AGL (230) pp.4-6 (proposing that the Guides state that it is 
unfair for a seller to provide an appraisal to a consumer when the 
appraiser is also the supplier of the item being appraised, and 
recommending that the Guides specify certain required content of 
appraisals of diamonds or colored stones (e.g., ``appropriate 
tolerance information for each element that impacts on the value of 
the gemstone''); and ISA (237) and (237A) p.5 (stating that 
important problems are misrepresentation of qualifications and 
overstating of value to justify the selling price). Only one 
comment, LaPrad (181), proposed standards to use (those of the 
Appraisal Foundation).
---------------------------------------------------------------------------

    However, if the Guides were to regulate the content of appraisals, 
standards for establishing a value would be needed.<SUP>69 Fourteen 
comments, including those of the American Gem Society, the American Gem 
Trade Association, and the Gemological Institute of America, 
recommended including appraisals in the Guides when there is adequate 
agreement on what the standards for appraisals should be.<SUP>70
---------------------------------------------------------------------------

    \69\ ISA (237A) noted, at p.18, that a New York City ordinance 
requires that appraisals state that ``the opinions of appraisers can 
vary up to 25%.'' ISA stated that the opinions of appraisers, 
``depending on marketplace, variances in grading, and geographical 
market locations, as well as various purposes and functions and the 
method of value conclusion can cause appraisers to vary in their 
opinions of value for amounts potentially greater than 25%.'' Id.
    \70\ AGS (18); AGTA (49); GIA (81); IJA (192); Fasnacht (4); 
Honora (15); Bridge (163); Mark (207); Bedford (210); Matthey (213); 
MJSA (226); and Preston (229) p.6 (stating that there are different 
formats and standards used for jewelry appraisals and that ``[t]here 
is no overall agreement within the industry on precisely what does 
or does not constitute the ultimate desirable appraisal'').
---------------------------------------------------------------------------

    Although the Commission has determined that for the sake of 
consistency for consumers purchasing industry products, the Guides will 
state that those who appraise, identify or grade industry products 
should follow the Guides, they do not otherwise purport to guide these 
industries.<SUP>71
---------------------------------------------------------------------------

    \71\ ISA (237) noted, at p.2, that its members are appraisers in 
more than ``130 subspecialty areas of the major personal property 
disciplines * * *.'' It stated, at p.7, that while it prefers to 
have its own industry guide, it favors the inclusion of appraisals 
in the Guides, because ``many times we serve as expert witnesses in 
court and rely on the content of the guides to inform the court as 
to what is or is not acceptable.'' The Commission believes ISA's 
concerns will be satisfied by the language added to the Guides.
---------------------------------------------------------------------------

    The JVC proposal included, in section 23.0(c), a description of the 
behavior (claims and representations) to which the Guides apply. It is 
similar to Sec. 23.1(b) of the current Guides, but does not list the 
specific forms of advertising (periodicals, radio, television) that are 
described in Sec. 23.1(b). The Commission's authority, however, is 
broader than the items currently listed as advertising in the Guides, 
and therefore the specific list unnecessarily limits the scope of the 
Guides. The National Retail Federation comment stated that such 
specifically enumerated limitations are helpful as they may prevent 
other representations, such as in-store signs or flyers, from being 
treated as advertising.<SUP>72 However, that is not the intent of that 
section. Accordingly, Sec. 23.0(c) of the revised Guides encompasses 
express and implied claims in all types of advertising and promotion.
---------------------------------------------------------------------------

    \72\ Comment 238, p.1.
---------------------------------------------------------------------------

B. Category I: Secs. 23.1-23.4

    Guides in this part apply to all industry products regardless of 
their composition.
    Section 23.1(a) of the current Guides contains a list of 
attributes, such as origin and durability, which industry members are 
advised not to misrepresent. The JVC proposal omits ``manufacture'' 
from the list (possibly in error). The Commission has found no basis in 
the record for deleting ``manufacture'' from the list of items not to 
be misrepresented.
    The JVC proposed adding the following attributes to the list of

[[Page 27183]]

characteristics that should not be misrepresented: ``clarity,'' 
``enhancement,'' ``future value,'' and ``prospects of resale.'' The 
Commission believes that the term ``clarity'' is unnecessarily 
specific, as it is already covered by the current Guides under 
``grade'' and ``quality.'' Therefore, this term has not been included. 
``Enhancement'' is the term used by the trade to describe the treatment 
of gemstones to improve their color or otherwise improve their 
appearance. However, the Commission has determined that a more accurate 
term is ``treatment'' and has added this term, in lieu of 
``enhancement,'' to the list of attributes that should not be 
misrepresented. The Commission has determined that the third term, 
``future value'' should not be added to the Guides, because the Guides 
already list ``value,'' and ``future value'' is subsumed in value. The 
Commission also has determined that ``prospects of resale'' should not 
be added to the Guides. Representations regarding the prospects of 
resale go to the investment of gems, and the Commission has concluded 
that the sale of investment gems is unsuitable for treatment in guides.
    The JVC proposed adding five additional parts to Sec. 23.1, which 
would be designated as follows: Misrepresentation of the character or 
identity of business; Misuse of the term ``certified,'' etc.; Deception 
(as to gemstone investments); Misuse of the term ``investment 
quality''; and Deception as to warranties on gemstone investments. 
Discussion of each of these proposed additions follows.
    Misrepresentation of the character or identity of business was the 
caption of a section of the Jewelry Guides that was in effect from 1957 
to 1979. This section admonished sellers from, for example, 
misrepresenting themselves as wholesalers or as offering wholesale 
prices.<SUP>73 NACAA commented that it is important to prohibit such a 
misrepresentation, noting that ``retailers use phrases such as `factory 
direct' to imply that items are less expensive, when in fact they 
obtain their merchandise through jobbers and other outside sources.'' 
<SUP>74 However, Sec. 23.1 warns against misrepresentation as to the 
``manufacture'' or ``distribution'' of industry products and this 
provision would encompass misrepresentations about the nature of the 
seller's business.
---------------------------------------------------------------------------

    \73\  The JVC also proposed expanding this section by adding 
``investment broker'' and ``independent testing laboratory'' to the 
list of examples of trade designations that firms are not to use 
falsely. ISA (237) recommended adding ``gemological laboratory'' and 
``appraisal facility'' to the list.
    \74\  Comment 90, p.2.
---------------------------------------------------------------------------

    Misuse of the term ``certified,'' etc. was the caption of a section 
in the Guides that were in effect between 1957 and 1979 and which the 
JVC proposed reinstating. This section stated that it was an unfair 
trade practice to refer to an industry product as ``certified'' unless 
the identity of the certifier and the specific matter to be certified 
is disclosed; the certifier examines the product, makes the 
certification, and is qualified to certify; and the certifier makes 
available a certificate that includes certain information about the 
certifier and the certification.<SUP>75
---------------------------------------------------------------------------

    \75\ The JVC also proposed requiring the disclosure of any 
business relationship between the certifier and the seller.
---------------------------------------------------------------------------

    Thirty-two comments favored requiring the seller to make available 
to the purchaser a certificate disclosing the name of the certifier and 
the matters and qualities certified.<SUP>76 The term ``certified'' or 
certificates of authenticity are likely to be used as a way of giving 
credence to a quality claim. If, in fact, the product is not 
``certified'' in a valid manner or a certificate misrepresents the 
qualities of the item, the seller is not complying with the Guides' 
admonition in Sec. 23.1 not to misrepresent important qualities or 
otherwise deceive purchasers. For this reason, the Commission is not 
including a provision relating to certificates in the Guides.<SUP>77
---------------------------------------------------------------------------

    \76\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15); 
Argo (17); AGS (18); Capital (19); Estate (23); G&B (30); Jabel 
(47); AGTA (49); Schwartz (52); Skalet (61); Lannyte (65); Newhouse 
(76); GIA (81); NACAA (90); Nowlin (109); McGee (112); ArtCarved 
(155); Bridge (163); LaPrad (181); IJA (192); Matlins (205); Bedford 
(210); Matthey (213); Bruce (218); MJSA (226); Preston (229); ISA 
(237A); and Leach (257).
    Opposed to this provision are: Bales (156) p.5 (stating that it 
would raise costs and eliminate many smaller jewelers); NACSM (219); 
Service (222); and Franklin (250).
    With respect to the issue of whether there should be a 
disclosure that there is subjectivity in the grading and appraising 
of diamonds and colored stones, a comment form AGTA (49) and 56 
individual AGTA members opposed disclosure, stating at p.6, that the 
degree of subjectivity is ``better addressed by those in the 
business of operating laboratories for certificates * * * and to 
those associations governing appraisers.'' However, ISA (237A) 
stated at p.21, that appraisal reports should disclose that diamond 
and colored stone gradings are subjective in nature. Thorpe (7), AGS 
(18), Schwartz (52), Skalet (61), NACAA (90), Bruce (218), and 
Preston (229) were also in favor of the disclosure of the degree of 
subjectivity in grading.
    \77\  Certificates have no accepted meaning in the industry and 
are not defined in the standard dictionary for the industry 
[``Jewelers' Dictionary'' (3d ed. 1976)]. See AGTA (49) p.5 
(favoring the proposal, but stating that since ``there are no 
nationally accepted standards for certification,'' the requirement 
that a certificate state the name of the certifier ``is no assurance 
of either expertise or quality''); NACSM (219) p.24 (stating that 
the proposed section was ``vague and broad in that it could be 
construed to make any sales slip identifying the product a 
certification''); Service (222) p.2 (stating that the current Guides 
``are sufficient to prevent deception with certifications and 
appraisals'').
---------------------------------------------------------------------------

    However, some commenters suggested that the Guides address 
misrepresentation of the system of grading that was used in any 
certificate or grading report.<SUP>78 There are several different 
diamond color grading systems in general use, each having its own 
standards and terminology, and several grading systems for colored 
stones.<SUP>79
---------------------------------------------------------------------------

    \78\ Rapaport (233) p.1 (stating that misuse of GIA color and 
clarity terminology by sellers (as opposed to appraisers or graders) 
is a major problem and suggesting that the Guides state that it is 
unfair to misuse GIA grading terminology); Thorpe (7) p.2 (stating 
that an identification of the grading system used ``is necessary to 
make accurate quality comparisons''); Shor (257) p.1 (suggesting 
that the Guides state that it is unfair to describe diamonds by 
color and clarity grades developed by GIA or other recognized gem 
labs ``unless they conform exactly to the standards set forth by 
those institutions'').
    \79\  Richard T. Liddicoat, Jr. & Lawrence L. Copeland, ``The 
Jewelers' Manual'' 29-32 (1967); AGL (230); Rapaport (233) p.1. The 
Gemological Institute of America (GIA) and the American Gem Society 
(AGS) employ different grading systems, and some diamond graders 
have their own ``in-house'' grading systems. The letter ``D'' 
designates the best color in the GIA grading system. Some in-house 
grading systems have grades that start with ``A,'' ``AA,'' or 
``AAA'' and consequently ``D'' in their systems stands for a much 
poorer color grade.
---------------------------------------------------------------------------

    The Commission is persuaded that a representation that a stone is a 
specific grade could be deceptive if the identity of the grading system 
used is not disclosed. Section 23.1 states that it is unfair or 
deceptive to misrepresent the grade of an industry product. The 
Commission has added a Note to Sec. 23.1 that states that, if any 
representation is made regarding the grade assigned to an industry 
product, the identity of the grading system used should be disclosed.
    The FRN solicited comment on the JVC's proposed subsections 23.1(d) 
through (f), which address deception involving gemstone investments. 
Section 23.1(d) would require, in the sale of gemstones as investments, 
a disclosure that profit or appreciation cannot be assured, that no 
organized market exists for the resale of gemstones by private owners, 
and that the seller is in compliance with all applicable laws and 
regulations governing securities dealers. In general, the comments 
favored these disclosures.<SUP>80
---------------------------------------------------------------------------

    \80\  JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); King (11); 
Honora (15); Argo (17); AGS (18); Capital (19); G&B (30); Jabel 
(47); Schwartz (52); Skalet (61); Lannyte (65); GIA (81); Eisen 
(91); Nowlin (109); McGee (112); ArtCarved (155); Bales (156); 
Bridge (163); IJA (192); Bedford (210); Matthey (213); Bruce (218); 
Shire (221); MJSA (226); Preston (229); Limon (235); ISA (237A); 
Leach (257); and AGTA (49) (favoring the proposal for sales to 
consumers but opposing the proposal for inter-trade transactions 
(e.g., a sale by a dealer to a retailer).
    Opposed to this provision: Onyx (162) and Rapaport (233) p.4 
(stating that ``there are regular ongoing markets for the resale of 
diamonds and colored stones by private owners'' such as auction 
houses, jewelry stores, estate jewelry shows, and pawnshops). But 
see Shire (221) p.3 (stating that these examples do not constitute a 
ready market, since auction houses, for example, only want specific 
items and do not take everything for sale). The Commission believes 
that most consumers know that they, as individuals, would not have 
access to a market comparable to the stock market; hence, a 
disclosure would not be necessary to prevent deception in the 
absence of an affirmative misrepresentation as to the nature of the 
market.
    There is no evidence indicating that consumers believe that 
sellers of investment gemstones are governed by laws and regulations 
covering securities dealers.

---------------------------------------------------------------------------

[[Page 27184]]

    The comments favoring these disclosures also generally favored the 
proposed sections 23.1(e) and (f). Proposed part (e) would prohibit the 
seller from implying that a gemstone sold for investment purposes is 
more desirable or different than gemstones marketed for use in 
jewelry.<SUP>81 Proposed part (f) states that it is an unfair practice 
to limit a purchaser's opportunity for an independent examination of an 
industry product by delivering a product in a sealed container with a 
warranty that becomes void if the seal is broken.<SUP>82 This practice 
makes it impossible for the consumer to examine the product or retain 
an independent expert to examine or appraise the product to determine 
whether the seller has fairly represented it. On the other hand, a 
consumer can refuse to buy a product sold under these conditions.
---------------------------------------------------------------------------

    \81\ See comments cited in note 80, and NACAA (90) and LaPrad 
(181). These comments are mostly from retail jewelers who would not 
usually sell gemstones as investments. Ethical sellers of gemstones 
for investment purposes may provide gemstones that are a higher 
grade then those commonly sold as jewelry.
    \82\ See comments cited in note 80. Rapaport (233) stated, at 
p.4, that it would be acceptable to deliver the product in a sealed 
container with a warranty that becomes void if the seal is broken, 
if the sealing agency allows the re-sealing of the product at a 
reasonable cost and discloses this at the time of sale.
---------------------------------------------------------------------------

    The FRN asked if there would be voluntary compliance with the 
proposed guidelines for sellers of investment gemstones. Thirteen 
comments stated that voluntary compliance could not be expected.\83\ 
Six comments stated that compliance could be expected only from 
legitimate operators.\84\ Five comments anticipated voluntary 
compliance by all concerned.\85\
---------------------------------------------------------------------------

    \83\ King (11); Argo (17); Jabel (47); Schwartz (52); Skalet 
(61); GIA (81); Nowlin (109); McGee (112); ArtCarved (155); IJA 
(192); Matthey (213); Shire (221); and Leach (257).
    \84\ Fasnacht (4); AGTA (49); Bales (156); LaPrad (181); Bedford 
(210); and ISA (237A).
    \85\ Sibbing (5); Thorpe (7); Honora (15); Bridge (163); and 
MJSA (226).
---------------------------------------------------------------------------

    An industry guide is not appropriate if there is an indication that 
the violations are willful or wanton and will not be voluntarily 
abandoned. The experience of the Commission in bringing cases against 
sellers of investment gemstones indicates that most of the sellers have 
been engaged in fraud. Thus, they are unlikely to comply with practices 
that would be likely to put them out of business. The Commission has 
concluded that a case-by-case approach is a more appropriate way to 
address the problem of gemstone investment claims than inclusion in the 
Guides.
    The JVC did not propose any substantive changes in the last three 
sections in Category I (23.2, 23.3, 23.4), and there were no comments 
pertaining to these sections. The Commission has decided to retain 
sections 23.2 and 23.4. Section 23.2 states that it would be deceptive 
to use depictions that would materially mislead consumers about the 
product shown.\86\ Section 23.4 states that it would be deceptive to 
use the term ``handmade'' unless the item is entirely handmade or made 
by manually controlled methods consistent with consumer expectations.
---------------------------------------------------------------------------

    \86\ The Postal Service (244) stated that mail order purveyors 
of jewelry sometimes use deceptive photographs to sell their wares. 
This section notes that such a practice is unfair or deceptive, and 
a following Note specifically states diamonds should not be depicted 
in greater than actual size without a disclosure that the depiction 
is an enlargement. The JVC proposed expanding the Note to include 
depictions of gemstones other than diamonds, and the Commission has 
made this change. In addition, because television shopping programs 
or computer images also may contain misleading images of jewelry, 
the Commission has added ``televised or computer image'' to the list 
of covered ``visual depictions'' in this section.
---------------------------------------------------------------------------

    However, the Commission has determined to delete section 23.3. The 
admonition in section 23.3(a) against misrepresenting the origin of a 
product repeats the general guidance provided in section 23.1 (which 
provides a list of characteristics, including origin, which should not 
be misrepresented). Section 23.3(b) states that a disclosure of foreign 
origin should be made only when it is deceptive not to do so. A Note 
following this section explains that it is not necessary to disclose 
the foreign origin of small and functional parts, or other items (such 
as diamonds) which are primarily obtained from sources outside the 
United States. U.S. Customs requires products being imported into the 
U.S. to be marked with the country of origin unless they will be 
substantially transformed in the United States.\87\ Thus, the 
Commission has concluded that this section of the Guides is 
unnecessary.
---------------------------------------------------------------------------

    \87\ See The Tariff Act of 1930, as amended, 19 U.S.C. 1304, and 
Customs' implementing regulations, 19 CFR 134.11.
---------------------------------------------------------------------------

    The Commission also has deleted Sec. 19.4(b) of the Watch Band 
Guides, which states that it is unfair to fail to disclose that a 
metallic watchband, or a substantial part thereof, is of foreign 
origin.\88\ No commenters identified themselves as watchband 
manufacturers or marketers, and very few commenters even addressed the 
existence of the Watch Band Guides. It is unclear whether the fact that 
a watchband is made abroad is material to consumers, or whether 
consumers currently expect that any unmarked metallic watchband was 
made in the U.S.A. However, as noted, U.S. Customs requires imported 
watchbands (and other items of commerce) to be marked with the country 
of origin. Therefore, the Commission has concluded that this section is 
unnecessary.\89\
---------------------------------------------------------------------------

    \88\  The Watch Band Guides contain very detailed instructions 
as to the labeling of watchbands assembled in the U.S. of foreign 
components. 16 CFR 19.4(b), note 2. Several Commission orders, from 
the 1960's or earlier, require similar detailed disclosures. 
However, the Commission recently issued a ``Sunset Rule'' that 
terminates administrative orders automatically after 20 years. 60 FR 
58514 (Nov. 28, 1995).
    \89\ More specific guidance on when industry products can be 
marked ``Made in the U.S.A.'' is likely to be addressed further by 
the Commission later this year.
---------------------------------------------------------------------------

C. Metals (Category II): Secs. 23.5-23.8

    Guides in Category II, in both the current Guides and the JVC 
petition, apply to industry products composed in whole or in part of 
precious metal. In the JVC petition, this category also includes a 
proposed standard for pewter.
1. Inclusion of Metallic Watchbands
    As noted previously, the Guides for the Metallic Watchband Industry 
have been combined with the Jewelry Guides. The Commission believes 
that, in most respects in which the Watch Band Guides differ from the 
Jewelry Guides, the Watch Band Guides are unnecessarily restrictive or 
no longer represent the Commission's views of how the law should be 
applied. For example, unlike the Jewelry Guides, the Watch Band Guides 
state that it is unfair to fail to disclose the metallic composition of 
a product which has the appearance of gold but is not gold 
(Sec. 19.2(A)(2)). There is no evidence that suggests that consumers 
today will infer that a gold-colored metal watch band is gold. The 
prices for gold-colored

[[Page 27185]]

metallic watch bands compared to what gold watch bands (or other gold 
jewelry) would sell for is at least one way consumers are alerted that 
a gold-colored band is not gold.\90\ Thus, the Commission has omitted 
this provision from the Guides.
---------------------------------------------------------------------------

    \90\ To the extent that sellers purposely inflate the price of 
their gold-colored products to lead consumers to believe they are 
purchasing a gold item, they are probably engaging in fraud and are 
likely to misrepresent the item as gold when it is not, which would 
be a deceptive practice under Sec. 23.5(a).
---------------------------------------------------------------------------

    Other differences between the Watch Band Guides and the Jewelry 
Guides are noted at appropriate portions below.
2. Misrepresentation as to Gold Content: Sec. 23.5
    Section 23.5(a) of the current Guides states that it is an unfair 
trade practice to sell or offer for sale any industry product by means 
of any representation that would deceive purchasers as to the gold 
content. Section 23.5(b) identifies specific practices that may be 
misleading and section 23.5(c) lists markings and descriptions that are 
consistent with the principles described in the section. These latter 
provisions are ``safe harbors'' (i.e., examples of ways of avoiding 
misrepresentations).
    a. General provision as to misrepresentation: Sec. 23.5(a). As 
noted, Sec. 23.5(a) of the current Guides contains a general provision 
admonishing against misrepresenting the gold content of industry 
products. The JVC proposed adding definitions of ``karat,'' ``gold,'' 
``karat gold,'' ``fine gold,'' ``mark,'' and ``apply or applied'' to 
this section.<SUP>91 No evidence indicating confusion as to the meaning 
of the terms was presented. In some cases, the terms are already 
defined very succinctly in the current Guides.<SUP>92 For these 
reasons, the Commission has not included the proposed definitions in 
the Guides.
---------------------------------------------------------------------------

    \91\ Only one comment specifically addressed the proposed 
definitions. Finlay (253) stated at p.1 that it did not object to 
the proposed definitions of ``gold.''
    \92\ For example, the JVC proposed defining ``fine gold'' as 
``gold of 24 karat quality.'' However, Sec. 23.5(b)(1) of the 
current Guides simply refers to ``fine (24 karat) gold.'' Similarly, 
although the JVC proposed a new definition for ``quality mark'' 
specifically for gold, the more general definition in Sec. 23.8 of 
the current Guides (defining the term ``mark'' in conjunction with 
precious metals generally) is clearer and more accurate. See 
discussion regarding quality marks below.
---------------------------------------------------------------------------

    The JVC also proposed including a statement that no mark other than 
the quality mark (e.g., 14 K) shall be applied to an article indicating 
that it contains gold or as to the quality, fineness, quantity, weight, 
or kind of gold in an article. The Commission found no justification or 
need for such a broad statement. Section 23.5(a) already states that 
misrepresentations about the gold content of an article are unfair or 
deceptive.
    b. Specific provisions and ``safe harbors'': Sec. 23.5(b)-(c). 
Section 23.5(b) in the current Guides identifies specific practices 
that may be misleading. Subsection (1) states that the unqualified use 
of the word ``gold'' is limited to 24 karat gold. The JVC proposed 
adding that the unqualified use of ``solid gold'' is limited to 24 
karat gold. There were two comments on this issue, one favoring the JVC 
proposal because ``solid gold should mean that the product is 100% 
gold,'' and one against the proposal, since fineness must be disclosed 
for all gold other than 24 karat gold.<SUP>93 The Commission believes 
that the term ``solid gold'' is not inherently deceptive or 
unfair.<SUP>94 Accordingly, the Commission has rejected this proposal.
---------------------------------------------------------------------------

    \93\ Lee (153); NRF (238) p.1.
    \94\ For example, the phrase ``solid 10 karat gold'' is not 
likely to lead consumers to believe the item is 24 karat gold. See 
Advisory Opinion, ``Solid'' and ``karat'' used together, 71 F.T.C. 
1739 (1967).
---------------------------------------------------------------------------

    Subsection (2) in the current Guides advise that (except for 24 
karat gold), the karat fineness be stated when the word ``gold'' is 
used. The JVC did not suggest any changes in this section, and only 
suggested minor changes in the corresponding ``safe harbor'' provision 
in Sec. 23.5(c)(1).<SUP>95 However, Finlay argued that the word 
``gold'' should be allowed in product advertising without a designation 
as to karat fineness.<SUP>96 Including karat fineness in advertising, 
however, helps consumers make basic comparisons among competing 
products offered by different retailers. Therefore, the Commission has 
not changed this provision.
---------------------------------------------------------------------------

    \95\ This safe harbor provision simply states that an industry 
product composed throughout of an alloy of gold of not less than 10 
karat fineness, may be described as ``Gold'' when the word ``Gold'' 
is immediately preceded by a correct designation of the karat 
fineness. The JVC suggested following the words ``an alloy of gold 
of not less than 10 karat fineness'' with ``less tolerance set out 
in 15 U.S.C. 294, et seq.'' [the National Stamping Act] and 
footnoting that statement with a detailed explanation of the 
tolerance. The tolerances are set forth in Sec. 23.5(d) of the 
current Guides and are more easily understood in the current format.
    \96\ Comment 253, p.1 (stating that this ``will not mislead 
consumers where all other requirements of the guidelines have been 
met and where information as to karat fineness is given at the point 
of sale''). See NRF (238) p.1 and discussion infra, regarding the 
scope and application of the Guides.
---------------------------------------------------------------------------

    A Note following the first ``safe harbor'' provision, 
Sec. 23.5(c)(1) in the current Guides, deals with hollow products and 
advises that there be a disclosure that these products, whatever their 
gold content, have hollow centers, when the failure to make such a 
disclosure would be deceptive. It also states that these products 
should not be referred to as solid gold. The JVC proposed revising the 
note to drop the guidance that there be a disclosure that the product 
is hollow. However, the Commission has determined that this disclosure 
is useful because, otherwise, consumers would be unaware that the 
product is only hollow. Thus, the Commission has not deleted this 
provision. The JVC also suggested that the note be changed to state 
that products that are filled with cement or some other filler may not 
bear a quality mark. However, such products are essentially ``gold 
plated'' products, and as long as they conform with the Guides' 
provisions about how to mark such products, consumers are not likely to 
be deceived. Thus, the Commission has decided not to adopt this 
proposal.
    Subsections (3)-(5) advise against particular uses of the word 
``gold'' (e.g., plated, filled, rolled, overlay) unless they are so 
qualified as to be non-deceptive. Subsection (6) advises against 
representing that one gold product is superior to another unless the 
representation is true.<SUP>97
---------------------------------------------------------------------------

    \97\ A Note following this section provides guidance for the use 
of the word ``gold'' as applied to certain words (Duragold, 
Diragold, Noblegold, Goldine). The JVC proposed adding ``Layered 
Gold'' to this list, and the Commission has done so.
---------------------------------------------------------------------------

    Subsection (7) advises against the use of the word ``gold'' on any 
product of less than 10 karat fineness. Bales proposed in its comment 
that the Guides be amended to permit gold alloys containing less than 
10 karats of gold (less than .416 percent gold) to be marketed as 
containing gold. Bales has a patent on a product in which the gold 
content varies from four to six karats and which is alleged to have 
good corrosion resistance.<SUP>98 This issue was addressed 
comprehensively by the Commission in 1977.<SUP>99 Thus, the

[[Page 27186]]

Commission has not changed this provision.
---------------------------------------------------------------------------

    \98\ Comment 156, pp.5-8. LaPrad (181) stated at p.2 that ``gold 
plated items should include any item that is not at least 10 karat 
solid gold in fineness throughout the item.'' This suggests that an 
alloy that contained less than 10 karat gold could be described as 
``plated.'' However, ``plated'' has been used for many years to 
refer to a base metal product with a coating of gold. Extending the 
meaning of the term to low-karat alloys would be confusing.
    \99\ The 10 karat minimum standard has been used at least since 
1933, when it first appeared in Commercial Standard CS 67-38, 
promulgated by the then Bureau of Standards of the U.S. Department 
of Commerce. It was incorporated into the Trade Practice Rules for 
the Jewelry Industry, 16 CFR Part 23, in 1957. In 1977, the 
Commission proposed permitting sellers to market gold of less than 
10 karat and silver of less than 92.5% if the quality was accurately 
disclosed. This proposal was published for public comment. Over 1200 
comments were received, many from consumers, and over 98% of the 
comments opposed lowering the 10K standard. The Commission found, 
based on articles and test reports, that articles of less than 10 
karat fineness tend to tarnish and corrode. The Commission 
ultimately retained the 10 karat minimum fineness for gold and the 
92.5% standard for silver. 42 FR 29916, 29917 (1977).
---------------------------------------------------------------------------

    The JVC petition also included an admonition against applying a 
quality mark (e.g., 9 karats) to any article of less than 10 karat 
fineness regardless of whether the word ``gold'' is used. Because the 
word ``karat'' is so clearly associated with gold content (even without 
the use of the word ``gold''), the use of the term ``9 karat'' is 
likely to represent that the item is 9 karat gold. The Commission has 
determined that advising against this use is consistent with and 
clarifies the Guides.
    On the basis of comments received in response to questions in the 
FRN, the Commission has revised current Secs. 23.5(b)(3), (4), and (5). 
These changes are explained in detail below, along with the changes to 
the corresponding ``safe harbor'' provisions in subsection 23.5(c) of 
the current Guides.
    i. Mechanically or electrolytically ``plated'' products. There are 
two basic kinds of ``plated'' gold. Mechanically plated gold has a 
layer of gold alloy bonded to a base metal by heat and pressure. Gold 
electroplate has a layer of gold alloy electrolytically deposited on a 
base metal. Section 23.5(b)(3) of the current Guides states that a 
surface-plated or coated article can only be referred to as ``gold'' 
when the term is adequately qualified so as to disclose that the 
product or part is only surface-plated or coated with an alloy of gold. 
However, for mechanically plated articles, it adds that the word 
``gold'' should be preceded by a designation of the karat 
fineness.<SUP>100
---------------------------------------------------------------------------

    \100\ Canada (209) suggested, at p.4, that gold plated articles 
``be prohibited from using the quality mark `karat'* * *'' because 
such use confuses the consumer as to the value of the article. In 
fact, the current Guides (in Secs. 23.5(b)(5) and (c)(3)) appear to 
prohibit a quality mark on gold electroplated items. However, a 
designation of karat fineness has been recommended in the Guides for 
mechanically plated articles for many years, and Commission staff is 
not aware of complaints from consumers who were deceived by this 
representation. No other commenters suggested that the Guides advise 
against the use of a quality mark on mechanically plated items. 
Hence, the revised Guides, in Secs. 23.4(b)(5) and (c)(3), continue 
to recommend that items identified as mechanically plated contain 
quality marks.
---------------------------------------------------------------------------

    Section 23.5(b)(4) states that certain terms (``gold-filled,'' 
``rolled gold plate,'' ``rolled gold plated,'' ``gold overlay,'' ``gold 
plated,'' or ``gold plate'') should only be used for mechanically-
plated items (i.e., not gold electroplate) and that the gold on these 
items should be of ``such thickness and extent of coverage that the 
terms will not be deceptive.'' It also states that the karat fineness 
should be included with these terms. The safe harbor provision in 
Sec. 23.5(c)(2) states that these terms are not deceptive when used for 
mechanically-plated items if the karat fineness is stated and the gold 
is of ``substantial thickness'' and constitutes 5% of the weight of the 
item. Section 23.5(c)(2) also creates a safe harbor for all these terms 
except ``gold filled'' when the gold weight is less than 5% if they are 
preceded by a fraction indicating the gold weight (e.g., \1/40\ 12 Kt. 
Rolled Gold Plate). ``Gold filled'' is reserved for items with a gold 
weight of 5% or more.<SUP>101
---------------------------------------------------------------------------

    \101\ The Watch Band Guides contain almost identical provisions 
for mechanically plated watch bands, but they contain a section 
(Sec. 19.2(e)(2)) entitled ``Examples of Proper Markings for 
Expansion Bands of Specified Composition and Construction.'' The 
main point made by the ``Examples'' is that quality marks on gold-
filled portions of a watchband should not imply that base metal 
portions of the band are gold. The Commission believes the section 
of the current Jewelry Guides dealing with quality marks (Sec. 23.8) 
adequately addresses this issue. See discussion of quality marks, 
infra. Therefore, the Commission is not including the ``Examples'' 
in the revised Guides.
---------------------------------------------------------------------------

    The JVC proposed adding a note to Sec. 23.5(c)(2) of the current 
Guides, stating ``The actual gold content of gold-filled and rolled 
gold plate articles shall not be less than the gold content indicated 
by the quality mark by more than ten percent.'' Only three comments 
addressed this issue, all opposing the provision.<SUP>102 Section 
23.5(d) of the current Guides provide that ``the requirements of this 
section relating to markings and descriptions of industry products and 
parts thereof are subject to the tolerances applicable thereto under 
the National Stamping Act (15 U.S.C. 294, et seq.) * * *.'' The 
National Stamping Act provides that, for articles made of gold, ``the 
actual fineness * * * shall not be less by more than three one-
thousandths parts than the fineness indicated by the mark * * *.'' 15 
U.S.C. 295 (1993). No reason was offered for the much larger, proposed 
tolerance. Accordingly, the Commission has not adopted this 
change.<SUP>103
---------------------------------------------------------------------------

    \102\ NACSM (219) p.24; Leach (258) p.9 (stating that the 
tolerance is ``by far too liberal''); Korbelak (27) p.4 of attached 
letter of April 23, 1982 to Susanne S. Patch (stating that the 
proposal is ``unsupportable'' and ``contrary to the spirit of the 
recent amendment of the Marking Act which tightened tolerances on 
karat goods''). [The National Stamping Act was amended in 1976.]
    \103\ A ten percent tolerance is found in Voluntary Product 
Standard PS 67-76, ``Marking of Gold Filled and Rolled Gold Plate 
Articles Other than Watchcases.'' The tolerance is apparently meant 
to apply to weight claims, such as ``10% 14 karat gold''.
    This standard is referred to in the current Guides 
[Secs. 23.5(d) and 23.5(f) (as ``Commercial Standard CS 47-34'')] 
with respect to the exemptions applicable to the tolerance when a 
test for metal content is being performed (e.g., excluding ``joints, 
catches, screws'' etc.) Other Voluntary Product Standards are also 
referred to in the current Guides for the same reason (i.e., a list 
of parts of jewelry exempt from assay.) The JVC recommended 
including in the Guides the full text of all five Voluntary Product 
Standards for precious metals that are referred to in the current 
Guides as ``Commercial Standards.'' Commercial Standards were 
promulgated by the U.S. Department of Commerce and administered by 
the National Bureau of Standards (``NBS''). Later renamed by the NBS 
as Voluntary Product Standards (``VPS''), they had the same legal 
significance as FTC guides. The Department of Commerce and the NBS, 
which is now called the National Institute of Standards and 
Technology (``NIST''), withdrew these and all other VPS, as an 
economy measure, on January 20, 1984. The JVC proposed preserving 
the material in the VPS by incorporating it into the Jewelry Guides.
    Only one comment addressed the issue of whether to include the 
VPS in the Guides. The Gold Institute (13) agreed that the VPS 
should be incorporated, but gave no reasons. The Commission has 
included the material pertaining to exemptions from assay (with some 
changes, discussed infra) in the Appendix. However, the Commission 
has concluded that it is not necessary to include other portions of 
the VPS. The VPS state the standards that must be met for each 
product, if the product is represented to be in compliance with the 
VPS. However, the VPS have been withdrawn so such a representation 
is obsolete.
---------------------------------------------------------------------------

    Section 23.5(b)(5) states that the terms ``gold electroplate'' or 
``gold electroplated'' can only be used when the plating ``is of such 
karat fineness, thickness, and extent of surface coverage that the use 
of the term will not be deceptive.'' The safe harbor provision in 
Sec. 23.5(c)(3) states that these terms are not unfair or deceptive 
when used for items with a coating of seven millionths of an inch of 
fine (24 karat) gold, or the equivalent. [If the gold coating is, for 
example, 12K (half as fine), the coating should be 14 millionths of an 
inch thick (twice as thick).] ``Heavy gold electroplate'' may be used 
for a coating equivalent to 100 millionths of an inch of fine gold. 
This subsection also states that the terms ``gold flashed'' or ``gold 
washed'' may be used to describe an electroplated coating that is 
thinner than seven millionths of an inch of fine gold or its equivalent 
(the minimum thickness for the use of the term ``gold 
electroplate'').<SUP>104
---------------------------------------------------------------------------

    \104\ The Postal Service (244) p.2, commented that the use of 
``gold flashed'' or ``gold washed'' is misleading to consumers, 
particularly where items are ordered by mail and not seen by the 
consumer until after purchase. However, the terms ``gold flashed'' 
and ``gold washed'' have been in common use for many years. The 
Commission does not have sufficient evidence at this time to advise 
against the use of these terms in all circumstances.
---------------------------------------------------------------------------

    The FRN sought comment on how ``gold plate'' should be defined in 
the Guides. (As noted, current Sec. 23.5(b)(4) allows ``gold plate'' to 
be used to describe only mechanically plated items.) Six comments 
opposed allowing

[[Page 27187]]

electroplated items to be described as ``gold plate.'' <SUP>105 Most 
gave no reason other than stating that there should be a distinction 
between products that are mechanically plated and those that are 
electroplated.
---------------------------------------------------------------------------

    \105\ Gold Institute (13) p.2 (defining ``gold plate'' as an 
optional term to describe a mechanically plated article); Handy 
(62); Newhouse (76); Mark (207); MJSA (226) p.4 (limiting ``gold 
plate'' to mechanically plated articles is ``generally consistent 
with terminology used in the trade''); and Knight (256) p.2 (stating 
that consumers know electroplate is inferior to mechanically plated 
gold).
---------------------------------------------------------------------------

    Twelve commenters favored letting electroplated items be designated 
as ``plate.'' <SUP>106 Sheaffer noted that ``gold electroplate,'' the 
designation currently advised by the Guides, is too lengthy for many of 
its products and is unknown to consumers in foreign countries, who are 
familiar with the term ``plate.'' <SUP>107 Sheaffer stated that most 
foreign countries permit ``plate'' or ``plated'' to be used to describe 
an article coated with gold, regardless of the method of application, 
and that a change in U.S. requirements would allow them to stock 
inventory of items marked as ``gold plate.'' Further, one commenter 
interviewed by Commission staff stated that some manufacturers would 
like to market items that are the product of both mechanical plating 
and electrolytic plating, that could be labeled ``gold plate.'' 
<SUP>108
---------------------------------------------------------------------------

    \106\ Fasnacht (4) p.1 (stating that ``gold plate'' has 
historically been used in the trade ``for any application of a karat 
gold to a base''); Benrus (22); Estate (23); Korbelak (27) p.3 
(stating that the trade now uses ``gold plate'' to mean gold applied 
electrolytically); G&B (30); ArtCarved (155); LaPrad (181); Matthey 
(213); Bruce (218) p.7 (stating that the trade now uses the term 
``gold plate'' to mean gold applied electrolytically); Citizen (228) 
p.3 (stating that the term should not ``be restricted to any 
particular method of applying the gold covering'' and noting that 
``the vast majority of gold coverings are applied 
electrolytically''); Sheaffer (249); and Leach (257). Four of these 
(Fasnacht, G&B, Matthey, and Estate) stated that the method should 
be disclosed.
    \107\ Comment 249, p.2. Section 23.5(c)(2) states that 
``adequate abbreviations'' are not unfair or deceptive for 
mechanically plated gold, which is also referred to as ``gold 
filled'' and abbreviated as G. F. Section 23.5(c)(3) makes no such 
provision for electrolytically plated gold. Moreover, in an advisory 
opinion issued in 1971, the Commission stated that ``gold 
electroplate'' could not be abbreviated. Advisory Opinion, 
Designation of gold content on ball point pens, 79 F.T.C. 1052 
(1971). However, the Commission currently has no information that 
consumers would understand abbreviations for mechanically plated 
gold but not for electrolytically plated gold. Thus, the Commission 
has revised the Guides to state that adequate abbreviations are not 
unfair or deceptive for electrolytically plated gold (e.g., 12 Kt. 
G. E. P.). Therefore, the advisory opinion is withdrawn.
    \108\ Matthew Runci from MJSA.
---------------------------------------------------------------------------

    Some comments stated that the relevant issue for consumers is 
durability, and not the method of plating. Sheaffer stated that ``[t]he 
normal consumer is totally unconcerned about the process which a 
manufacturer might use to apply gold or silver plate to an article so 
long as the precious metal plate meets all appropriate required 
standards.'' <SUP>109 Canada commented that ``gold plate'' is ``simply 
a layer of gold placed over a base substance'' and that the ``important 
reference should inform the consumer of the thickness of the plate.'' 
<SUP>110
---------------------------------------------------------------------------

    \109\ Comment 249, p.3 (noting that ``silverplate'' is allowed 
under the current Guides regardless of the method of application and 
that this has not misled consumers).
    \110\ Comment 209, p.4.
---------------------------------------------------------------------------

    Although the comments indicate that there are differences of 
opinion in the industry regarding industry custom and usage of the term 
``plate,'' under the current Guides the term ``gold plate'' can only be 
used for mechanically plated gold. Historically, mechanically plated 
gold has contained a thicker coating of gold and has been more durable 
than gold electroplate, both because it was thicker and because it was 
less porous.
    However, the comments indicate that electroplating has been 
significantly improved in recent years.<SUP>111 Other comments indicate 
that gold electroplate could now be as desirable, or more desirable, 
than mechanically plated gold.<SUP>112 Commission staff conducted 
telephone interviews of seven commenters, who, with one exception, 
indicated that gold electroplate can be made as thick and as durable as 
mechanically plated gold.<SUP>113 Furthermore, all of the commenters 
whom Commission staff interviewed stated that mechanically plated gold 
has usually been marketed as ``filled gold,'' ``rolled gold,'' or 
``gold overlay'' (instead of ``gold plate'').
---------------------------------------------------------------------------

    \111\ Benrus (22) p.2 (stating that ``The science of gold 
plating has improved greatly in the past 15 years and the 
requirements in the current Guides . . . are simply not in tune with 
today's technology or market practices''); Alan Foster, 
``Electrodeposited and Rolled Gold,'' Gold Bulletin 64 (1982), 
attached to comment 27 (indicating that the electroplating of gold 
was greatly improved about 30 years ago). Korbelak (27) (attached 
letter of April 23, 1982 to Susanne S. Patch) states that the 
current Guides ``perpetuate an economic advantage to one method of 
manufacturing [mechanical] over another.''
    \112\ Catholyte (34) p.1 (stating that when corrosion is the 
quality criterion, ``mechanically cladded material is not the 
present day choice because machining processes which produce the 
desired designs will destroy the starting clad stock and yield `raw' 
or cut edges which will have little or no clad matter present. (This 
procedure necessitates the use of electroplate to `cover' those 
edges which are exposed.)''). Other comments indicate that 
mechanically plated gold normally has a surface coating of 
electroplate. Korbelak (27) (see articles attached to comment); Tru-
Kay (196) p.1 (stating that its major product was mechanically-
plated jewelry, and noting the existence of ``the surface coating of 
gold electroplate'' on gold filled items); Mark (207) p.3 (owned and 
operated a gold-filled manufacturer and distributor for 25 years and 
referred to the ``surface coating of gold electroplate'' on gold 
filled (i.e., mechanically-plated) items).
    \113\ Matthew Runci, Executive Director, MJSA (226); George 
Knight, former president of the Gold Filled Manufacturers 
Association (256); Irving Ornstein, Vice President, Leach & Garner 
(258); Howard Solomon, Vice President, Donald Bruce & Co. (218); 
I.L. Wein, President, Benrus (22); Barry Sullivan, President, 
ArtCarved (155); Kenneth Genender, U.S. Watch Council (118). Only 
Mr. Knight stated that gold electroplate is inherently inferior to 
mechanically plated gold.
---------------------------------------------------------------------------

    Based on the comments, the Commission has determined that the 
current Guides reflect the now-outdated belief that gold electroplate 
is inherently inferior to mechanically plated gold. The Guides may thus 
unfairly give mechanical plating a competitive advantage and may make 
international trade more difficult. Further, the comments indicate that 
the term ``gold plate'' has not been used extensively for mechanically 
plated items, and therefore, consumers may not expect an item labeled 
as ``gold plate'' to have been mechanically plated. Moreover, the 
Commission agrees with the comments that state that consumers are 
unlikely to distinguish between products on the basis of the method of 
plating used and are more concerned with the durability.<SUP>114 Thus, 
the distinction between mechanically plated and electroplated products 
no longer serves a useful purpose. Therefore, the Commission has 
concluded that the term ``gold plate'' would not be inherently 
deceptive when applied to electroplated items with a sufficient layer 
of gold that assures reasonable durability. This will allow products 
composed of a combination of types of plating, or newer methods of 
plating that are developed, to be called ``gold plate.''
---------------------------------------------------------------------------

    \114\ Consumers can determine for themselves whether they like 
the appearance of the product, but the consumer has no way of 
determining durability.
---------------------------------------------------------------------------

    For these reasons, the Commission has created a safe harbor that 
would allow ``gold plate'' to be used for gold applied by any process 
so long as the coating is sufficiently durable to satisfy consumer 
expectations that the plated product would retain its appearance for a 
reasonable period of time.<SUP>115 The Commission believes that a 
standard based on thickness, rather than weight of the gold coating, is 
more relevant to

[[Page 27188]]

consumer expectations.<SUP>116 For the reasons discussed below, the 
Commission has established a safe harbor for products with a minimum 
thickness of one half micron of gold coating.
---------------------------------------------------------------------------

    \115\ Although the evidence indicates that the term ``gold 
plate'' has not been frequently used, because plating generally has 
been in use for many years, consumers reasonably would expect a 
certain minimum level of durability from an item so labeled. The 
Commission believes it is appropriate to create a safe harbor with a 
numerical standard for a specific term such as ``gold plate'' when 
consumers would expect certain qualities from products described by 
the term and products at or above the standard would have such 
qualities.
    \116\ Sheaffer (249) p.4 (stating that a standard based on a 
weight ratio (e.g., 1/20th) can ``encourage the production of 
inferior articles lacking strength and rigidity as the thickness, 
and thus, the cost of the plate can readily be reduced by use of a 
very thin base material''). But cf. AWA (236) p.2 (in discussing 
``gold flashed'' watches, stating that thickness ``is only one 
factor in determining the esthetic qualities and durability of the 
electroplating process,'' that different technologies produce 
varying thicknesses, all of which provide durable coverage, and that 
establishing a threshold standard for ``gold flashed'' or other 
similar terms creates an arbitrary standard that distorts the 
marketplace); and NAW (251). However, because of the other comments 
discussed in the text, the Commission believes that identifying a 
minimum thickness and fineness is appropriate for a safe harbor for 
``gold plate'' claims for jewelry.
---------------------------------------------------------------------------

    In developing this safe harbor, the Commission has considered the 
standard for gold plated jewelry established by the International 
Organization for Standardization (``ISO''): ``ISO International 
Standard 10713 Jewellery [sic]--Gold alloy coatings.'' <SUP>117 This 
standard sets a minimum thickness of half a micron of fine gold (or its 
equivalent) for both mechanically plated and electrolytically plated 
gold jewelry.
---------------------------------------------------------------------------

    \117\ The Trade Agreements Act of 1979 states that federal 
agencies must, in developing standards, ``take into consideration 
international standards and shall, if appropriate, base the 
standards on international standards.'' 19 U.S.C. 2532(2)(A) (1980). 
A ``standard'' is defined as ``a document approved by a recognized 
body that provides, for common and repeated use, rules, guidelines, 
or characteristics for products or related processes and production 
methods, with which compliance is not mandatory.'' 19 U.S.C. 
2571(13) (1995). An international standard is defined as a standard 
promulgated by an organization engaged in international standards-
related activities, the membership of which is open to 
representatives, whether public or private, of the United States and 
all members of the World Trade Organization (``WTO''). 19 U.S.C. 
2571(5), (6), and (8) (1995). A WTO member is ``a state or separate 
customs territory (within the meaning of Article XII of the WTO 
Agreement), with respect to which the United States applies the WTO 
Agreement. 19 U.S.C. 3501(10) (1995).
    ISO is, according to the ``foreword'' sections in several ISO 
standards attached to the Swiss Federation comment (232), ``a 
worldwide federation of national standards bodies. The work of 
preparing International Standards is normally carried out through 
ISO technical committees.'' ISO is open to representatives from the 
United States and to representatives from members of the WTO, and 
qualifies as an international standards organization.
    However, the Trade Agreements Act also explicitly states several 
reasons why basing a standard on an international standard may not 
be appropriate, including the prevention of deceptive practices and 
fundamental technological problems. 19 U.S.C. 2532(2)(B)(i).
---------------------------------------------------------------------------

    The Commission also considered the ISO standard for gold plated 
watches, which sets a minimum thickness standard of 5 microns, and 
comments submitted as to the current standard in the Watch Guides, to 
determine a sufficiently durable coating of gold for plated jewelry. 
Watches have historically been assumed to be subjected to more wear 
than other articles of jewelry.<SUP>118 The comments that address gold-
plated watches indicate that a one micron thickness may be durable. 
Benrus commented that thicknesses of up to \1/2\ micron ``are 
unsubstantial and wear very quickly'' but that there is ``a new 
industry `standard' of a minimum of 1 micron of gold plating (40 
millionths of an inch) which has substantial durability and reliability 
and gives years of satisfactory service.'' <SUP>119 The U.S. Watch 
Council also noted that the watch industry has adopted 1 micron of 
thickness (described as 40 millionths of an inch of 23 karat gold) as a 
standard for gold plating.<SUP>120 Two commenters interviewed by 
Commission staff, Benrus and U.S. Watch Council, stated that watches 
with a one micron coating of gold, if worn every day, could be expected 
to last between two and four years.
---------------------------------------------------------------------------

    \118\ This is reflected in the current Guides. Watches marked 
``gold electroplate'' should be plated with at least three-fourths 
one thousandths of an inch of 10 karat gold (or 750 millionths of an 
inch) whereas jewelry should be plated with at least 7 millionths of 
an inch of 24 karat gold or the equivalent.
    The American Watch Association (236) stated at p.1, that 
standards for gold plating should be similar for watches and jewelry 
because ``consumers can be confused when faced with jewelry and 
watch products subject to entirely different definitions and 
standards.'' However, watches may be subjected to more wear than 
most jewelry (because they are usually worn daily), and, based on 
past practice, consumers may expect watches to have a thicker 
coating of gold plate than jewelry. Moreover, there are different 
ISO standards for plated jewelry and plated watches.
    \119\ Other commenters interviewed by Commission staff stated 
that \1/2\ micron was not very durable [Irving Ornstein from Leach 
(257); Kenneth Genender from U.S.W.C. (118)]. Catholyte, (34) p.1 (a 
``quality'' product would contain 5 microns).
    \120\ Benrus (22); USWC (118).
---------------------------------------------------------------------------

    Because most jewelry gets less wear than watches, the Commission 
believes that the ISO standard of half a micron of fine (24 karat) gold 
plating for jewelry constitutes a ``floor'' of sufficient durability, 
so that consumers are unlikely to be misled about the durability of an 
item marked ``gold plate.'' However, the Commission recognizes that 
some commenters indicated that half a micron is not very durable. Also, 
certain items of jewelry receive more wear than others, and some items, 
such as rings, might actually receive more wear (and more friction with 
skin) than watches.<SUP>121
---------------------------------------------------------------------------

    \121\ Telephone interview with I. L. Wein, President, Benrus. 
Bruce (218), in discussing vermeil (which is gold plate over 
sterling silver), stated that one micron of plating would be 
sufficient for some items such as earrings, two microns for other 
such as necklaces, but that an item like a ring would require three 
microns.
---------------------------------------------------------------------------

    Therefore, to ensure that consumers are not deceived by the implied 
claims of durability arising from the term ``gold plate,'' the ``safe 
harbor'' in the revised Guides (Sec. 23.4(c)(2)) reflects the 
Commission's view that the term ``gold plate'' is not inherently 
deceptive or unfair when used for gold applied to an industry product 
(excluding watches) by any process so long as the following two 
conditions are met: (1) The product contains a coating of half a 
micron, or 20 millionths of an inch, of fine gold or the equivalent; 
and (2) The coating is ``of substantial thickness,'' <SUP>122 which for 
items that are subject to a great amount of wear, such as rings, should 
be more than half a micron of fine gold or the equivalent. This second 
provision ensures that products that are subject to greater wear should 
have a coating of greater thickness than the minimum half micron. 
Moreover, it ensures that products that are subject to a great amount 
of wear in certain areas would have a more substantial coating in those 
areas.
---------------------------------------------------------------------------

    \122\ ``Substantial thickness'' is defined in a footnote which 
is similar to the present footnote 1 in the current Guides.
---------------------------------------------------------------------------

    The Commission has indicated that the thickness of the gold plating 
may be marked in microns on the item itself if it is followed in close 
proximity by a gold quality mark (e.g., 2 microns 12 K. G. P.). A note 
following this section recommends that if a product has a thicker 
coating in some areas than others, the area of least thickness should 
be marked. This allows manufacturers to inform consumers of the minimum 
thickness of the plating, and consumers may therefore shop for items 
with more or less plating depending on their needs and budget.
    The ISO standard, in section 5.4, prohibits quality marks on gold 
plated items. However, the Commission does not believe it is 
appropriate to include this portion of the international standard in 
the revised Guides. The quality mark in combination with an indication 
of the thickness of the gold plate, can communicate important 
information to consumers. The ISO standard also sets up a system 
whereby gold plated products can be labeled ``A,'' ``B,'' or ``C,'' 
with A indicating products that have a minimum of 5 microns of 14 karat 
gold (or the equivalent), B indicating a minimum of 3 microns of 14 
karat gold (or the equivalent), and C indicating a half micron of 24 
karat gold (or the equivalent). However, American

[[Page 27189]]

consumers are not familiar with this system, and the Commission does 
not believe it is appropriate to include it in the Guides at this 
time.<SUP>123
---------------------------------------------------------------------------

    \123\ ISO standard 17013 also provides a similar system of 
marking mechanically plated gold items (e.g., ``A'' indicates a 
thickness of 5 microns), based on the thickness of the gold plate. 
However, the Guides allow marking of mechanically plated items 
(e.g., gold-filled or rolled gold plate), based on the weight of the 
gold in the item. The current system in the Guides has been used for 
many years and the ISO system of marking may be confusing to 
consumers. Thus, the Commission has not included the ISO system in 
the revised Guides. The Commission believes that omitting the ISO 
system of marking mechanically plated gold from the Guides will not 
pose a barrier to international trade, because manufacturers can 
mark the product ``gold plate'' according to the new provisions for 
gold plated items, discussed above.
---------------------------------------------------------------------------

    The safe harbor for ``gold plate'' (Secs. 23.4 (b)(4) and (c)(2)) 
will be in addition to those already contained in the Guides. Thus, 
Secs. 23.4 (b)(5) and (c)(3) of the revised Guides indicate that 
mechanically plated gold can be called ``gold filled,'' ``rolled gold 
plate,'' or ``gold overlay.'' However, items mechanically plated with 
gold also can be referred to as ``gold plate,'' in accordance with the 
guidance of Sec. 23.4 (c)(2) of the revised Guides. Electroplated items 
can be marked as ``gold electroplate'' or ``GEP,'' in accordance with 
the guidance of Secs. 23.4(b)() and (c)(4) of the revised 
Guides,<SUP>124 or as ``gold plate,'' in accordance with 
Sec. 23.4(c)(2).
---------------------------------------------------------------------------

    \124\ The JVC petition suggests revising the sections pertaining 
to electroplate by substituting the word ``electroplate'' for the 
word ``plate'' and ``electroplating'' for ``plating.'' This revision 
clarifies that products coated with gold by a process other than 
electroplating should not be sold as ``gold electroplate.''
---------------------------------------------------------------------------

    c. New methods of plating. The FRN solicited comment on whether 
newer methods of plating should be included in the guides and how they 
should be addressed. Nineteen comments addressed this issue, and of 
this group, only one commenter stated that he was unaware of new 
techniques.<SUP>125 The most frequently mentioned new method was 
``electroforming,'' a process in which gold is deposited over materials 
that are removed, leaving a hollow item.<SUP>126 (If all of the foreign 
material is removed, the product is not actually plated.) Citizen Watch 
(228) described a process called ``ion plating,'' and Sheaffer (249) 
described ``vapor deposition,'' ``sputtering,'' and ``electroless 
immersion.'' However, Sheaffer stated that these processes could be 
handled in the same basic manner as mechanical plating and 
electroplating and noted that the terms ``plate'' or ``plated'' should 
be available to describe products coated by any of these 
methods.<SUP>127 As discussed supra, the Commission has revised the 
Guides to indicate that it is not misleading to describe an item as 
gold plate, whatever method is used to apply the gold, so long as it 
meets the suggested minimum thickness and fineness standards. The 
Commission does not have enough information at this time to provide 
more detailed guidance regarding the newer methods of plating.
---------------------------------------------------------------------------

    \125\ Gold Institute (13); Estate (23); Korbelak (27); G&B (30); 
Handy (62); Newhouse (76); Eisen (91); ArtCarved (155); Bales (156); 
LaPrad (181); Mark (207); Canada (209); Matthey (213); Bruce (218); 
WGC (223); MJSA (226); Citizen (228); Sheaffer (249); and Leach 
(257). Leon Newhouse (76), a former executive in the watch industry 
who stated that he has been retired since 1971, said he was not 
aware of any new techniques. Handy, Mark, Matthey and MJSA stated 
the techniques can be adequately dealt with by the existing 
provisions in the Guides.
    \126\ Bruce (218) (stating that it produces this type of 
jewelry); Bales (156) p.8 (stating that such jewelry is often sold 
by weight and that ``[m]any times, the manufacturer leaves a 
measurable amount of residue inside the shell and weighs it, and 
actually sells [it] as gold or silver''); Canada (209) (stating that 
the problem of foreign substances left inside plated articles 
deserves review). Section 23.5(a) of the Guides makes clear that 
overstatement of the quantity of gold in a product is unfair and 
deceptive.
    \127\ Comment 249, p.3; ArtCarved (155) (stating that ``gold 
plate'' should be allowed for all methods). Two comments, Estate 
(23) and G&B (30), stated that the method of application should be 
revealed, but gave no reasons.
---------------------------------------------------------------------------

    d. Nickel in gold-filled jewelry. The FRN solicited comment on 
whether the Guides should advise against the use of the term ``gold-
filled'' to describe a product in which nickel is inserted between the 
gold-filled item and a surface coating of gold electroplate. The FRN 
also asked if it would be acceptable to permit the insertion of nickel 
so long as the lessened durability of such an item is disclosed, and 
asked what type of disclosure should be made.<SUP>128
---------------------------------------------------------------------------

    \128\ The JVC proposed this provision to prevent ``the 
occasional expediency, in the manufacturing of finished products, to 
`hot nickel' or use some other non-precious electroplating over the 
mechanical precious metal surface and then merely to apply a flash 
of precious metal electroplating.'' Petition Section 23.5 C(2), 
Footnote 2. ArtCarved (155) suggested, at p.3, that ``on some 
surfaces nickel serves as a leveling agent.'' Korbelak (27) stated, 
at p.4, that ``nickel is apparently used to prevent corrosion of the 
unavoidably exposed copper alloy base of the mechanically coated 
stock.''
---------------------------------------------------------------------------

    Most of those who commented believed that jewelry made in this way 
should not be called ``gold-filled.'' <SUP>129 Tru-Kay (which stated 
that gold-filled jewelry is its major product line) noted that the 
insertion of nickel would adversely affect durability and 
quality.<SUP>130 Three comments contended that nickel should not lessen 
durability.<SUP>131
---------------------------------------------------------------------------

    \129\ Fasnacht (4); Gold Institute (13); Estate (23); Korbelak 
(27); Newhouse (76); Tru-Kay (196); Phillips (204); Mark (207); 
Matthey (213); Bruce (218); WGC (223); MJSA (226); and Leach (257). 
Two commenters, G&B (30) and Jabel (47), favored allowing the 
insertion of nickel with a disclosure, but G&B noted that there may 
be a need to ``have a new term.''
    \130\ Tru-Kay (196) p.1.
    \131\ Handy (62); ArtCarved (155); and Sheaffer (249).
---------------------------------------------------------------------------

    Mark stated that if a layer of nickel ``has covered the basic 
material, it will show up as soon as any gold surface coloration has 
worn through* * *.'' <SUP>132 This is particularly important since the 
metal color would change from yellow to white. Mark also stated that 
``[t]o cover the mechanically bonded layer of gold [with nickel] which 
is the essence of the gold-filled product defeats the purpose of the 
gold-filled standard to the consumer.'' <SUP>133
---------------------------------------------------------------------------

    \132\ Mark (207) p.4.
    \133\ Id.
---------------------------------------------------------------------------

    The Commission agrees with the argument of the majority of the 
commenters that a thin wash of gold could wear away and reveal the 
nickel. Thus, the use of the term ``gold-filled'' to describe such a 
product does not comport with Sec. 23.4(b)(5) of the revised Guides, 
which states that the product should contain ``a surface-plating of 
gold alloy applied by a mechanical process which is of such thickness 
and extent of surface coverage that reasonable durability is assured.'' 
The Commission has concluded that the use of ``gold-filled'' or other 
terms to describe mechanically plated gold covered with nickel that is 
washed with gold involves a misleading use of the word ``gold'' because 
it does not disclose that this product has only a thin wash of gold 
over a surface layer of nickel.<SUP>134 To clarify this point in the 
revised Guides, the Commission has added a provision, Sec. 23.4(b)(6), 
that states that such a product should not be described as ``gold 
plate'' or ``gold-filled'' unless it contains a disclosure that the 
primary gold coating is covered with a base metal, which is gold 
washed. Such a product comports with the guidance in the current and 
revised Guides for ``gold washed'' or ``gold flashed'' and, if the 
seller wished to do so, the seller could so describe it.<SUP>135
---------------------------------------------------------------------------

    \134\ The Commission rendered an advisory opinion on this issue 
in 1966, stating that ``a purchaser of such an article would not get 
the type of performance expected from gold filled articles because 
points of wear would expose the coating of white nickel at a very 
early stage and the ornamental value would be seriously reduced.'' 
Advisory Opinion, Improper Use of terms such as ``gold filled'' or 
``rolled gold plate'', 69 F.T.C. 1234 (1966).
    \135\ The Gold Institute stated, that ``Nickel is a recognized 
skin irritant,'' and urged that the use of nickel in gold jewelry be 
prohibited. Comment 13, p.2. Several other commenters took this 
position. However, the fact that nickel is a skin irritant would 
require the disclosure of its presence in all jewelry, not just 
rolled gold jewelry. This was not proposed in the FRN and there is 
not an adequate basis at this time for adding such a provision.

---------------------------------------------------------------------------

[[Page 27190]]

    e. Provisions relating to vermeil. Vermeil, a product made of 
sterling silver with a coating of gold, is a special form of gold 
plate.<SUP>136 The JVC proposed including provisions for vermeil in the 
Guides and the FRN solicited comment on whether a recommended minimum 
plating of 120 millionths of an inch of fine gold, or its equivalent, 
over sterling, was appropriate.
---------------------------------------------------------------------------

    \136\ ``Tiffany's Sterling: History and Status,'' National 
Jeweler (undated) (attached to Korbelak (22)) (stating that vermeil 
is a unique product with a ``silver-gold'' glow, which has been on 
the market for a long time). However, no provisions pertaining to 
vermeil have ever been included in the Jewelry Guides.
---------------------------------------------------------------------------

    Eighteen comments addressed this issue.<SUP>137 Two comments stated 
the proposed standard was not appropriate; one offered no reason and 
the other stated that the standard should be up to the 
manufacturers.<SUP>138 Three comments stated that the proposed standard 
was thicker than necessary.<SUP>139 Other commenters offered various 
opinions on the proposed standard.<SUP>140 Most of the other comments 
simply said the proposed standard was appropriate but offered no 
reasons.
---------------------------------------------------------------------------

    \137\ Fasnacht (4); Gold Institute (13); Korbelak (27); G&B 
(30); Jabel (47); Handy (62); Newhouse (76); ArtCarved (155); IJA 
(192); Tru-Kay (196); Mark (207); Canada (209); Bruce (218); Impex 
(219); MJSA (226); Sheaffer (249); Knight (256) and Leach (257).
    \138\ Newhouse (76) and Impex (219).
    \139\ Korbelak (27) p.4 (stating that ``a floor of 100 
millionths of an inch was established by the trade many years 
ago''); Tru-Kay (196) p.2 (stating that the proposed standard was 
``quite excessive'' and not necessary ``in order to give the 
consumer a quality product''); Bruce (218) p.8 (stating that the 
proposed standard was ``very heavy'' and noted that ``the nature of 
the product and the wear it is subjected to would be a more 
appropriate guide for plating thickness''). Bruce (218) suggested 
that the proposed standard was appropriate for items such as rings 
(which receive a lot of wear) but suggested 40 millionths of an inch 
for earrings and pendants and 80 millionths of an inch for bracelets 
and neck chains.
    \140\ MJSA (226) pp.4-5 (stating that the JVC recommended 120 
millionths of an inch simply because it is higher than the 100 
millionths of an inch required for heavy gold electroplate); G&B 
(30) p.8 (indicating that the point was simply to set some 
standard); ArtCarved (155) p.4 (stating that ``if vermeil is the 
standard word used for 120 millionths of an inch, this would be 
okay''); Canada (209) p.4 (noting that it has a quality mark for 
vermeil but has yet to establish a minimum standard for plating).
---------------------------------------------------------------------------

    MJSA supported the proposed standard stating that it ``assures an 
extremely high level of durability and low porosity.'' However, MJSA 
stated that ``it is possible to establish a highly durable coating of 
gold over silver at substantially lesser thicknesses,'' and noted that 
many manufacturers currently produce such a product.<SUP>141 In the 
Jeweler's Dictionary, modern usage of ``vermeil'' is defined as ``Heavy 
gold electroplate over sterling silver * * * or a substantial layer of 
karat gold mechanically applied over sterling silver.'' <SUP>142 The 
current Guides identify the minimum thickness for heavy gold 
electroplate as the equivalent to 100/1,000,000ths of an inch of fine 
gold.
---------------------------------------------------------------------------

    \141\ Comment 226, pp.4-5.
    \142\ ``Jewelers' Dictionary'' 253 (3d ed. 1976).
---------------------------------------------------------------------------

    The JVC petition indicates that vermeil is susceptible to 
discoloration, presumably because the silver might tarnish.<SUP>143 
Because gold itself deters tarnishing, the thicker the coating of gold, 
the less likely the underlying silver will tarnish. However, Korbelak 
(27) p.4, stated that ``gold coatings are permeated by sulfides in the 
average atmosphere up to thicknesses of 10 microns (0.0004 inch).'' 
Thus, even a gold coating of 120 millionths of an inch (or 0.00012 
inch), or about 3 microns would not completely solve this problem.
---------------------------------------------------------------------------

    \143\ The JVC recommended the addition of a note that states 
that a diffusion barrier (typically of nickel) may be 
electrolytically applied, in a thickness of no more than 50/
1,000,000ths of an inch, under the layer of gold.
---------------------------------------------------------------------------

    The Commission believes it is appropriate to reference a numerical 
thickness in the Guides when consumers have come to expect certain 
qualities from products described by the term and products below the 
standard would not have such qualities. The comments indicate that 
there are items sold as ``vermeil'' that have the qualities consumers 
associate with ``vermeil,'' and that have a gold coating of less than 
120 millionths of an inch. Furthermore, the definition of vermeil in 
the Jeweler's Dictionary is consistent with Korbelak's comment (27) 
that many years ago, the trade established a floor of 100 millionths of 
an inch for vermeil. Therefore, the Commission has concluded that a 
thickness of 100 millionths of an inch, or 2.5 microns, of fine gold is 
an appropriate thickness ``floor'' for vermeil.
    Because there may be items currently sold as ``vermeil'' that do 
not comport with the generally accepted meaning (i.e., gold over 
silver), the Commission has added a general provision stating that it 
would be unfair or deceptive to describe an article as ``vermeil'' if 
it misrepresents the product's true composition. The Commission has 
also added a section, 23.5(b), which provides guidance on when a 
product may be described as ``vermeil.'' This section states that a 
product may be described as ``vermeil,'' ``if it consists of a base of 
sterling silver,<SUP>144 coated or plated on all significant surfaces, 
with gold or gold alloy of not less than 10 karat fineness, which is of 
substantial thickness and a minimum thickness throughout which is 
equivalent to two and one half (2\1/2\) microns (or approximately 100/
1,000,000ths of an inch) of fine gold.'' As with other gold-plated 
items (covered in Sec. 23.4 of the revised Guides), ``substantial 
thickness'' is defined in a footnote which is similar to the present 
footnote 1 in the current Guides.
---------------------------------------------------------------------------

    \144\ The comments indicate that the sterling silver base is 
part of the common understanding of the term ``vermeil.''
---------------------------------------------------------------------------

    With respect to the problem of the tarnishing of the silver base, 
the JVC recommended the addition of a note allowing a nickel barrier. 
However, the nickel is placed over the silver base, and it is the 
silver that distinguishes vermeil from other gold plated items. 
Moreover, vermeil is by definition composed completely of precious 
metal alloys.<SUP>145 Although the note indicates that the purpose of 
the ``diffusion barrier'' is to prevent premature discoloration, there 
was no discussion of the effect a ``diffusion barrier'' over the silver 
would have on the unique coloration of vermeil. Moreover, no 
explanation was offered for limiting the thickness of the barrier to 
50/1,000,000ths of an inch.<SUP>146 Although there may be a need for 
such a barrier, in the absence of adequate information on this issue 
(including whether it changes the appearance of the product in a manner 
that would be objectionable to consumers), the Commission has 
determined not to add this note to the Guides. Instead, the Commission 
has added a Note which states that such a product should not be 
described as vermeil unless there is a disclosure that the sterling 
silver is covered with a base metal, which is gold-plated.
---------------------------------------------------------------------------

    \145\ See also Advisory Opinion, Impropriety of description 
``14K'' for item not entirely gold, 69 F.T.C. 1212 (1966) (stating 
that an earring post with a 14K gold base, electroplated with 
copper, nickel and then karat gold, could not be described as 14 
karat gold, because it would ``contains substantial electroplatings 
of base metals'').
    \146\ Franklin Mint (250) p.4 (objecting to the proposal and 
stating that their own tarnish testing indicates the need for a 
barrier of 150/1,000,000ths of an inch).
---------------------------------------------------------------------------

    The JVC petition suggested several other qualifications of the use 
of ``vermeil'' that the Commission has not included in the revised 
Guides. The petition suggested that the application of the gold must be 
either by mechanical bonding or electroplating. However, comments have 
indicated that some new methods of application have been developed, and 
no reasons were offered

[[Page 27191]]

for excluding those methods. (See infra for a discussion of these 
comments.) The JVC also proposed that a vermeil industry product only 
be represented by the word `Vermeil' standing alone,<SUP>147 and 
proposed prohibiting use of the words ``gold'' or ``silver'' to modify 
``vermeil.'' However, no reasons were offered as to why the terms 
``gold vermeil'' or ``silver vermeil'' would be deceptive. The use of 
the terms ``gold'' and ``silver'' are covered by other sections of the 
revised Guides, and the Commission believes these sections are adequate 
to prevent the deceptive use of these terms in connection with vermeil.
---------------------------------------------------------------------------

    \147\  Franklin (250), at p.4, objected to the exclusion of 
``alternative descriptions and markings . . . such as `sterling 
silver electroplated with 24 kt. gold'' and noted that ``no evidence 
has been produced that such designations would mislead the public.'' 
The Commission believes that alternative truthful descriptions of a 
vermeil product (e.g., sterling silver electroplated with 24 kt. 
gold) are acceptable.
---------------------------------------------------------------------------

    Finally, the JVC suggested including a requirement that when 
``vermeil'' is used as a quality mark, it must be accompanied by the 
name or trademark of the manufacturer or importer according to the 
provisions of the National Stamping Act. The National Stamping Act 
creates such a requirement for any quality mark indicating the presence 
of gold or silver. Thus, the requirements of the Act may apply to a 
``vermeil'' quality mark. However, there is currently a Note in the 
Guides, following the section dealing with quality marks, referring to 
the requirements of the National Stamping Act. Instead of creating a 
second note, the Commission has added ``vermeil'' to the list of 
quality marks in that Note (and in Sec. 23.9 of the revised Guides).
3. Misrepresentation as to Silver Content: Sec. 23.6
    Section 23.6(a) of the current Guides cautions against 
misrepresenting the silver content in any industry product. The JVC 
proposed adding the abbreviation ``Ster.'' to Sec. 23.6(b) of the 
Guides, which states that the use of the terms ``silver,'' ``solid 
silver,'' ``Sterling,'' or ``Sterling Silver'' is deceptive unless the 
product is 925/1000ths pure silver. Because consumers are likely to 
believe this term stands for ``Sterling,'' the Commission has added the 
abbreviation ``Ster.'' to this section.
    The JVC proposed stating that abbreviating the term ``Sterling'' 
was not allowed when used to describe hollowware or flatware. No reason 
was offered for prohibiting this practice, and the Commission has no 
reason to conclude that this practice is inherently unfair or 
deceptive.<SUP>148 The JVC also proposed stating that ``Sterling'' or 
``Ster.'' was not allowed to be applied to a silverplated article. This 
proposed addition to Sec. 23.6(b) essentially restates Sec. 23.6(d) of 
the current Guides, which states that it is unfair to apply the terms 
``Sterling'' or ``Coin'' to any silver-plated article or the plating 
thereon. In fact, the National Stamping Act states that silverplated 
articles shall not ``be stamped, branded, engraved or imprinted with 
the word `sterling' or the word `coin,' either alone or in conjunction 
with other words or marks.'' 15 U.S.C. 297(a). However, the Commission 
has determined that Sec. 23.6(d) of the current Guides may 
unnecessarily inhibit the use in advertising of phrases such as 
``sterling silver plated'' or ``coin silver plated.'' Thus, the 
Commission has deleted Sec. 23.6(d) and has added a Note referring to 
the requirements of the National Stamping Act.
---------------------------------------------------------------------------

    \148\  Franklin (250) commented at p.5, that the presumption 
implicit in allowing sterling to be abbreviated on other products 
``is that buyers of the other products named therein for which 
`ster.' is an acceptable usage understand its meaning; it defies 
logic to assume that the term `ster.' is not recognized and 
understood by the hollowware and flatware buying public.''
---------------------------------------------------------------------------

    Section 23.6(c) states that the use of ``coin'' is deceptive unless 
the product is at least 900/1000ths pure silver. The JVC proposed 
adding a prohibition against abbreviating the term ``coin.'' There is 
no evidence that ``coin'' is being abbreviated or, if it were, that it 
would be misleading to consumers. Accordingly, the Commission has not 
adopted this proposal.
    a. Silverplate. Section 23.6(e) of the current Guides state that it 
is an unfair trade practice to represent an industry product as plated 
with silver unless all significant surfaces are coated with silver 
``which is of substantial thickness.'' <SUP>149 The JVC proposed 
continuing the use of the ``substantial thickness'' standard but adding 
a footnote stating this means thickness sufficient to assure durable 
coverage of the base metal. (The current Guides contain such a footnote 
in Sec. 23.5(c)(2) with respect to gold-filled items.) The FRN 
solicited comment on whether this addition should be made or whether 
the thickness should be defined numerically.
---------------------------------------------------------------------------

    \149\ The Watch Band Guides differ from the Jewelry Guides in 
that they state that when an industry product is marked as ``silver 
plate'' all significant surfaces ``shall have a plating or coating 
of silver of a high degree of fineness and such plating or coating 
shall be of substantial thickness.'' 16 CFR 19.2(b) (emphasis 
added). The Jewelry Guides simply state that such a product should 
contain a ``plating or coating of silver which is of substantial 
thickness.'' The Jewelry Guides state that ``silver'' means sterling 
silver (i.e., unless qualified by the word ``coin''). Thus, the 
Jewelry Guides appear to limit the use of ``silver plate'' to 
sterling silver plate, whereas the Watch Band Guides appear to allow 
coin silver to be used on an item marked ``silver plate.'' Because 
no one objected to the current provision in the Jewelry Guides, the 
Commission has retained the provision as it appears in the Jewelry 
Guides for both jewelry and detachable watch bands.
---------------------------------------------------------------------------

    All but one of the 16 pertinent comments indicated that giving a 
numerical value to ``substantial thickness'' would be 
desirable.<SUP>150 However, four of these suggested that additional 
data were needed.<SUP>151 Moreover, only a few made specific 
recommendations. Sheaffer noted that it was ``not aware of any problems 
resulting from the current definition of `substantial thickness''' but 
nevertheless proposed a coating five microns (200 millionths of an 
inch) thick. Mr. Korbelak suggested 500 millionths of an inch where it 
is functionally necessary.<SUP>152
---------------------------------------------------------------------------

    \150\  Gold Institute (13); Korbelak (27); G&B (30); Handy (62); 
Newhouse (76); ArtCarved (155); Bales (156); Phillips (204); Canada 
(209); Bruce (218); MJSA (226); Sheaffer (249); and Leach (257). The 
one dissenter was the JCWA (216), which stated at p.3 that ``there 
is insufficient data to determine an `acceptable' thickness of 
silver plating, and because related ISO standards have not been 
established, it is difficult to determine the durability of specific 
levels of silver plating. Therefore, it is not practical to define 
`durability' in numerical terms. The existing definition is 
appropriate.''
    \151\  G&B (30); Handy (62); Canada (209); and MJSA (226).
    \152\  Sheaffer (249) p.4; Korbelak (27) p.4.
---------------------------------------------------------------------------

    The Gold Institute made detailed recommendations, but only for 
silver plated flatware and hollowware.<SUP>153 However, without more 
evidence of the need for, and desirability of, these particular 
standards, the Commission does not believe it is appropriate to adopt 
specific standards for flatware and hollowware. Moreover, the amount of 
wear received by jewelry is different from the amount of wear received 
by flatware and hollowware. Therefore, the proposed standards for 
flatware may not be appropriate for jewelry. Indeed, the amount of wear 
received by different kinds of jewelry varies greatly (e.g., earrings 
as compared to bracelets) and manufacturers may need flexibility in any 
silver plate standard for jewelry.
---------------------------------------------------------------------------

    \153\  Comment 13, pp.2-3.
---------------------------------------------------------------------------

    Based on the comments, the Commission does not believe that there 
is currently a consensus in the industry as to what would constitute an 
appropriate minimum numerical thickness for the purpose of identifying 
a safe harbor for the term silverplate.<SUP>154 However, the Commission 
has added a note to Sec. 23.6(e) to provide some guidance to the 
industry regarding ``substantial thickness'' in connection

[[Page 27192]]

with the use of the term silverplate. This note is similar to footnote 
1 in the current Guides, which annotates the use of the phrase 
``substantial thickness'' in connection with ``gold plate.''
---------------------------------------------------------------------------

    \154\  There is no ISO standard for silverplate.
---------------------------------------------------------------------------

    Finally, the JVC recommended adding a section to the Guides that 
would allow items with an inner core of base metal to be referred to as 
sterling or coin (instead of silverplate) as long as the item as a 
whole contained 925 or 900 parts silver per thousand. A literal reading 
of the sections of the current Guides pertaining to sterling and coin 
[Secs. 23.6 (b) and (c)] indicates that this practice is not currently 
perceived as misleading. However, the actual practice in most of the 
industry is only to label an item sterling if it is a uniform mixture 
throughout of 92.5% silver and a base metal (or, for coin, 90% silver 
and the rest base metal). Without more information as to consumer 
beliefs, the Commission is not adopting this specific provision at this 
time.
    b. Diffusion barrier on sterling silver. The JVC recommended adding 
a note to the Guides that states that a diffusion barrier (typically of 
nickel) may be electrolytically applied, in a thickness of no more than 
50/1,000,000ths of an inch, under a layer of rhodium, to deter 
premature tarnishing on sterling silver products.\155\
---------------------------------------------------------------------------

    \155\ Rhodium, a member of the platinum group metals, is very 
hard.
---------------------------------------------------------------------------

    Although this note refers to ``sterling silver products,'' it 
follows the section on silver plate, and it is unclear whether this 
note is meant to apply to sterling silver products or silver plated 
products or both. In either event, the described product would have no 
silver on the surface, and thus, strictly speaking, it would not fall 
within the definitions in the Guides of either sterling silver or 
silver plate. John Lutley, Executive Director of the Silver Institute 
and President of the Gold Institute, stated, ``[s]ome jewelry 
manufacturers plate pure silver over a nickel flash on sterling silver 
to achieve a mirror finish and reduce the rate of tarnishing.'' \156\ 
This may be the practice the note was designed to address. However, in 
the absence of adequate information on this issue (e.g., how such 
products are described to consumers), the Commission has not included 
this Note in the revised Guides.
---------------------------------------------------------------------------

    \156\ Comment 13, p.2.
---------------------------------------------------------------------------

    c. Quality marks. The JVC proposed adding three subsections dealing 
with quality marks. Two subsections [23.6 Section I(g) and I(h) in the 
JVC petition] reiterate the general provisions concerning the use of 
the terms ``Sterling,'' ``Ster,'' ``Sterling Silver,'' ``Silver,'' or 
``Solid Silver'' and ``Coin'' or ``Coin Silver,'' set out in 
subsections (a), (b), and (c) of the silver section. Therefore, the 
Commission is not restating these provisions in another section.
    The third proposed section dealing with quality marks [section 23.6 
Section I (i) of the JVC petition] states that no quality marks shall 
be used ``other than those herein specified.'' The Franklin Mint 
commented that this ``inexplicably prohibits use of such universally 
recognized numerical terms as `.925' in conjunction with other 
applicable quality marks such as `ster.' or `sterling.' '' \157\ The 
Commission does not believe that a marking such as ``.925 ster.'' is 
inherently deceptive, and is not including this proposal in the Guides.
---------------------------------------------------------------------------

    \157\ Comment 250, p.5.
---------------------------------------------------------------------------

    d. Tolerances and exemptions for testing purposes. Footnote 2 of 
the current Guides notes that the tolerances of the National Stamping 
Act are applicable to claims made with respect to silver content. The 
JVC suggested reorganizing this information, and the Commission 
believes that this change will be helpful to industry members who are 
using the Guides. Footnote 2 of the current Guides also refers to the 
exemptions recognized in an assay for quality (to determine the amount 
of fine silver in the item which is assayed), which are taken from 
Commercial Standard CS 118-44 [Marking of Jewelry and Novelties of 
Silver] and Commercial Standard CS 51-35 [Marking Articles Made of 
Silver in Combination with Gold]. The JVC suggested identifying these 
exemptions in an additional subsection. Because the exemptions apply to 
both silver and gold, and because the lists of exemptions distract from 
the main points of the text of the Guides, the Commission has included 
this information as an appendix to the Guides. A Note following the 
silver section refers to the Appendix.
4. Marking of Articles Made of Silver in Combination With Gold
    The current Guides do not contain a separate section addressing how 
products which are a combination of silver and gold can be 
nondeceptively described. The JVC proposed including in the Guides most 
of the text of Voluntary Product Standard PS 68-76, ``Marking of 
Articles Made of Silver in Combination with Gold.'' \158\ The proposed 
section defines the covered products as sterling silver in combination 
with gold.\159\
---------------------------------------------------------------------------

    \158\ Footnote 2 in the current Guides references former 
Commercial Standard CS 51-35 (``Marking of Articles Made of Silver 
in Combination with Gold'') but only to note that it sets out 
exemptions from an assay in quality. See discussion, infra, 
regarding Commercial Standards generally.
    \159\ The VPS provides that articles where the gold and silver 
are visually indistinguishable (e.g., where the gold covers the 
entire article, or where white gold is combined with silver) may be 
marked, e.g., ``Sterling and \1/5\ 10 K,'' where the fraction 
represents the proportion of the weight of the alloyed gold to the 
weight of the entire metal in the article. It also provides that the 
karat mark can only be used if the gold alloy is \1/20\ of the 
weight of the entire metal in the article. For articles where the 
gold and silver are visually distinguishable, the karat mark must 
always follow the Sterling mark, e.g., ``Sterling and 10 K,'' and 
there is no requirement that the proportion of the weight of the 
alloyed gold to the weight of the entire metal in the article be 
disclosed. The JVC also proposed that articles so marked must not 
contain any metal other than Sterling silver and 10 karat or better 
gold.
---------------------------------------------------------------------------

    The JVC's proposals, at least in the case of products with 
distinguishable components, result in markings that the Commission has 
already identified as deceptive.\160\ However, claims as to silver 
content are covered by the silver section and claims as to gold content 
are covered by the gold section. Furthermore, the marking of articles 
which are a combination of silver and gold is adequately addressed by 
Sec. 23.8(a) of the current Guides. That section provides that it is 
unfair to place a quality mark on a product when the mark would deceive 
purchasers as to the metallic composition of the product or any part 
thereof. Moreover, subsection (a)(2) notes that, when a quality mark 
applies to one part of a product but not another part of a similar 
appearance, it should be accompanied by an identification of the part 
to which it applies. The JVC offered no evidence regarding why 
additional guidance on these issues was needed or that any combination 
gold and silver products

[[Page 27193]]

were being marketed in a manner that deceived consumers as to their 
metallic content.\161\
---------------------------------------------------------------------------

    \160\ In an advisory opinion, Marking of jewelry produced from a 
14 karat gold sheet laminated upon sterling, 89 F.T.C. 651 (1977), 
the Commission stated that the mark ``Sterling and 14K'' was 
deceptive as applied to an article in which a 14K gold sheet was 
laminated on sterling, and the gold constituted at least 5% of the 
weight of the article. The Commission noted that the different 
metals were visually distinguishable ``but casual inspection cannot 
determine the relative thickness of the gold layer and the silver.'' 
Id. at 651. The Commission stated that the suggested markings 
``could suggest to consumers that the amount of gold and silver. . . 
are approximately equal or, at least, would suggest more than five 
percent 14K gold.'' Id.
    In an advisory opinion involving two visually indistinguishable 
metals, Marking of 18 karat white gold ring with platinum baguette 
prongs, 74 F.T.C. 1686 (1968), the Commission stated that a white 
gold ring with platinum baguettes could not be marked ``18K--10% 
Plat.'' The Commission reasoned that ``the consumer might conclude 
that all of the prongs, including those for the center stone, are of 
platinum composition. Under these circumstances, it is not enough to 
merely say that the ring contains 10% platinum and 90% gold without 
disclosing the true composition of the various parts of the ring.'' 
Id. The Commission suggested that the ring could be marked ``18K-
baguette prongs Plat.''
    \161\ The Franklin Mint (250) stated at p.4, that there is no 
evidence that a gold karat mark is misleading on a gold and silver 
item when the gold constitutes less than \1/20\ of the total metal 
weight. Moreover, it also noted that the JVC did not propose any 
such prohibition for vermeil products, ``which are but another form 
of gold and silver item. . . .''
---------------------------------------------------------------------------

    Finally, the JVC's proposal to permit quality marks only for 
sterling and gold items is unduly restrictive. For example, an article 
made of coin silver combined with gold could not contain a quality mark 
under the JVC proposal, nor could an article which contains any metal 
other than sterling silver or gold. For all these reasons, the 
Commission has not included in the Guides, the proposed provisions 
relating to articles made of silver in combination with gold.
5. Platinum: Sec. 23.7
    Section 23.7 of the current Guides states that it is an unfair 
trade practice to use the words ``platinum,'' ``iridium,'' 
``palladium,'' ``ruthenium,'' ``rhodium,'' or ``osmium,'' or any 
abbreviations thereof, in a way likely to deceive purchasers as to the 
true composition of the product. The JVC and a number of commenters 
proposed changes to this section. However, the Commission recently 
received a request for an advisory opinion from the JVC and Platinum 
Guild International for markings of platinum products. This request 
indicated that members of the platinum industry are interested in 
simplifying current Commission guidance regarding platinum descriptions 
and bringing this guidance into closer accord with international 
standards. The comments submitted in response to the FRN do not address 
some of these issues. Therefore, the Commission has decided that it 
would be beneficial to solicit additional comment from the entire 
industry on markings and descriptions of platinum products before 
making any changes in this section. A request for comment on these 
issues will be published in a separate Federal Register notice.
6. Pewter
    The current Guides do not pertain to products made from pewter. The 
JVC recommended including a section on pewter and the FRN solicited 
comment on whether the guides should include a provision, and whether 
the standard of any alloy consisting of at least 900 parts per thousand 
Grade A Tin is appropriate.
    Thirty comments addressed this issue, and most thought pewter 
should be included in the Guides and that the proposed standard was 
appropriate. Four opposed the change, stating that the Guides should 
only address precious metals.<SUP>162 One comment stated that there was 
no apparent need for regulation of pewter but another stated that there 
are ``many companies that are abusing the representation of pewter 
products.'' <SUP>163
---------------------------------------------------------------------------

    \162\ Nowlin (109); LaPrad (181); Sheaffer (249); and Leach 
(258).
    \163\ NACSM (219) p.7; Bales (156) p.9.
---------------------------------------------------------------------------

    It appears that pewter has been increasingly utilized in costume or 
fashion jewelry. Nellie Fischer of the American Pewter Guild advised 
staff in a telephone interview that over the past five years her 
company's sales of pewter jewelry to the trade have increased by 40 
percent.<SUP>164 Pewter jewelry and other pewter products are sold by 
at least some of the same entities that sell other products covered by 
the current Guides. The Commission has concluded that inclusion of a 
provision for pewter may prevent misrepresentations.
---------------------------------------------------------------------------

    \164\ Christopher R. Mellott, counsel for the Pewter Guild, 
compiles voluntary statistical reports from samplings of pewter 
manufacturers and, over the period from 1983 to 1990, found a six-
fold increase in the value at wholesale of pewter jewelry sales.
---------------------------------------------------------------------------

    With respect to the proposed standard, Salisbury Pewter stated that 
``a 90% tin requirement is justified by the metallurgical restraints 
for strength and hardness.'' <SUP>165 The American Pewter Guild, a 
trade association, attached a list of historical references to pewter 
which indicate that pewter has virtually always had a tin content of at 
least 90%.<SUP>166 Ten pewter producers also supported the proposed 
standard.<SUP>167
---------------------------------------------------------------------------

    \165\ Comment 86, p.1.
    \166\ Comment 89 (also stating that pewter has been defined as 
containing 90% tin in the Guild's By-Laws since their adoption in 
1976).
    \167\ Stieff (25); Empire (44); Woodbury (64); Lance (84); Web 
(85); Salisbury (86); Fischer (87); Seagull (111 and 120); Universal 
(178); and Heritage (215). Other comments favoring the proposed 
standard for pewter are: Fasnacht (4); Estate (23); G&B (30); Jabel 
(47); Bales (156); Canada (209); Bruce (218); MJSA (226); and 
Preston (229).
---------------------------------------------------------------------------

    Because pewter has historically contained at least 90% tin, 
consumers presumably expect pewter to have the qualities that are 
associated with an alloy containing at least 90% tin. Thus, the 
Commission has included a section on pewter in the Guides. Section 
23.8(a) states that it is unfair and deceptive to describe a product as 
``pewter'' if the description misrepresents the product's true 
composition. Section 23.8(b) states that a product may be described as 
``pewter'' if it contains at least 90% tin, with the remainder composed 
of metals appropriate for use in pewter.
7. Additional Guidance Relating to Quality Marks: Sec. 23.8
    The JVC proposed several changes in Sec. 23.8 of the current 
Guides. The introductory paragraph of this section defines ``quality 
mark'' and gives specific examples of words (e.g., ``gold,'' ``karat,'' 
``silver,'' etc.) that are considered to be quality marks. (As noted 
previously, the Commission has added the word ``vermeil'' to this list 
of words that constitute quality marks.) <SUP>168
---------------------------------------------------------------------------

    \168\ The Watch Band Guides differ from the Jewelry Guides with 
respect to quality marks in that they list the words duragold, 
diragold, noblegold, and goldine as quality marks in Sec. 19.2(g). 
However, the Jewelry Guides, in a Note following Sec. 23.8 on 
quality marks, reach the same practices by stating that quality 
marks ``include those in which the words or terms `gold,' `karat,' 
`silver,' `platinum,' (or platinum related metals), or their 
abbreviations, are included, either separately or as suffixes, 
prefixes, or syllables.'' The Commission has added this sentence of 
this Note to the introductory paragraph of this section in the 
revised Guides (Sec. 23.9). The Commission does not believe it is 
necessary to add the words duragold, diragold, noblegold, and 
goldine to the examples of quality marks listed in current 
Sec. 23.8.
---------------------------------------------------------------------------

    Part (a) of this section addresses the use of quality marks on 
articles that are made from more than one metal. The JVC suggested that 
the title be changed from ``Deception as to applicability of marks'' to 
``Deception as to application of marks'' and that a definition of 
application be added. The definition of application suggested by the 
JVC includes bills, invoices, orders, statements, letters, and 
advertisements. However, this definition is inappropriate in the 
context of part (a) of this section, which is limited to deception in 
the use of quality marks, which do not encompass bills, invoices, etc. 
The term ``quality mark'' is defined as a mark ``which has been 
stamped, embossed, inscribed, or otherwise placed, on any industry 
product and which indicates or suggests that such product is composed 
throughout of any precious metal or any alloy thereof or has a surface 
or surfaces on which there has been plated or deposited any precious 
metal or any alloy thereof.'' <SUP>169 Section 23.8 contains specific 
guidance for marks on the products themselves

[[Page 27194]]

(or attached thereto). Other sections of the Guides apply to claims 
made in bills, invoices, orders, statements, letters, and 
advertisements. Thus, the Commission has not included the proposed 
definition of application in the Guides.
---------------------------------------------------------------------------

    \169\ This is consistent with the references to such marks in 
the National Stamping Act, which applies to articles ``having 
stamped, branded, engraved, or printed thereon, or upon any tag, 
card, or label attached thereto, or upon any box, package, cover, or 
wrapper in which said article is incased or inclosed, any mark or 
word indicating or designed or intended to indicate'' the degree of 
fineness of the gold or silver in the article. 15 U.S.C. 294. A 
quality mark does not have to be placed on a product, but, if it is, 
it must be accurate within the tolerances prescribed by the National 
Stamping Act. 15 U.S.C. 294-296. The National Stamping Act goes 
beyond embossing quality marks on products to things surrounding the 
product (e.g., labels, wrappers), but not as far as bills, 
advertisements, etc., as the JVC proposes for the Guides.
---------------------------------------------------------------------------

    Part (b) of this section addresses deception by reason of the 
difference in the size of letters or words in quality marks (e.g., GOLD 
electroplate). A Note following this section, entitled ``Legibility of 
markings,'' recommends that quality marks be of sufficient size to be 
legible and be so placed as to be likely to be observed. The JVC has 
not suggested any changes to this section, or to the Note following it. 
The Commission agrees that the portion of the Note pertaining to 
legibility should remain unchanged.<SUP>170 However, the second 
sentence of the Note implies that quality marks should normally be 
engraved on products and that tag or labels can only be used when 
``such marking cannot be achieved without injury to the appearance of 
the product.'' The National Stamping Act indicates that quality marks 
can be applied by means of tags or labels, regardless of whether 
engraving would damage the product. The Commission has therefore 
modified this Note to clarify the fact that if a quality mark is used, 
it may be either engraved on the product or placed on a tag or label.
---------------------------------------------------------------------------

    \170\ There is no requirement that there be a quality mark; 
however, it may be deceptive to place an illegible mark on a 
product, because consumers might interpret such a mark to mean the 
product is of higher quality than it actually is.
---------------------------------------------------------------------------

    The second Note following this section currently states that it is 
the consensus of the members of the industry that quality marks on such 
items should be accompanied by identification of the manufacturer, 
processor, or distributor. The Commission has changed this Note to 
reference the requirements for identification contained in the National 
Stamping Act.<SUP>171
---------------------------------------------------------------------------

    \171\ The Watch Band Guides differ from the Jewelry Guides in 
their treatment of quality marks in two respects (in addition to 
that discussed in note , supra). Section 19.2(g)(3) of the Watch 
Band Guides, dealing with the marking of watch bands composed of two 
metals of similar appearance, is adequately addressed by 
Sec. 23.8(a) of the current Jewelry Guides, discussed above. Section 
19.2(g)(1) of the Watch Band Guides provides that if a quality mark 
is concealed by packaging, it should appear on the outside of the 
packaging if the failure to so display it would deceive consumers. 
The Jewelry Guides do not require that products contain quality 
marks and, thus, do not require that a quality mark be visible in 
spite of packaging. The Commission believes it is neither unfair nor 
deceptive to fail to include a quality mark; hence, it is neither 
unfair nor deceptive to allow packaging to conceal a quality mark. 
Thus, the Commission has not included this provision in the revised 
Guides.
---------------------------------------------------------------------------

8. Exemptions From Assay
    Some functional parts of gold alloy, gold-filled, silver and 
platinum items may need to be made of other sturdier metals to function 
properly, and thus, are exempt from any assay for quality. (An assay is 
a test made to determine the quantity of precious metal in a product 
compared to the weight of the whole product.) The current Guides 
include the exemptions for these parts that are set out in the various 
Voluntary Product Standards. Since trade practice for many years has 
been to make such parts of base metals, it is unlikely that consumers 
would expect them to be made of precious metal; hence, a claim that an 
item was silver would not be deceptive because the screws and rivets 
were made of base metal.
    The current Guides list the exemptions for gold and gold-filled 
items in section 23.5(e) and (f) and for silver and for silver in 
combination with gold, in footnote 2.<SUP>172 However, the Commission 
believes that detailed listings of the exemptions need not appear in 
the body of the Guides and has included the list of exemptions for all 
covered metal products in an Appendix.<SUP>173
---------------------------------------------------------------------------

    \172\ The Guides contain no exemptions for products which are 
never assayed. This includes products made of gold or silver 
electroplate. (Such articles are not sold with the representation 
that they contain a specific percent by weight of precious metal.)
    \173\ The current Guides use the Appendix to list and classify 
the Guides. The JVC proposed placing this material first as a Table 
of Contents. The Commission believes that the existing list of 
section numbers and titles in the table of contents is sufficient 
and has omitted this classification from the revised Guides.
---------------------------------------------------------------------------

    The list includes all exemptions from the current Guides and, based 
on the comments, includes some additions.<SUP>174 Tru-Kay stated that 
there is a significant inconsistency in the Guides between the 
exemptions recognized in the manufacture of gold-filled jewelry and 
those which are exempted in the manufacture of silver jewelry. Tru-Kay 
stated that ``industry trade practice over many years has been to apply 
the exemptions as listed for gold-filled to both gold-filled and 
sterling silver,'' because the same reasons that certain parts are 
exempt in gold-filled jewelry are also applicable in silver 
jewelry.<SUP>175 Tru-Kay explained that when the exemptions were first 
written, ``many articles that were being produced in gold-filled, were 
not at that time being produced in sterling silver.'' <SUP>176 Since 
this is no longer the case, Tru-Kay urged that ``these exemptions be 
standardized in a consistent manner.'' <SUP>177 The Commission agrees 
with this proposal and has expanded the list of exemptions for silver 
items to include all exemptions listed for gold-filled items.<SUP>178
---------------------------------------------------------------------------

    \174\ In addition, because the revised Guides cover items other 
than jewelry, the exemptions are stated as applying to industry 
products, not to jewelry industry products.
    The JVC proposed exemptions from assay for optical products, 
which are based on the VPS, with some additions. There were no 
comments opposing this proposal, and the Commission has included 
this list of exemptions for optical products in the Guides.
    \175\ Comment 196, p.2.
    \176\ Id.
    \177\ Id.
    \178\ Silver is relatively soft. Hence, it is logical for the 
exemptions for gold-filled items to apply also to silver items.
---------------------------------------------------------------------------

    General Findings, which makes small functional components of 
jewelry, suggested that there should be two additions to the gold 
exemptions.<SUP>179 First, it suggested the exemptions for karat gold 
jewelry include ``metallic parts completely encased in nonmetallic 
covering.'' This would include base-metal pegs used in gluing pearls or 
stones to the findings. (According to General Findings, ``the pegs are 
completely encased within the stone or pearl.'') The current Guides 
exempt ``metallic parts completely encased in nonmetallic covering'' 
when they are included in articles made of silver in combination with 
gold.<SUP>180 On the basis of the comment, the Commission has 
determined that such parts should be added to the list of exemptions 
for gold alloy jewelry (and to the list of exemptions for silver items, 
under the rationale advanced by Tru-Kay). The second suggestion was 
that ``bracelet and necklace snap tongues, i.e., clasps'' (sometimes 
referred to as springs) should be added to the exemptions for rolled 
gold plate jewelry. Bracelet and necklace snap tongues are already an 
exemption for articles made of platinum, and the Commission has added 
this to the list of exemptions for rolled gold plate jewelry (and to 
the list of exemptions for silver items).
---------------------------------------------------------------------------

    \179\ Comment 88, p.1.
    \180\ Footnote 2 to current Guides.
---------------------------------------------------------------------------

    Donald Bruce also suggested that the mechanical parts of lockets be 
added to the lists of exemptions for silver and gold alloy jewelry. 
These are already in the list of exemptions for gold-filled jewelry 
(which exempt ``field pieces and bezels for lockets''), and Bruce 
stated that ``the trade practice has interpreted this for Silver and 
Gold as well'' because a base metal hinged frame ``offers stability and 
strength to the moving parts.'' <SUP>181 Adding these to the list of 
exemptions for silver is logical because silver is relatively soft. 
Gold

[[Page 27195]]

alloy, however, is relatively hard.<SUP>182 Nevertheless, because trade 
practice has interpreted this exemption as applying to gold lockets for 
some time, it is unlikely that consumers would believe that the field 
pieces and bezels of a locket advertised as 14 karat gold were 14 karat 
gold. Therefore, the Commission has added these exemptions to the list 
of exemptions of silver and gold alloy products.<SUP>183
---------------------------------------------------------------------------

    \181\ Comment 218, p.3.
    \182\ As a result, the list of exemptions in the current Guides 
is much shorter for gold items than for silver items.
    \183\ The following were added to each list of exemptions: (1) 
karat gold: metallic parts completely and permanently encased in a 
nonmetallic covering, and field pieces and bezels for lockets; (2) 
gold-filled: bracelet and necklace snap tongues; (3) silver: field 
pieces and bezels for lockets; bracelet and necklace snap tongues; 
any other joints, catches, or screws; metallic parts completely and 
permanently encased in a nonmetallic covering. There were no 
additions to the exemptions for silver in combination with gold or 
for platinum.
---------------------------------------------------------------------------

9. Misuse of ``Corrosion Proof,'' ``Noncorrosive,'' etc.
    The Watch Band Guides, 16 CFR 19.3, contain a section regarding the 
use of the terms ``corrosion proof,'' ``noncorrosive,'' ``corrosion 
resistant,'' ``rust proof,'' ``rust resistant,'' or any word or term of 
equivalent import. The JVC did not recommend any changes in this 
section. Thus, the Commission has included this provision, unchanged, 
in the revised Guides as the last section pertaining to metals 
(Sec. 23.10).

D. Diamonds (Category III): Secs. 23.9-23.14

    The current Guides address diamonds in the definition section, 
Sec. 23.0, and in Secs. 23.9-23.14. Section 23.9 describes practices 
which are unfair uses of the word ``diamond.'' Sections 23.10-23.14 
deal with misuse of the terms ``perfect,'' ``blue white,'' ``properly 
cut,'' ``brilliant,'' ``full cut,'' and ``clean.'' In addition, 
artificial coloring, imitation and synthetic diamonds, and the words 
``reproduction,'' ``replica,'' ``gem,'' ``real,'' ``genuine,'' and 
``natural'' are addressed in Secs. 23.18-23.21.
1. Definition
    The Commission has moved the definition of ``diamond'' from 
Sec. 23.0 to the beginning of the substantive sections that deal with 
diamonds (Sec. 23.11, which is renamed ``Definition and misuse of the 
word `diamond' ''). The JVC proposed adding the following sentence to 
the definition of the word diamond: ``It is the hardest natural 
substance and in 1818 was arbitrarily given 10 on the Mohs relative 
scratch hardness scale.'' The JVC also proposed adding, after the 
definition of diamond, a ``Note'' regarding the Mohs scale and the 
standards for determining mineral ``hardness.''
    A definition of diamond is helpful to the extent that it makes 
clear what can nondeceptively be represented to be a diamond. However, 
there is no indication that the current definition of diamond has ever 
failed to serve its purpose, and some comments indicated the current 
definition is better.<SUP>184 The Commission, therefore, is not 
adopting this proposal.
---------------------------------------------------------------------------

    \184\ AGTA (49) p.15 (commenting that either information should 
be added to the proposed JVC definition or the last sentence of that 
definition and the following Note should ``be struck,'' adding that 
``AGTA prefers that both be struck from the guides''); NACSM (219) 
pp.25-26 (stating that the proposed addition to the definition is 
``not an improvement on the clarity of the mandates of the law'').
---------------------------------------------------------------------------

    The Postal Service stated that mail order jewelry promoters sell 
``tiny, unattractive, industrial grade diamonds'' as jewelry which ``no 
one would buy if they saw them.'' It suggested that the Guides be 
modified to prohibit ``advertisers from representing expressly or 
impliedly, that industrial or other non-jewelry quality diamonds are of 
jewelry quality.'' <SUP>185 The Commission agrees that such a practice 
is unfair and deceptive, and has included a Note that states the 
practice of advertising industrial grade diamonds as jewelry is unfair 
and deceptive. The provision advising against misrepresenting products 
visually, in Sec. 23.2, also would apply to this practice.
---------------------------------------------------------------------------

    \185\ Comment 244, p.2.
---------------------------------------------------------------------------

2. Misuse of the Word ``Diamond''
    Section 23.9 of the current Guides deals with misuse of the word 
``diamond.'' Neither the JVC nor any of the commenters proposed a 
change in this section, and there is no other information indicating a 
need for changing this section.
3. Misuse of the Words ``Perfect'' and ``Flawless''
    Section 23.10 of the current Guides, and the accompanying Note, 
deal with the use of the words ``perfect'' and ``flawless'' to describe 
a diamond. The JVC proposed revising this section to focus on the use 
of the term ``flawless,'' with a subsection stating that it is unfair 
to use the word ``perfect'' with respect to any diamond which is not 
flawless, or which is of inferior color or make. The organization of 
the current section is convoluted and difficult to understand. The 
Commission has determined that the proposed change will improve the 
clarity of the Guides, and has revised this section accordingly.
    To determine whether there was evidence that the term ``perfect'' 
has been used to mislead consumers, the FRN sought comment on whether 
the Guides should advise against use of the term ``perfect.'' Thirty-
two comments addressed this issue.
    Seven comments indicated that the term ``perfect'' is acceptable as 
defined in the current Guides.<SUP>186 Twenty-eight commenters stated 
that the term ``perfect'' should be prohibited, and one stated it 
should be allowed only as a synonym for flawless.<SUP>187 However, the 
current Guides allow diamonds to be called ``perfect'' if they are 
flawless and not of inferior color or make, and there is no evidence 
that large numbers of consumers have been deceived by the use of the 
word ``perfect.'' <SUP>188 The Commission has determined that the 
scheme in the current Guides adequately explains the type of diamond 
that nondeceptively may be described as ``perfect'' and that guidance 
that in effect totally bars the use of the word ``perfect'' would be an 
unwarranted infringement on free speech.<SUP>189
---------------------------------------------------------------------------

    \186\ King (11); Estate (23); Lannyte (65); GIA (81); Bales 
(156); NACSM (219); and Best (225).
    \187\ JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); Honora 
(14) and (15) p.1 (stating that if diamonds can be called perfect, 
``it would open vast opportunities for deceptive advertising and 
many consumers would be hurt''); Argo (17); AGS (18) p.3 (favoring 
the prohibition because ``[t]he potential for misuse is too 
great''); Capital (19); Estate (23); G&B (30); Jabel (47); Schwartz 
(52); Skalet (61); Eisen (91); Nowlin (109); McGee (112); ArtCarved 
(155); Bridge (163) p.2 (stating that ``perfect'' should not be 
allowed because relatively few diamonds ``meet all these very high 
standards''); LaPrad (181); IJA (192); Phillips (204); Bedford 
(210); Matthey (213); Bruce (218); MJSA (226); Preston (229); Limon 
(235); Leach (258); and Solid Gold (261).
    \188\ Indeed, many consumers may regard the word as ``mere 
puffing.'' One comment noted, ```Perfect' pertaining to anything is 
a dumb word and should arouse suspicion.'' Jabel (47) p.2.
    \189\ One comment stated that limiting the use of the term 
``perfect'' as a synonym for ``flawless'' to those situations in 
which the diamond described is not ``of inferior color or make'' is 
meaningless because ``inferior color or make'' cannot be defined. 
Limon (235) p.2. The Commission agrees that the definition is not 
precise, but nevertheless believes that the word can be used in a 
non-deceptive manner.
---------------------------------------------------------------------------

    The JVC also proposed changing current Sec. 23.10 to state that it 
is unfair to use the word ``flawless'' to describe a diamond ``which 
discloses blemishes, inclusions, lasering, prominent reflective whitish 
or colored grain lines, or clarity faults of any sort when examined 
under a corrected magnifier at 10-power, with adequate illumination, by 
a person skilled in diamond grading.'' With the exception of the 
addition of ``lasering,'' the changes appear to be simply a change in 
terminology. No reasons for the changes

[[Page 27196]]

in terminology are apparent (e.g., changing the terms ``flaws, cracks, 
carbon spots, clouds or other blemishes or imperfections'' to 
``blemishes, inclusions, lasering, prominent reflective whitish or 
colored grain lines, or clarity faults''). Thus, the Commission has not 
adopted these changes. However, the numerous comments which addressed 
lasering of diamonds in the context of a related JVC proposal, 
discussed below, indicate that lasering leaves channels or surface 
openings in a diamond that are similar to grains or other clarity 
faults. The Commission believes that it would be deceptive to describe 
a diamond that discloses internal lasering under the conditions 
specified in that section as ``flawless,'' and therefore has revised 
this section.<SUP>190
---------------------------------------------------------------------------

    \190\ Preston (229) stated, at p.10, that the word ``internal'' 
should precede the word ``lasering'' in this section, apparently to 
clarify that ``lasering'' in this section is not meant to include 
the use of lasers to cut diamonds but rather the use of lasers to 
remove blemishes. The Commission agrees with this comment and has 
included this clarification in the revised Guides.
---------------------------------------------------------------------------

    The Commission also has included the JVC's descriptions of when the 
flaws are visible--i.e., ``when examined under a corrected magnifier at 
10-power, with adequate illumination, by a person skilled in diamond 
grading.'' This is an updating of the current Guides (which refer to an 
examination ``in normal daylight, or its equivalent, by a trained eye 
under a ten-power, corrected diamond eye loupe or equal magnifier'') to 
reflect changes in available equipment.<SUP>191
---------------------------------------------------------------------------

    \191\ ICT (189) also suggested, at p.2, a modification of 
Sec. 23.10, i.e., that the word ``flawless'' should always be 
accompanied by the magnification level at which no flaws are visible 
[for example, ``flawless under 15X loupe'']. However, there is no 
evidence that such detailed information is material to consumers.
---------------------------------------------------------------------------

    In the current Guides, the Note following Sec. 23.10(a) also states 
that the use of a phrase such as ``commercially perfect'' for a diamond 
that has flaws is ``regarded as misleading and in violation of this 
section.'' The JVC proposed expanding this portion of the Note to also 
cover the phrase ``commercially flawless.'' <SUP>192 The Commission 
believes that the provision in the revised Guides, which applies to use 
of the words ``perfect,'' ``flawless,'' or ``any representation of 
similar meaning,'' is sufficient to prevent deception. The current Note 
is superfluous, and the Commission has deleted it.<SUP>193
---------------------------------------------------------------------------

    \192\ Eisen (91) stated, at p.1, that ``commercially flawless'' 
should not be allowed but did not offer any reasons.
    \193\ The JVC also proposed adding a Note that states that the 
term ``internally flawless'' may be used to describe a diamond 
``which meets the requirements set forth . . . but possesses only 
minor surface blemishes such as grain lines, polish or burn marks, 
scratches, nicks, or small naturals.'' No reasons were offered for 
this change. However, Lannyte (65) p. 5, stated ``Do not play games 
with the word `internally.' Any surface blemish has to exist on or 
in the surface to exist at all.'' Based on this comment, and the 
lack of other explanation for this provision, the Commission has not 
included this Note in the Guides.
---------------------------------------------------------------------------

    Section 23.10(b) states that it is unfair to describe a ring or 
other article of jewelry with a ``perfect'' center stone and side 
stones which are not ``perfect,'' as ``perfect,'' without disclosing 
that the description applies only to the center stone. The JVC proposed 
modifying this to apply to representations that stones are 
``flawless,'' and also proposed changing the reference to ``center 
stone or stones'' to ``principal diamond or diamonds.'' Such a change 
appropriately includes jewelry in which the principal stone is not the 
center stone.
4. Disclosure of Treatments
    Section 23.18 of the current Guides, entitled ``Deception as to 
precious and semi-precious stones,'' contains a Note which states that 
any artificial coloring or tinting of a diamond or precious or semi-
precious stone by ``coating, irradiating, or heating, or by use of 
nuclear bombardment, or by any other means'' should be disclosed and 
the fact that the coloring is not permanent, if such is the fact.
    The JVC proposed moving the portion of this section that applies to 
diamonds into the diamond category, modifying it to apply to any 
diamond that has been treated (rather than colored) by certain methods, 
and adding the following treatments to this list of those that should 
be disclosed: the internal use of a laser beam, the introduction or the 
infusion of any foreign substance, or treatment ``by any other means, 
without disclosure of the fact that the inherent quality and/or 
appearance of such diamond has been enhanced, and the result of this 
enhancement is not or may not be permanent, if such is the case.'' 
<SUP>194
---------------------------------------------------------------------------

    \194\ ISA (237A) proposed, at p.53, changing ``internal use of 
laser beam'' to ``the penetration of a laser drilling technique and/
or acid bath(s) which is customarily used by the trade to change the 
color of `black' inclusions to `white.''' It also suggested that 
``infusion of any foreign substance'' should be followed by the 
words ``fracture filled.'' However, the Commission believes that the 
words used in the JVC proposal adequately identify the processes 
that are being addressed.
---------------------------------------------------------------------------

    Internal laser treatment and the infusion of a foreign substance 
are treatments that did not exist in 1959 when the Guides were last 
substantively revised. A laser treatment involves the use of a laser 
beam to improve the appearance of diamonds having black inclusions by 
directing the laser beam at the black inclusion and then forcing acid 
through the tunnel made by the laser beam to remove the inclusion or to 
alter it so that the inclusion is not visible to the naked eye. 
``Infusion'' treatment, also known as ``fracture-filling,'' conceals 
cracks in diamonds by filling them with a foreign substance.
    Thirteen comments opposed the disclosure of laser treatment stating 
that it is ``a common practice'' and ``an extension of cutting, since 
soaking out surface black leaves no evidence of soaking. The channel 
left by the laser is often just one of several or numerous `natural' 
cracks, inclusions, or grain.'' <SUP>195 Verstandig stated that the 
other treatments which the JVC proposed should be disclosed ``are 
hardly-if at all-noticeable under a 10X magnification'' but that 
lasering is obvious under such magnification. It also noted that while 
lasering produces a small surface opening, the majority of diamonds 
sold in the U.S. have similar surface imperfections, and disclosure of 
these is not required.<SUP>196
---------------------------------------------------------------------------

    \195\  Green (6) p.1; see also London Star (20); DMIA (26); 
Roisen (31); Werdiger (48); Verstandig (154); David (194); H.R. 
Diamonds (195); ADS (197); Weitz (200); Kwiat (203); NACSM (219); 
and Service (222).
    \196\  Comment 154, p.2.
---------------------------------------------------------------------------

    DMIA noted that lasering is ``irreversible, does not add a foreign 
substance, is readily detectable with a ten power loupe, and does not 
require disclosure any more than * * * cutting an additional facet to 
improve the purity of a diamond.'' It also noted that GIA, which it 
described as a world-renowned diamond grading lab, refuses to grade 
diamonds infused with a foreign substance but does grade lasered 
diamonds, indicating on the grading report ``inclusions, naturals, 
extra facets, as well as lasering.'' <SUP>197 In addition, it noted 
that resolutions have been adopted on ``a world-wide basis requiring 
full disclosure of any ``treatment'' of diamonds such as irradiation 
which changes the color and atomic structure or the infusion of a 
foreign substance which produces a product no longer a pure diamond, 
but a ``composite'' material.'' It stated that ``[l]asering, on the 
other hand, is not a ``treatment'' * * * .'' <SUP>198
---------------------------------------------------------------------------

    \197\ Comment 26, pp.1-2.
    \198\ Comment 26, p.1. Roisen (31), David (194), H.R. Diamonds 
(195), ADS (197), and Weitz (200), all referred to the fact that the 
rules of the World Federation of Diamond Bourses require strict 
punishment of a member who fails to disclose treatment of a diamond, 
such as irradiation or infusion of a foreign substance. See the text 
of the joint resolution of the World Federation of Diamond Bourses 
and the International Diamond Manufacturers Association, as 
described in the Rapaport Diamond Report, July 17, 1992, p.5 
(attached to Rapaport (233)).

---------------------------------------------------------------------------

[[Page 27197]]

    On the other hand, one comment contained an attachment that argued 
that internal lasering should be disclosed because it adversely affects 
the value of the diamond.<SUP>199 The attachment stated that lasered 
stones are inferior because they ``are worth less than normal non-
lasered stones of the same grade.'' It further stated that a diamond 
purchaser who is unaware of the lasering, will be upset ``when the 
appraisal indicates laser treatment, or upon resale when the buyer 
offers a lower price due to lasering.'' <SUP>200
---------------------------------------------------------------------------

    \199\ Rapaport Diamond Report, July 17, 1992, p.6, attached to 
Rapaport (233); see also Preston (229) p.3; ISA (237A) p.51.
    \200\ Rapaport Diamond Report, July 17, 1992, p.6, attached to 
Rapaport (233).
---------------------------------------------------------------------------

    However, the comments (including eleven comments from diamond 
dealers and a diamond trade association) indicated that lasering is a 
common practice and not an extraordinary process that would be 
deceptive to conceal from the consumer. Moreover, a consumer acting 
reasonably under the circumstances would be on notice of laser 
treatment before sale. A grading report would indicate that the diamond 
had been laser-cleaned, and, if the buyer chose to examine the diamond 
under standard ten-power magnification, the laser tunnels would be 
obvious to the buyer. Thus, the Commission has determined not to 
include lasering among the treatments that always should be disclosed 
to avoid misleading consumers.
    By contrast, twelve of the thirteen comments that opposed 
disclosure of lasering stated that the fracture-filling process is a 
treatment of a diamond that should be disclosed to the 
consumer.<SUP>201 As previously noted, several of these comments stated 
that the rules of the World Federation of Diamond Bourses require 
disclosure of fracture-filling. Because fracture-filling is not the 
norm or what consumers acting reasonably under the circumstances would 
expect, it would be deceptive to fail to disclose fracture-filling. 
Consumers will not likely expect, in the absence of disclosure, that 
the stone was so treated. Thus, the absence of disclosure is also 
unfair in that it is likely to cause injury to consumers by 
affirmatively misleading their informed choice and so causing 
substantial, unavoidable injury that is not outweighed by any 
countervailing benefits.<SUP>202 Accordingly, the revised Guides advise 
sellers to disclose this treatment.
---------------------------------------------------------------------------

    \201\ Green (6); London Star (20); DMIA (26); Roisen (31); 
Werdiger (48); Verstandig (154); David (194); H.R. Diamonds (195); 
ADS (197); Weitz (200); Kwiat (203); and NACSM (219). Service (222) 
opposed all disclosure of diamond treatments, and did not 
specifically discuss fracture-filling. Best (225) opposed all the 
changes proposed by the JVC, but stated that fracture-filling ``may 
justify some future study and potential regulation by the FTC.''
    \202\ International Harvester Co., 104 F.T.C. 949, 1051 (1984). 
NACSM (219), at p. 26, pointed out that the process can sometimes be 
reversed by heat. For example, it is not uncommon for a diamond to 
be remounted and the heat from that process may partly melt out the 
foreign material used to fill the fracture. This adversely affects 
the appearance of the diamond and it may not be possible to remove 
the remainder of the fracture-filling material. See S. Lynn Diamond, 
``Filled Diamonds in the Spotlight,'' National Jeweler, Dec. 1, 
1994, at 36, 42 & 43.
---------------------------------------------------------------------------

    The JVC also proposed that this section require the disclosure of 
treatment of a diamond ``by any other means.'' However, the Commission 
believes that phrase is sufficiently vague to imply, for example, that 
removal of blemishes by lasering always should be disclosed, and thus, 
has not included this phrase in the section.
 5. ``Blue White'': Sec. 23.11
    Section 23.11 of the current Guides prohibits the use of ``blue 
white'' to describe a diamond ``which under normal, north daylight or 
its equivalent, shows any color or any trace of color other than blue 
or bluish.'' The JVC proposed prohibiting the use of this term.
    The term ``blue white'' has apparently been misused in the past to 
describe poorer quality or ``off color'' diamonds.<SUP>203 The use of 
blue white appears to have diminished because most of the industry now 
uses formal diamond grading systems. One comment suggested that ``blue 
white'' be restricted to ``a diamond that has strong blue fluorescence 
and is of the D-G color range [in the GIA grading system].'' <SUP>204 
However, the current Guides describe a proper use of blue-white and 
discourage its misuse. The Commission therefore has retained this 
section of the Guides.<SUP>205
---------------------------------------------------------------------------

    \203\  The definition of blue white in the Jewelers' Dictionary 
states: ``Term, often abused, to describe the color of a diamond. As 
frequently abused, it includes anything from a Jager to a Silver 
Cape. . . . [n.b., Jager refers to a fine white diamond; Silver Cape 
is a yellow one.] Better Business Bureaus recommend avoidance of the 
term and the American Gem Society prohibits its use.'' ``Jewelers' 
Dictionary'' 28 (3d ed. 1976). However, the proprietor of Solid Gold 
(261) stated, at p.2, that he has seen ``many diamonds which are 
accurately described as having a bluish-white color.''
    \204\ Rapaport (233) p. 2 (stating that the ``guides should not 
outlaw any terminology used by the trade'' but instead should define 
it ``so that it is not misleading'').
    \205\ ISA (237A) recommended, at p.53, the addition of a 
definition of ``normal north daylight'' and an addition which would 
limit the use of the term blue white to ``a diamond which is totally 
natural and free from any man induced treatments which exhibits a 
partially white body color and a partially blue body color. . . .  
The term blue body color is not to be blue caused by visible 
fluorescence . . . '' However, no evidence was provided that either 
of these additions were necessary, and the Commission has not 
included them in the Guides.
---------------------------------------------------------------------------

6. Cuts of Diamonds and ``Clean Diamonds'': Secs. 23.12- 23.14
    Section 23.12 of the current Guides states that it is unfair to 
describe a diamond as ``properly cut,'' ``well made,'' or ``modern 
cut'' or words of similar meaning, if it is ``lopsided, or so thick or 
so thin in depth as materially to detract from the brilliance of the 
stone.'' Section 23.13 restricts the use of the terms ``brilliant,'' 
``brilliant cut'' or ``full cut'' to a round diamond having at least 56 
facets.<SUP>206
---------------------------------------------------------------------------

    \206\  This section does allow certain other cuts (emerald, 
pear-shaped, heart-shaped, oval-shaped, and marquise) meeting the 
above-stated facet requirements to be described as ``brilliant cut'' 
or ``full cut'' if ``disclosure is made of the fact that the diamond 
is of such form.''
---------------------------------------------------------------------------

    The JVC did not propose any changes to these sections, but several 
comments did propose revisions. Two comments proposed certain numerical 
standards for describing ``properly cut'' diamonds.<SUP>207 AGL 
proposed that the Guides state that it is unfair for ``a diamond 
quality assessment report to itemize a series of percentages and non-
integrated cutting details without reference to a meaningful and 
comprehensive evaluation of cutting in order to facilitate a consumer's 
understanding of these critical value components.'' <SUP>208 However, 
AGL also indicated that such reports do not usually contain such an 
evaluation of cutting.<SUP>209 No other comments addressed this issue. 
Because there is insufficient information in the record to evaluate the 
proposals, the Commission has not changed these sections.
---------------------------------------------------------------------------

    \207\  ISA (237A) pp.54-56; Rapaport (233) p.3 (proposing a 
definition for a range of `Properly Cut' round diamonds and 
numerical standards (which differ from ISA's proposed numerical 
standards)).
    \208\  Comment 230, p.5. AGL also suggested that the Guides 
state that it is unfair for any diamond or colored stone quality 
assessment reports or appraisals to fail to contain adequate 
tolerance information for each element that impacts on the value. 
Id. at 4. However, the Commission believes such a proposal, which 
would involve providing guidance on the manner in which appraisers 
and graders prepare reports, is beyond the scope of these Guides.
    \209\  Comment 230, p.5. Preston (229) stated, at p.6, that 
``AGS attempts to train its members to specify cutting grades rather 
precisely. GIA, on the other hand, does not specify a cutting grade 
at this time.''
---------------------------------------------------------------------------

    Section 23.14 states that it is unfair to use the terms ``clean,'' 
``eye clean,'' ``commercially clean,'' ``commercially white,'' or 
similar terms to mislead or deceive consumers. The JVC did not propose 
any changes to this section. Unlike other provisions of the Guides, 
this section does not provide guidance regarding the use of these 
terms, other

[[Page 27198]]

than to state that they should not be used to deceive purchasers. 
Although one comment indicated that these terms are still in 
use,<SUP>210 the Commission has concluded that the admonition in 
Sec. 23.1 not to misrepresent material characteristics of a product 
adequately encompasses misrepresentations regarding these terms. 
Therefore, the Commission has deleted this provision from the Guides.
---------------------------------------------------------------------------

    \210\  Rapaport (233) stated, at pp.2-3, that the terms 
``clean,'' ``eye clean,'' and ``commercial white'' are ``regularly 
used by the diamond trade to describe diamonds,'' noting 
specifically that the term ``eye clean'' is ``commonly used to 
describe diamonds that do not have inclusions that are visible to 
the naked eye.''
---------------------------------------------------------------------------

7. Proposals Relating to Diamond Weight
    a. Misrepresentation of weight. Section 23.16 of the JVC petition 
deals with misrepresentations of diamond weights, an issue which is not 
specifically addressed in the current Guides. The JVC's proposed 
preamble to this section states that the standard unit of weight for 
diamonds is the carat, defines the terms carat and point, and states 
that the abbreviation for carat is ct. The Commission has not included 
this preamble in the revised Guides. As discussed below, the Commission 
has included a provision relating to the use of ``points'' in the 
revised Guides, and that provision contains an explanation of the 
meaning of ``carat'' and ``point.''
    The JVC suggested adding a section stating that it is unfair to 
misrepresent the weight of a diamond. Section 23.1 of the current 
Guides provides that it is unfair to misrepresent various material 
characteristics of industry products, including weight. However, the 
Commission has included this admonition against misrepresenting the 
weight of diamonds in section 23.17 of the revised Guides, and has 
provided additional guidance for diamond weight representations in that 
section, as discussed in detail below.
    b. Use of ``points''. The JVC, in section 23.16(a), proposed that a 
section be added to the Guides stating that the use of the term 
``points'' <SUP>211 to represent the weight of a diamond is unfair 
except ``in direct conversations.'' In some instances, according to the 
comments, consumers perceive a representation that a diamond is ``.25 
pt.'' to mean ``.25 ct.'' <SUP>212 The latter is \1/4\th carat; the 
former (.25 pt.) is 1/400th carat. To obtain more information about 
this issue, the FRN asked whether the use of ``points'' to describe 
diamond weights should be limited to oral representations.
---------------------------------------------------------------------------

    \211\  The term ``point'' is used to express one-hundredths of a 
carat (e.g., .25 ct = 25 points).
    \212\  Limon (235) p.3 (stating that the proposal ``was inspired 
by a nationally published advertisement for an item containing a 
diamond weighing `.25 pt.'[which was] universally misread as `.25 
ct.'''); Skalet (61) p.4 (stating that ``considerable deception has 
been leveled at the consuming public to make a `point .25 carat' or 
`.25 point' gemstone appear to be describing a \1/4\ carat 
gemstone''); Bedford (210) p.2 (stating ``I have had some people 
come in thinking they were going to win a .25ct. diamond and they 
were actually getting a .025 point diamond''); Bruce (218) p.10 
(noting that ``we have seen advertisements where people confuse 
points with carats (pt. with ct.)'').
---------------------------------------------------------------------------

    Thirty-five comments addressed this issue. Four comments, including 
ones from the Postal Service and NACAA, supported eliminating use of 
the term ``points'' in either oral or written representations.<SUP>213 
Twenty-two comments supported limiting the use of the term ``points'' 
to oral representations.<SUP>214 Nine comments stated that the use of 
the term should be permitted in written as well as oral 
representations, contending that the term can be used in writing in a 
manner that is not unfair or deceptive.<SUP>215
---------------------------------------------------------------------------

    \213\  Honora (15); Lannyte (65); NACAA (90); and Postal Service 
(244).
    \214\  Fasnacht (4); Sibbing (5); Thorpe (7); Argo (17); AGS 
(18); Capital (19); Estate (23); Jabel (47); Schwartz (52); Skalet 
(61); GIA (81); Nowlin (109); McGee (112); Bridge (163); IJA (192); 
Phillips (204); Bedford (210); Matthey (213); Bruce (218); MJSA 
(226); Preston (229); and Limon (235).
    \215\  G&B (30); ArtCarved (155); Bales (156); LaPrad (181); 
NACSM (219); Service (222); Diamonique (224); Best (225); and Leach 
(256). Diamonique (224) stated, at p.1, that prohibition of 
``point'' or ``pt.'' would ``result in the use of fractional 
definitions of diamond weights as used in the past.'' However, other 
comments (discussed below), stated that fractions are currently in 
wide use, and are not deceptive.
---------------------------------------------------------------------------

    One comment noted that ``points'' is ``a term that the layman is 
not familiar with.'' <SUP>216 The Postal Service favored a prohibition, 
stating that, in many situations, consumers do not actually see the 
jewelry before purchasing it, and the term point (i.e., .25 pt.) is 
used to misrepresent the value of a diamond.<SUP>217
---------------------------------------------------------------------------

    \216\  Bruce (218) p.10.
    \217\  Comment 244, pp.1-2.
---------------------------------------------------------------------------

    The comments clearly believe that the term ``pt.'' is being used to 
deceive the public, particularly in mail order transactions.<SUP>218 
The deception described in the comments appears to arise primarily when 
the abbreviation for point (``pt.'') appears in writing.<SUP>219
---------------------------------------------------------------------------

    \218\  Thorpe (7) p.2 (stating that the ``consumer sees a 
jewelry term they are `familiar' with and read it as 0.25 ct.'').
    \219\  However, one comment noted that problems also occur in 
television advertising. Sibbing (5) p.1 (stating ``No more `quarter 
point diamonds' as can be found on TV advertisements'').
---------------------------------------------------------------------------

    Nevertheless, the term ``point,'' with adequate disclosure, could 
be used in a non-deceptive manner. Therefore, the Commission has added 
a provision to the Guides which states that if the term ``point'' is 
used in advertising (including television) or in point of sale 
materials to describe the weight of a diamond, the weight should also 
be given in decimal parts of a carat (e.g., .25 pt. is .0025 ct.). The 
admonition to include the carat weight in decimals should deter sellers 
from attempting to mislead consumers. Furthermore, Sec. 23.2 of the 
Guides addresses the use of misleading visual representations of 
diamonds.
    c. Disclosure of minimum total weight. The JVC also proposed adding 
provisions to the Guides stating that it is unfair to fail to mark new 
industry products containing one or more diamonds with the minimum 
weight of the diamonds in the product and that it is unfair to refer to 
the weight of a diamond or diamonds in advertising for new industry 
products without disclosing the minimum total weight.<SUP>220 The FRN 
solicited comment on this proposal.
---------------------------------------------------------------------------

    \220\ Apparently the proposal was limited to new products 
because, as one comment noted, ``it is impossible to get exact 
measurements of a diamond weight when measuring diamonds when 
mounted.'' Bedford (210) p.2.
---------------------------------------------------------------------------

    Thirty-nine comments addressed this issue. Thirty-one comments 
approved marking jewelry, or tags or invoices attached to it, with the 
minimum weight of the diamonds set in it.<SUP>221 Eight comments 
opposed the proposal.<SUP>222
---------------------------------------------------------------------------

    \221\ JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); Honora 
(15); AGS (18); Capital (19); Estate (23); G&B (30); Jabel (47); 
Schwartz (52); Skalet (61); Lannyte (65); GIA (81); NACAA (90); 
Nowlin (109); McGee (112); ArtCarved (155); Bales (156); Bridge 
(163); LaPrad (181); IJA (192); Phillips (204); Bedford (210); JVC 
(212); Matthey (213); Bruce (218); MJSA (226); Preston (229); Limon 
(235); and Leach (258). Two of these stated that diamonds under .10 
carat should be exempt [Skalet (61) and ArtCarved (155)], and one 
stated that the minimum weight information should only be required 
on the invoice [Honora (15)].
    \222\  Argo (17); Schaeffer (211); NACSM (219); Service (222); 
Best (225); Sheaffer (249); and Franklin (250). (Solid Gold (261) 
also opposed this provision, but apparently did not understand that 
it would only apply to new jewelry.) Several of these comments 
stated that this requirement would increase costs.
---------------------------------------------------------------------------

    Generally, the comments indicated a belief that marking new jewelry 
with the minimum diamond weight would prevent misrepresentation of 
weight by the manufacturer or other sellers farther down in the line of 
commerce. GIA stated that there was a tendency for ``multistone rings 
and other jewelry sold as a given weight to weigh less than the 
indicated weight,'' especially where the ring is not stamped with the 
minimum weight.<SUP>223 GIA further stated that ``[i]n our experience, 
if the total weight is stamped on the jewelry, the manufacturer usually 
makes sure that

[[Page 27199]]

the weight is accurate,'' and believed that ``requiring stamping of a 
minimum weight on the jewelry (particularly in combination with 
trademark stamping) would provide a strong deterrent against 
underweighting diamond content.'' <SUP>224
---------------------------------------------------------------------------

    \223\ Comment 81, p.2.
    \224\ Comment 81, p.2. AGS (18) p.2 (stating, ``The market place 
is replete with purveyors of diamond jewelry who overstate the total 
carat weight of multi-diamond items'').
---------------------------------------------------------------------------

    NACAA commented that its members received complaints about 
exaggeration of the weights of stones (not limited to diamonds) and 
stated that it would be ``helpful to consumers'' for the Guides to 
require marking of minimum total weight on new items.<SUP>225 However, 
the Guides already state that it is unfair to misrepresent the weight 
of a diamond (or any other jewelry). Moreover, none of the comments 
explained why it would be unfair or deceptive to fail to mark new 
jewelry containing diamonds with the minimum total weight of the 
diamonds, nor is there any obvious reason why a failure to so mark the 
jewelry, or to include this in advertising, would be unfair or 
deceptive.<SUP>226 Therefore, the Commission has not included this 
provision in the revised Guides.
---------------------------------------------------------------------------

    \225\ Comment 90, pp.1-2.
    \226\  Indeed, if this practice is unfair or deceptive for 
``new'' jewelry, logically it is also unfair or deceptive for 
``old'' jewelry and for jewelry containing gemstones other than 
diamonds. LaPrad (181) p.2, and Limon (235) p.4, each suggested that 
the weight marking requirement should apply to colored stones as 
well as diamonds.
---------------------------------------------------------------------------

    d. Weight tolerance. The JVC also proposed adding provisions to the 
Guides setting forth specific tolerances for diamond weight 
representations. The JVC proposed in sections 23.16(c)-(e) of its 
petition, a tolerance of .005 carat for weight representations for 
individual diamonds, whether mounted or unmounted, and a tolerance of 
.01 carat for weight representations pertaining to ``two or more 
diamonds in a single product.'' This proposal generated 84 
comments.<SUP>227 Three comments specifically supported the JVC's 
proposed tolerance.<SUP>228 Eighty-one commenters opposed the proposed 
tolerances.<SUP>229
---------------------------------------------------------------------------

    \227\ This figure is exclusive of comments that simply favored 
all the changes suggested by the JVC.
    \228\ Bruce (218); Limon (235); and Schwartz (52).
    \229\ NACSM (219); Service (222); Diamonique (224); Best (225); 
MJSA (226); Rapaport (233); and NRF (238) submitted individual 
comments. The other 74 were form letters. In the interest of 
brevity, the 74 commenters are listed here by their comment number 
only: 28; 32; 33; 35; 36; 37; 39; 40; 41; 43; 45; 46; 50; 51; 53; 
54; 55; 56; 57; 58; 59; 60; 63; 67; 68; 69; 70; 71; 72; 73; 74; 75; 
77; 78; 79; 80; 93; 94; 95; 96; 97; 99; 100; 101; 102; 104; 105; 
107; 108; 110; 114; 115; 117; 119; 121; 122; 157; 158; 160; 164; 
179; 180; 190; 191; 201; 211; 214; 220; 241; 243; 260; 263; and 264.
---------------------------------------------------------------------------

    One comment stated that the proposed tolerance was too small 
because few diamond scales are so finely calibrated, and that the 
tolerance should be .01 ct.--one hundredth of a carat.<SUP>230 However, 
Commission staff telephoned several companies, and determined that most 
have scales that can weigh diamonds to .005 carats.<SUP>231
---------------------------------------------------------------------------

    \230\ Rapaport (233) p.4. Diamonique (224) pp.1-2 (stating that 
current measuring devices are not adequate and the present tolerance 
is .01 carat). But see Fasnacht (4) p.2 (stating that weighing is 
fast and accurate with today's electronic scales).
    \231\ Commission staff interviewed 5 jewelers (Boone and Sons 
Jewelers, Fleisher Jewelers, Kings Jewelry, Loubons, and Jewelry by 
Design) in the Washington area about what kind of scales they use. 
No store utilized a scale that was not accurate enough to meet the 
proposed .005 carat tolerance. Staff also interviewed Ben Fine, who 
sells Melter Scales; Gaston Lopez, a sales representative of 
Gemological Institute of America, which sells several different 
makes of scales; and a representative from Dendritic Scales. All 
confirmed that they sell scales that are accurate to within \1/2\ 
point.
---------------------------------------------------------------------------

    Numerous other comments opposed the tolerances because they would 
increase the cost of sorting diamonds, raise the price of diamonds for 
high-volume manufacturers, and increase prices for consumers. MJSA 
explained that high-volume manufacturers sieve rather than weigh 
individual stones, and that the proposed tolerance would require 
manufacturers to ``weigh, tag, and flute the stones to be incorporated 
in a piece of jewelry.'' <SUP>232 MJSA stated that ``the added costs of 
this procedure would be reflected in the price of the finished article 
and be passed on to the consumer.'' <SUP>233
---------------------------------------------------------------------------

    \232\  Comment 226, p.8.
    \233\ Comment 226, p.8. NACSM (219) pp.20-21 (explaining that 
rough diamonds ``are purchased most often from DeBeers * * * [and] 
sold to manufacturers * * * in parcels containing certain grade and 
quantities such as `one fifths,' `quarters,' `one thirds,' `halves,' 
`carats,' etc. The fractions refer to the approximate sizes of the 
diamonds contained in the parcels''); Goldman (60) p.3 (stating that 
the international market ``sells as a fifth of a carat, goods 
(diamonds) from 18 to 23 points'').
---------------------------------------------------------------------------

    Although Bruce supported the proposed tolerance and opposed the use 
of fractions to describe diamond weights, it noted that ``fractional 
diamond sizes are a convenience for the industry, in the trading of 
loose stones,'' and that ``keeping track of diamond sizes for tagging 
purposes would require a little more care and planning, but it can be 
done.'' <SUP>234
---------------------------------------------------------------------------

    \234\ Comment 218, pp.2-3 (also stating that ``if people in the 
trade buy a single stone they will pay for it by its exact 
weight'').
---------------------------------------------------------------------------

    Many commenters stated that the current industry practice is to use 
fractions to designate weights of less than a carat, and that there is 
a standard tolerance for such fractional representations. Service 
explained that chain retailers use fractions to advertise diamonds so 
that specific prices can be given for specific weights. Service 
explained that the proposed tolerance would be costly because it 
``would narrowly and unreasonably limit the range of weights available 
for particular fractions of a carat.'' <SUP>235 For example, a fifth 
represents 20 points and under the JVC's proposed tolerances, only 
diamonds that weigh at least 19.5 points could be described as a fifth. 
Several commenters stated that they used the standards contained in the 
GIA publication, ``Diamonds 3.'' <SUP>236 This 1986 GIA booklet, 
states, at p.19, that ``approximate weights are often stated in 
fractions,'' and it sets out a chart stating the average weight range 
associated with the various fractions (i.e., \1/5\ carat refers to .18 
through .22 carat).<SUP>237
---------------------------------------------------------------------------

    \235\ Comment 222, p.3. Numerous comments also indicated that 
there would be high demand for stones close enough to the fractions 
to be designated as fractions, and other stones could not be used by 
mass retailers. ``If retailers were no longer allowed to sell 18 
points as a fifth, then what would happen to all the 18 and 19 
pointers * * *?'' Goldman (60) p.2. London Star stated, ``This 
standard would considerably lessen the availability of stones within 
each size and therefore drastically increase the price to the 
consumer.'' Comment 20, p.2. Of course, diamond weights can be, and 
often are, expressed in the decimal system. However, the mass 
marketers, for the reasons described above, state that it is more 
efficient for them to describe diamond weights as fractions.
    \236\ Attachment B to NACSM (219). Best (225) pp.4-5 (stating 
that these standards ``have been widely used and accepted for many 
years and have effectively become the national and international 
industry standard''); NACSM (219) p.11 (stating that these GIA 
ranges ``merely recognize industry standards which have resulted 
from longstanding accepted custom and usage'').
    \237\ Attachment B to NACSM (219). The booklet notes that the 
ranges ``may vary slightly from one firm or organization to 
another.'' Id. This is borne out by the comments.
---------------------------------------------------------------------------

    Best noted that under the GIA tolerances, a diamond can be sold as 
half a carat if it weighs between .47 and .56 carats, but that the 
proposed tolerances would require it to weigh at least .495 carats. 
Best stated that under the JVC proposal it would be forced to either 
select stones that fall within the tolerances, so that prices for the 
size could be advertised, or to treat each stone individually, and not 
provide price information regarding the stones in advertising. It 
explained that because there is a limited supply of stones that fall 
within the JVC's proposed tolerances, demand will escalate for these 
stones and the cost of the stones will increase. Therefore, 
``[j]ewelers like Best would no longer be able to offer a consistently 
lower price alternative to the traditional high margin jewelers.'' 
Instead, Best would be forced to ``price, mark and sell each item 
individually,'' which is the philosophy of a boutique

[[Page 27200]]

jeweler, and ``contrary to the way a mass merchandiser operates.'' 
<SUP>238
---------------------------------------------------------------------------

    \238\  Comment 255, p.8.
---------------------------------------------------------------------------

    Several comments suggested alternatives to the JVC proposal. MJSA 
suggested ``a broader minus tolerance which is expressed in 
proportional terms rather than as an absolute quantitative 
measurement.'' <SUP>239 Ross-Simons suggested a tolerance of 5% or .05 
carat for a piece with multiple diamonds, whichever is smaller.<SUP>240
---------------------------------------------------------------------------

    \239\  Comment 226, p.8.
    \240\  Ross-Simons (67) stated, at p.1, that for catalog 
advertisers ``a tolerance of just .01 ct on a piece of jewelry with 
multiple diamonds is too restrictive . . . [because] we show a piece 
of diamond jewelry in our catalog and order backup items after the 
catalog is mailed.'' Ross-Simons further stated that for pieces 
containing several carats of diamonds, with multiple stones, a .01 
ct. deviation is unrealistic, and would require it to either 
``understate the weight to be safe or overcharge the consumer.'' 
Comment 67, p.1.
---------------------------------------------------------------------------

    The Commission agrees with the comments that state that the 
proposed tolerance may be too restrictive and may result in an 
increased cost to the consumer. However, consumers may not interpret a 
claim that a diamond is half a carat as meaning that it falls within 
the range set out in the GIA booklet. In fact, the GIA booklet states: 
``Customers also think in terms of fractions, but they tend to expect a 
half-carat stone to weigh exactly 0.50 carat.'' <SUP>241 Furthermore, 
diamonds are so expensive that receiving a diamond that is even a few 
points less than what was represented can be a significant loss to the 
consumer. In this respect it appears that at least for some industry 
members, current practice may be contrary to consumers' expectations 
and may not adequately apprise consumers of the terms of the seller's 
offer (i.e., that jewelry advertised with \1/5\ carat diamonds is 
actually offered as jewelry with \1/5\ carat weight, plus or minus some 
tolerance the seller is using).
---------------------------------------------------------------------------

    \241\  GIA booklet, p.19, attached as Exh. B to NACSM (219).
---------------------------------------------------------------------------

    However, the Commission believes that a fractional representation 
of carat weight may be qualified so that it is neither unfair or 
deceptive. For example, if a claim such as ``\1/2\ carat'' is 
accompanied by a disclosure of the weight range that is used, it does 
not imply precision to the level of 0.005 carat. A decimal 
representation of carat weight, such as ``0.47 carat,'' does imply 
accuracy to the level of the second decimal place--i.e., .005 carat. 
Therefore, the level of tolerance applicable to a diamond weight claim 
depends on the type of claim that has been made.
    Thus, the revised Guides clarify that representations of diamond 
weight should indicate the weight tolerance that is being used. If 
diamond weight is stated as decimal parts of a carat, the stated figure 
should be accurate to the last decimal place. If a fractional 
representation is used to describe the weight of a diamond, the fact 
that the diamond weight is not exact should be conspicuously disclosed 
in close proximity to the fractional representation, and the range of 
weight for each fraction should also be disclosed. A Note following 
this section (23.17) explicitly states that, for claims made in 
catalogs, the disclosure should appear on every page where the claim is 
made, but that the disclosure may refer to a chart or other detailed 
explanation of the actual ranges used. (For example, ``Diamond weights 
are not exact; see chart on p.X for ranges.'') <SUP>242 These 
provisions also provide guidance for making weight representations for 
items with multiple stones.
---------------------------------------------------------------------------

    \242\  Some mass retailers stated that they already provide the 
weight ranges in their catalogs and/or at the point of purchase. 
Best (225) p.5 and Service (222) p.3.
---------------------------------------------------------------------------

    e. Misrepresentation of weight of diamonds combined with other 
gemstones. Finally, one comment suggested that a provision be added to 
the Guides stating that it is unfair to represent the combined weight 
of two or more gemstones of different gemological varieties in any new 
single product as ``total gemstone weight'' or words of similar import, 
without disclosing with equal conspicuity the combined weight of the 
gemstone of each gemological variety in the products.<SUP>243
---------------------------------------------------------------------------

    \243\  Limon (235) p.4.
---------------------------------------------------------------------------

    However, the phrase ``total gemstone weight'' does provide notice 
that the weight given applies to all gemstones in the item, not just 
the most expensive. Thus, the Commission does not believe that a 
representation of ``total gemstone weight'' would inherently be unfair 
or deceptive. Consumers interested in a breakdown by gemstone category 
would be put on notice by the statement ``total gemstone weight'' that 
further inquiry is needed.

E. Pearls (Category IV): Secs. 23.15-23.17

    The current Guides address pearls in the definition section, 
Sec. 23.0, and in Secs. 23.15-23.17. Section 23.15 describes practices 
which are unfair uses of the word ``pearl.'' Section 23.16 describes 
unfair uses of other terms, such as ``cultured pearl,'' ``Oriental 
pearl,'' and ``natura.'' Section 23.17 describes unfair practices 
involving false, misleading, or deceptive statements about cultured 
pearls, including the manner in which they are produced and the 
thickness of the nacre coating. In addition, provisions in Secs. 23.20 
and 23.21, pertaining to the misuse of certain words (real, genuine, 
natural, gem, reproduction, replica, and synthetic) apply to pearls. 
The changes proposed by the JVC and by certain commenters are discussed 
below.
1. Definitions
    a. Modifications of existing definitions.  The Commission has moved 
the definitions relating to pearls from Sec. 23.0 to the beginning of 
the substantive sections that deal with pearls (Sec. 23.18). The JVC 
proposed changes (in section 23.17 of its petition) in the three 
definitions pertaining to pearls (``pearl,'' ``cultured pearl,'' and 
``imitation pearl'') that currently appear in the Guides. No reasons 
were offered for changing the current definitions, and there was no 
allegation that they were inaccurate or caused any problems.
    Four comments addressed the proposed changes in the definitions. 
The National Retail Federation stated that cogent definitions for the 
three basic types of pearls ``are lacking'' in the JVC 
petition.<SUP>244 Three comments suggested changes in the JVC's 
proposed definitions, but did not explain why it is necessary to change 
the definitions in the current Guides, nor state that any 
misconceptions have occurred.<SUP>245
---------------------------------------------------------------------------

    \244\  Comment 238, p.2.
    \245\  A&Z Pearls (29) p.1 (suggesting that the JVC's definition 
of ``cultured pearl'' be revised to include a better definition of 
the word ``nacre'' because it would ``eliminate misinterpretations 
of the term therefore clearing any misconceptions of `nacre' being 
formed by a human agency''); AGTA (49) p.15 (suggesting editing the 
JVC's proposed definition of ``pearl''); CPAA (193) p.3 (suggesting 
editing the JVC's proposed definition of ``pearl'' and ``imitation 
pearl'').
---------------------------------------------------------------------------

     Definitions are helpful to the extent that they make clear what 
can nondeceptively be represented to be a pearl, a cultured pearl, or 
an imitation pearl. There is no indication that the definitions of the 
three types of pearls in the current Guides have ever failed to serve 
this purpose. Consequently, the Commission has not changed these 
definitions.
    b. Additional proposed definitions. The JVC proposed adding eleven 
new definitions of types of pearls to the Guides. The JVC offered no 
reason for adding definitions of these terms to the Guides, nor did it 
allege that these terms had been used to deceive consumers. The 
National Retail Federation noted that there are three basic types of 
pearls (natural, cultured, and simulated) and that the definition 
section proposed by the JVC ``is unnecessarily detailed and 
confusing.'' <SUP>246 The Commission has

[[Page 27201]]

determined to include additional definitions in the Guides, as 
discussed below, only where there are specific reasons for doing so.
---------------------------------------------------------------------------

    \246\  Comment 238, p.1; NACSM (219) p.27 (stating that the 
definitions ``seem unnecessary'').
---------------------------------------------------------------------------

    i. Definitions proposed by the JVC. The only apparent purpose for 
five of the proposed definitions appears to be to emphasize the fact 
that a cultured pearl (or whatever specific type of cultured pearl) 
must be described as a cultured pearl. The JVC proposed definitions, 
with accompanying sections regarding the use of the term ``cultured,'' 
for the following pearls: Mabe cultured pearl, black pearl and black 
cultured pearl, natural color, fresh water pearl <SUP>247 and sweet 
water pearl. However, Sec. 23.15 of the current Guides already states 
that it is unfair to use the unqualified word ``pearl'' to describe 
anything other than a natural pearl and that it is unfair to use the 
word ``pearl'' to describe a cultured pearl ``unless it is immediately 
preceded, with equal conspicuity, by the word `cultured' or 
`cultivated,' or by some other word or phrase of like meaning and 
connotation, so as to indicate definitely and clearly that the product 
is not a pearl.'' Because there is no information indicating a problem 
with these terms, or the adequacy of the existing provision, the 
Commission is not including these definitions in the Guides.
---------------------------------------------------------------------------

    \247\  Finlay implied that retailers may be describing fresh 
water cultured pearls as simply ``fresh water pearls'' and objected 
to requiring advertisers to use ``cultured'' for fresh water pearls, 
stating, ``consumers have come to associate the term `cultured 
pearls' with round pearls and that to use the term `cultured' in 
conjunction with irregularly shapen [sic] fresh water pearls would 
create confusion.'' Comment 253, p.2.
---------------------------------------------------------------------------

    South Sea pearls: The JVC suggested the following definitions for 
South Sea pearls: ``A natural pearl found in the salt water mollusks of 
the Pacific Ocean South Sea Islands, Australia and Burma.'' It 
suggested that a South Sea cultured pearl be defined as a cultured 
pearl ``found in the salt water mollusks of the Pacific Ocean South Sea 
Islands, Australia and Burma.'' There was comment suggesting that there 
is a market for South Sea cultured pearls, and that such pearls are 
quite valuable. An article attached to the Rapaport comment stated that 
South Sea cultured pearls ``have come to challenge the supremacy of the 
Japanese akoya [cultured pearls] in quality * * *. The South Sea pearls 
have a strong market because of one particular feature that makes them 
attractive: size.'' <SUP>248 The CPAA stated that it frequently 
receives complaints that imitation pearl companies are using foreign 
names to confuse consumers.<SUP>249
---------------------------------------------------------------------------

    \248\  Rapaport Diamond Report, July 17, 1992, p.24, attached to 
Comment 233 (noting that the South Sea pearls are the product of a 
different oyster than Japanese pearls).
    \249\  Comment 193, pp.13-14.
---------------------------------------------------------------------------

    The Commission therefore has revised the Guides to state that it is 
unfair or deceptive to represent a pearl or a cultured pearl as being a 
South Sea pearl when such is not the case. This statement, which 
includes a definition of the term, is included in section 23.20(g) of 
the revised Guides.<SUP>250
---------------------------------------------------------------------------

    \250\  The CPAA suggested revising the JVC's proposed definition 
of South Sea pearl: ``The word `Burma' should be replaced with the 
words `Southeast Asia.' Not only is Burma now officially called 
Myanmar, but there are other countries such as Malaysia, Indonesia, 
and Thailand in that region which are producing similar pearls.'' 
Comment 193, p.4. The Commission has made this change.
---------------------------------------------------------------------------

    Oriental pearl: The meaning of the term ``Oriental pearl'' is clear 
in the current Guides. There is no evidence that the lack of a separate 
definition has caused any confusion or resulted in any misuse of the 
term. There was no comment pertaining specifically to this proposed 
definition. Thus, the Commission has not included a separate definition 
in the Guides.
    Blister pearls: The JVC suggested definitions for ``blister pearl'' 
and ``cultured blister pearl'' and proposed a section stating that it 
is unfair to use the term blister pearl unless it is a pearl which 
meets the definition (i.e., a pearl ``often hollow and irregular in 
form'').
    There is no evidence that blister pearls are more valuable than 
other pearls or that the term ``blister pearl'' is being used to 
deceive consumers. Moreover, misrepresentations of the word ``pearl'' 
are adequately covered in the Guides. The Commission therefore is not 
including the definitions relating to blister pearls in the Guides.
    Seed pearl: Section 23.16(b) of the Guides states that it is unfair 
to use the term ``seed pearl'' or any similar term to describe any 
cultured or imitation pearl. The JVC proposed defining seed pearl as: 
``A small, natural pearl which measures approximately two millimeters 
or less.'' In a related portion of its petition, the JVC proposed a 
section that states that it is unfair to describe a cultured or 
simulated pearl as a seed pearl without using a qualifying term such as 
``cultured,'' ``simulated,'' ``artificial,'' or ``imitation.''
    The proposed definition and related section would indicate it is 
not deceptive to describe cultured and artificial pearls as seed 
pearls, if qualified appropriately, whereas the current Guides appear 
to inhibit this. The Commission has concluded that this is a useful 
change because it allows products that consumers might wish to purchase 
(i.e., cultured or artificial seed pearls) to be accurately described.
    ii. Definitions suggested by other commenters. Keshi pearls: A & Z 
Pearls, CPAA, and AGTA proposed that a definition of ``Keshi'' pearls 
be added to the Guides.<SUP>251 A & Z Pearls and CPAA also proposed 
adding two more definitions relating to ``Keshi'' pearls (Keshi pearl, 
Sweet Water or Freshwater Keshi pearl, and South Sea Keshi pearl.) CPAA 
stated the word ``Keshi'' has been used in recent years ``as a product 
name for seed pearls derived by accident as a by-product of the pearl 
cultivation process.'' CPAA proposed adding the term to the Guides ``to 
further define what is and what is not a cultured pearl.'' <SUP>252 A & 
Z Pearls stated, ``There is a lot of debate in the trade as to whether 
``Keshi'' pearls should be considered natural pearls. Like natural 
pearls, they grow accidentally, but they form in mollusks that are 
cultivated by man.'' <SUP>253
---------------------------------------------------------------------------

    \251\  AGTA (49) pp.15-16 (defining ``Keshi pearls'' as: 
``Pearls that grow accidentally in the soft tissue or the adductor 
muscle of cultured pearl-bearing mollusks. These tiny non-nucleated 
pearls are by-products of cultured pearls. The term `Keshi' also 
refers to the bigger pearls without nuclei that are spontaneously 
formed in mollusks which bear South Sea cultured pearls and 
freshwater cultured pearls'').
    \252\  Comment 193, p.8 (defining ``Keshi pearl'' as: ``A non-
nucleated pearl, usually less than 2 millimeters in size, that may 
be formed by an oyster in addition to the cultured product during 
the process of cultivation'').
    \253\  Comment 29, p.2 (defining ``Keshi pearl'' as: ``A 
formation of some nucleated baroque shape pearls that grow 
`accidentally.' The invasion of a foreign body (such as a nucleus 
shell or mantle tissue) stimulates the mollusk and induces abnormal 
production of nacre that forms to create `keshi' pearls'').
---------------------------------------------------------------------------

    The Commission believes that the JVC proposal--i.e., allowing the 
term ``cultured seed pearl'' to be used to describe very small pearls 
that grow in mollusks cultivated by man--is an appropriate solution to 
this issue. However, there is no reason that the term ``Keshi'' could 
not also be used to refer to these pearls as long as it is not used to 
deceive consumers. There is no evidence that the term ``Keshi'' is 
being used to deceive consumers, and thus, the Commission has not 
included the term in the Guides at this time.
    Organic pearl: Majorica suggested adding a definition for ``organic 
pearl.'' \254\ This definition would permit Majorica pearls to be 
called ``organic'' rather than ``imitation.'' An article attached to 
Majorica's comment noted that ``to the untrained eye, Majorica 
imitation pearls look very much like

[[Page 27202]]

saltwater cultured pearls.'' \255\ The article, authored by employees 
of the Gemological Institute of America, also implies that some other 
brands of imitation pearls, like Majorica pearls, are made from guanine 
crystals, although there may be other differences in the manufacturing 
process that make Majorica imitation pearls superior to most other 
imitation pearls.\256\
---------------------------------------------------------------------------

    \254\ Comment 240, p.6 (``A pearl produced by means of 
manufacture characterized by a formation of layers obtained from 
guanine crystals, an organic substance from the scales of ocean fish 
around a nucleus.'').
    \255\ ``Majorica Imitation Pearls,'' Gems and Gemology 185 (Fall 
1990), attached to Comment 240.
    \256\ The article notes that ``pearl essence'' (i.e., guanine 
crystals) was discovered in the late 17th century. Id. at 181. It 
states that ``the process used to produce most other imitation 
pearls involves dipping or painting the beads with a resin; thus, 
these imitations lack the iridescence of the Majorica product and 
its cultured counterpart.'' Id.
---------------------------------------------------------------------------

    Majorica states that the current system of classification (i.e., 
pearl, cultured, and imitation) ``has narrowed the market for MAJORICA 
pearls as a real alternative to so-called cultured pearls'' and ``gives 
an unfair advantage to the cultured pearl industry.'' \257\ One 
commenter noted that most cultured pearls today have only a small 
percentage of nacre (the iridescent coating), unlike pearls from 40-50 
years ago. Thus, cultured pearls today may not look very different from 
imitation pearls.\258\
---------------------------------------------------------------------------

    \257\ Comment 240, p.5.
    \258\ Russell (217) pp.1, 2, and 4.
---------------------------------------------------------------------------

    Majorica's suggestion, however, involves renaming items that the 
public has for many years known as imitation pearls. This seems likely 
to provide more rather than less opportunity for deceiving consumers. 
NACAA noted, for example, that ``consumers may be particularly confused 
by the many varieties of natural, cultured, and imitation pearls.'' 
\259\ Moreover, two commenters noted that consumers currently confuse 
Majorica pearls with real or cultured pearls.\260\ Accordingly, the 
Commission is not including a definition of ``organic pearls'' in the 
Guides.\261\
---------------------------------------------------------------------------

    \259\  Comment 90, p.3.
    \260\  Lange (183) and CPAA (193) p.14.
    \261\  See below for a discussion of other proposals regarding 
the term ``organic.''
---------------------------------------------------------------------------

2. Misuse of the Word ``Pearl''
    Section 23.15 of the current Guides deals with misuse of the word 
pearl. Section 23.15 (a) states that it is unfair to use the 
unqualified word ``pearl'' to describe anything other than a natural 
pearl, and Sec. 23.15(b) states that it is unfair to use the word 
``pearl'' to describe a cultured pearl unless it is qualified by the 
word ``cultured'' or ``cultivated,'' or a word of similar import, to 
indicate that the product is not a pearl. The JVC did not propose any 
changes in these two sections.
    Section 23.15(c) states that it is unfair to use the word ``pearl'' 
to describe an imitation pearl unless it is immediately preceded, with 
equal conspicuity, by the word ``imitation'' or ``simulated,'' or by 
some other similar word or phrase. The JVC proposed adding the word 
``artificial'' to this section. NACAA stated that the Guides should 
``require artificial pearls to be clearly labeled using one standard 
term.'' It preferred the terms ``imitation'' or ``artificial,'' instead 
of ``simulated,'' because ``consumers are more likely to understand 
what those words mean.'' \262\ The word ``artificial'' clearly 
indicates that a product is not a natural pearl. Thus, the Commission 
is including this term in the Guides as another example of a term 
(along with simulated) that can be used to describe imitation pearls.
---------------------------------------------------------------------------

    \262\  Comment 90, p.3.
---------------------------------------------------------------------------

    CPAA suggested that the Guides include a section that states that 
it is unfair ``to use the terms `faux pearl,' `fashion pearl,' `Mother 
of Pearl' or any other proper name or noun term alone when describing 
or qualifying an imitation pearl product without including the words 
`imitation', `simulated' or any other term of similar connotation 
within the same product description and with equal conspicuousness.'' 
CPAA stated that the use of these terms ``has been the number one 
marketing and advertising tool in the sale of imitation pearl products 
across the U.S.'' CPAA explained that ``many customers can not tell the 
difference between the products by sight alone,'' and that ``[w]ithout 
proper product designations such as natural, cultured and imitation, 
customers are often misled as to the true nature of the product that 
they are buying.'' \263\ With respect to ``faux'' generally, NACAA 
stated that ``we do not believe that most consumers know what it 
means'' and the Postal Service stated that ``the term `faux' has been 
used to confuse unsophisticated consumers and enhance the apparent 
value of their costume jewelry.'' \264\
---------------------------------------------------------------------------

    \263\  Comment 193, p.9.
    \264\  Comment 90, p.3 and comment 244, p.3.
---------------------------------------------------------------------------

    As noted, the Guides currently state that it is unfair to describe 
an imitation pearl as a pearl without a qualifier such as 
``imitation.'' Although the Guides permit sellers to use terms other 
than imitation as long as they ``indicate definitely and clearly that 
the product is not a pearl,'' based on information from CPAA, the 
Postal Service, and NACAA, it appears that the terms faux pearl, 
fashion pearl, and Mother of Pearl are inadequate to convey to a 
substantial group of unsophisticated consumers that the items are 
imitation pearls. Accordingly, the Commission has revised the Guides to 
state that it is unfair or deceptive ``to use the terms `faux pearl,' 
`fashion pearl,' `Mother of Pearl,' or any other such term to describe 
or qualify an imitation pearl product 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.'' <SUP>265
---------------------------------------------------------------------------

    \265\ The comments discussing the use of the word ``faux'' are 
discussed in more detail infra.
---------------------------------------------------------------------------

    The JVC also proposed adding a new subsection (d) which states that 
it is unfair to use the word `pearl' with an asterisk which references 
to a footnote explaining that the product is an imitation or cultured 
pearl. This proposal is similar to a Note currently in section 23.15 of 
the Guides. However, section 23.15(c) states that the word ``pearl'' 
should be ``immediately preceded'' by a qualifying word such as 
``imitation'' or ``cultured,'' if the item is not a natural pearl. The 
Commission believes that this language advises sellers about how to 
avoid a deceptive use of the term ``pearl.'' The current Note is 
superfluous and the Commission has deleted it.
3. Misuse of Other Terms
    a. Proposed changes to existing subsections. Section 23.16 of the 
current Guides consists of six subsections describing several terms 
that can only be used to describe specific types of pearls. The JVC did 
not suggest any changes in these sections.<SUP>266
---------------------------------------------------------------------------

    \266\ The JVC did suggest that subsection (b), which relates to 
the term ``seed pearl,'' be modified to allow the use of the term 
``cultured seed pearl'' or the terms ``simulated,'' ``artificial,'' 
or ``imitation seed pearl.'' As noted above, the Commission has 
concluded that this change is useful and has included it in the 
revised Guides.
---------------------------------------------------------------------------

    The only comment on these sections referred to Sec. 23.16(e), which 
states that it is unfair to use the word ``natura'' or any similar word 
to describe a cultured or imitation pearl. CPAA suggested the words 
``natural,'' ``nature's,'' and ``organic'' be ``added to the list of 
words that cannot be used to describe an imitation pearl product.'' 
<SUP>267 CPAA explained that these words have been used to describe 
imitation pearls, and argued that they ``only serve to confuse the 
consumer and retail buyer as to the proper origin and intrinsic value 
of an imitation product.'' <SUP>268
---------------------------------------------------------------------------

    \267\ Comment 193, p.6.
    \268\ Id.

---------------------------------------------------------------------------

[[Page 27203]]

    On the other hand, Majorica requested that the Guides be revised to 
add a section stating that pearls made from guanine crystals can be 
described as ``organic'' pearls. It stated that elimination of the word 
``organic'' would eliminate ``the only real competition which cultured 
pearls have in this country.'' <SUP>269 However, for the reasons stated 
above, the Commission has concluded that describing pearls made from 
guanine crystals as ``organic'' pearls is likely to mislead consumers. 
Nevertheless, there is a difference between the words ``natural'' and 
``nature's''--neither of which can inherently be used in a nondeceptive 
manner with respect to imitation pearls--and the word ``organic.'' The 
Commission believes that the word ``organic'' could be used, with 
adequate qualification, to describe Majorica pearls in a truthful 
manner. For example, in its ads, Majorica describes its pearls as 
``organic man-made pearls'' that consist of a translucent nucleus 
``coated with layers of pearlized essence, an organic material 
extracted from marine species.'' <SUP>270 Thus, the Commission has 
revised Sec. 23.16(e) of the current Guides to indicate that it is 
unfair or deceptive to use the term ``natural'' and ``nature's'' to 
refer to an imitation pearl. The Commission also has added a sentence 
to this section stating that it is unfair or deceptive to use the term 
``organic'' to refer to an imitation pearl unless the term is qualified 
in such a way as to make clear that the product is not a natural pearl.
---------------------------------------------------------------------------

    \269\ Comment 240, pp.6 and 11. The section requested by 
Majorica would limit the use of ``organic'' to any pearl other than 
an imitation pearl made from guanine crystals. Id. at 7.
    \270\ Attachment to comment 49.
---------------------------------------------------------------------------

    The JVC suggested adding the word ``cultura'' to Sec. 23.16(f) of 
the current Guides, which states that it is unfair to use the word 
``kultured'' or any similar word to describe an imitation pearl. 
However, the section as currently written prohibits the use of ``any 
other word, term, or phrase of like meaning * * * .'' The word 
``cultura'' is very similar to ``kultured.'' Thus, Sec. 23.16(f) 
already provides adequate guidance on how to avoid deceptive 
representations. However, CPAA stated that terms such as ``semi-
cultured pearl,'' ``cultured-like,'' ``part-cultured,'' and ``pre-
mature cultured pearl,'' have been used to describe imitation pearls, 
and argued that they ``only serve to confuse the consumer and retail 
buyer as to the proper origin of an imitation product.'' <SUP>271 The 
Commission has determined that these terms are deceptive when applied 
to imitation products and has included them in Sec. 23.16(f) of the 
current Guides.
---------------------------------------------------------------------------

    \271\ Comment 193, p.6.
---------------------------------------------------------------------------

    b. Additional proposed provisions relating to cultured pearls. The 
JVC proposed the addition of six new subsections relating to the 
failure to describe a cultured pearl as a cultured pearl. These 
proposed subsections relate to fresh water cultured pearls, Biwa 
cultured pearls, South Sea cultured pearls, black cultured pearls, and 
Mabe cultured pearls.
    All of these have been discussed previously, in connection with the 
section on definitions, except Biwa pearls (which were not included in 
the definition section proposed by the JVC.) As noted, the Commission 
has concluded that Sec. 23.15(b) of the current Guides, which states 
that it is unfair to use the word ``pearl'' to describe a cultured 
pearl unless the word ``pearl'' is ``immediately preceded, with equal 
conspicuity,'' by the word ``cultured'' or a word of similar import, is 
sufficient to admonish sellers that they should adequately disclose 
that a cultured pearl--of whatever type--is cultured. Thus, the 
Commission has not included any of these proposed subsections except 
the ones dealing with South Sea pearls (discussed supra) and Biwa 
pearls.
    The subsection proposed by the JVC for Biwa pearls states that it 
is unfair to use the term ``Biwa pearl'' without the qualifying term 
``cultured.'' The Commission has concluded that this portion of the 
proposed subsection is unnecessary. However, the proposed subsection 
also provides that ``the term `Biwa cultured pearl' must only be used 
when describing those formations which have the distinctive appearance 
of a fresh water cultured pearl taken from the fresh water mollusks 
inhabiting Lake Biwa within the island of Honshu, Japan.''
    CPAA commented that the term should be limited to ``those 
formations which are grown in fresh water mollusks in the lakes and 
rivers of Japan.'' CPAA stated that the words ``distinctive 
appearance'' might allow imitation pearls and pearls from other 
countries to use the regional description. CPAA explained that ``Biwa'' 
represents all Japanese freshwater pearls because ``first, many people 
currently refer to all Japanese origin freshwater cultured pearls as 
`Biwa'' and second, because freshwater pearl production in Japan is 
nearing extinction ``Biwa pearls'' are appreciating in value.<SUP>272 
CPAA stated that many U.S. importers use the term ``Biwa pearl'' ``to 
describe freshwater pearls that have a similar appearance to Biwa 
pearls but come from other countries such as China'' and artificially 
inflate the prices of them, which ``cost as little as 30 times less 
than the Biwas.'' <SUP>273
---------------------------------------------------------------------------

    \272\ Comment 193, p.7.
    \273\ Comment 193, p.7.
---------------------------------------------------------------------------

    Because of the evidence of deceptive use of this term, the 
Commission has included a provision in the Guides stating that the term 
``Biwa'' should only be applied to pearls ``which are grown in fresh 
water mollusks in the lakes and rivers of Japan.''
    c. Other proposed provisions. The JVC proposed that eight other 
subsections be added to the section dealing with misuse of specific 
terms (in addition to the proposed subsections described above.) The 
first such proposed subsection is general: ``It is an unfair trade 
practice to use the term `pearl,' `oriental pearl,' `cultured pearl,' 
`cultivated pearl' * * * to describe * * * any such pearl product whose 
outer surface does not consist wholly of naturally occurring concentric 
layers of nacre secreted by that mollusk.'' This section duplicates 
other subparts of Sec. 23.16 of the current Guides, and therefore, the 
Commission has not included it in the Guides.
    Another JVC proposal prohibits the use of the term ``non-nucleated 
pearl,'' because ``cultured pearls of this type are formed by the 
introduction of mantle tissue within the body of the mollusk'' and thus 
are nucleated. However, both the CPAA and AGTA used the expression 
``non-nucleated pearl'' in their comments in referring to Keshi 
pearls.<SUP>274 Moreover, whether or not the term ``non-nucleated'' is 
correct, no evidence has been offered to show that it is being used to 
deceive consumers as to a material fact. Thus, the Commission has not 
included this section.
---------------------------------------------------------------------------

    \274\ Comment 193, p.8; comment 49, p.15.
---------------------------------------------------------------------------

    Two of the additional proposed sections relate solely to imitation 
pearls. One states that it is unfair ``to use the term `man-made' or 
`man-created' without using the term `simulated' or similar term, to 
qualify the product as in `man-made simulated pearls.''' CPAA commented 
that this section should state that it is unfair to use these terms 
``without also using the term `simulated,' `imitation' or any other 
term that has the same connotation and meaning when qualifying or 
describing an imitation pearl product.'' <SUP>275 The only other 
comment relating to this provision was from Majorica, which requested 
the FTC ``to withhold any further restrictions on the words `organic,'

[[Page 27204]]

`man-made,' `synthetic,' and `created' while considering the creation 
of a new category of pearl to which the word `organic' could properly 
and accurately be applied.'' <SUP>276 CPAA may be arguing that the 
phrase ``man-made'' could be understood to mean cultured pearls, since 
such pearls are ``started'' by man. However, there is no evidence that 
consumers are interpreting the phrase ``man-made'' or similar phrases 
in this manner, and without such evidence, the Commission has decided 
not to include the section, as proposed by CPAA, in the revised Guides.
---------------------------------------------------------------------------

    \275\ Comment 193, p.6.
    \276\ Comment 240, p.6 (emphasis added).
---------------------------------------------------------------------------

    Four of the remaining five proposed subsections relate to the 
misuse of certain words, which are described in Secs. 23.20 and 23.21 
of the current Guides. Section 23.20 of the current Guides provides 
that it is unfair to use the words ``real,'' ``genuine,'' ``natural,'' 
or ``similar terms as descriptive of any article or articles which are 
manufactured or produced synthetically or artificially, or artificially 
cultured or cultivated * * *.'' Although this section deals primarily 
with precious and semi-precious stones, it also applies to cultured or 
imitation pearls.
    The subsection proposed by the JVC states that it is unfair to use 
these words or the word ``precious'' or similar terms to describe 
imitation or cultured pearls.
    The Commission has reorganized the Guides so that this statement 
appears in the pearl section, making it more likely that industry 
members searching for guidance as to pearl advertising will see it. As 
noted above, the Commission already has included the term ``natural'' 
in the subsection dealing with the term ``natura,'' Sec. 23.20(e) of 
the revised Guides. Thus, the Commission has added a new subsection, 
23.20(i), that states that it is unfair or deceptive to use the terms 
``real,'' ``genuine,'' or ``precious'' as descriptive of an imitation 
pearl.<SUP>277
---------------------------------------------------------------------------

    \277\ Although there was no comment on the inclusion of 
``precious'' in this subsection, the Commission has determined that 
it is deceptive as applied to imitation pearls because ``precious'' 
in the jewelry industry implies rarity. Although imitation pearls 
can be of high quality, they are not likely to be rare.
---------------------------------------------------------------------------

    This subsection does not state that the terms ``real'' or 
``genuine'' are unfair or deceptive if used to describe cultured 
pearls. The Commission has determined that it is possible to truthfully 
describe ``real'' or ``genuine'' cultured pearls without implying that 
they are not cultured. In addition, there may be instances when 
cultured pearls could be truthfully described as ``precious.'' 
Therefore, Sec. 23.20(i) is limited to imitation pearls.
    Section 23.21(a) in the current Guides states that it is unfair to 
use the term ``gem'' or a similar term to describe ``a pearl, cultured 
pearl, diamond, ruby, * * * which does not possess the beauty, 
symmetry, rarity, and value necessary for qualification as a gem.'' The 
JVC proposed a section recommending that the word ``gem'' not be used 
as a quality designation or description of natural pearls, ``since 
there is no existing criteria for these terms, and their use to 
describe, imply, or represent quality could be misleading.''
    AGTA commented that this provision should only apply to sales to a 
consumer, stating, ``The term `gem' is traditionally used within the 
trade to describe particularly fine qualities of any given gemstone 
species, including pearls. To prohibit its use within the trade is 
restrictive of traditional practice and is unnecessary as it is clearly 
understood.'' <SUP>278 There is no evidence that consumers would be 
deceived by this term as applied to pearls that ``possess the beauty, 
symmetry, rarity, and value necessary for qualification as a gem.'' 
Therefore, the Commission has retained current Sec. 23.21(a) and has 
moved the portion relating to pearls to the pearls section of the 
Guides (revised Sec. 23.20(j)). The Commission has included a Note 
after this section (which currently follows Sec. 23.21(b) in the 
current Guides) which states that the use of ``gem'' with respect to 
cultured pearls should be avoided since few cultured pearls possess the 
necessary qualities and that imitation pearls should not be described 
as `gems.'
---------------------------------------------------------------------------

    \278\ Comment 49, p.16 (noting that there is not a similar 
prohibition of the use of the term `gem' in the section on 
diamonds).
---------------------------------------------------------------------------

    Section 23.21(c) of the current Guides states that it is unfair to 
use the words ``reproduction,'' ``replica,'' or similar terms to 
describe a cultured or imitation pearl (or imitation precious or semi-
precious stones.) The JVC proposed including this statement, as it 
pertains to pearls, in the pearls section. However, if the nature of 
the material used in a reproduction or replica is adequately disclosed, 
as advised by other sections of the Guides, it is not clear that the 
use of these terms would be deceptive or unfair. Thus, the Commission 
has not added this section to the Guides.<SUP>279
---------------------------------------------------------------------------

    \279\ The Commission has deleted Sec. 23.21(c) of the Guides, as 
discussed below, in the section pertaining to gemstones.
---------------------------------------------------------------------------

    Section 23.21(d) of the current Guides states that the use of the 
term ``synthetic'' to describe cultured or imitation pearls is unfair. 
The term may be used for precious and semi-precious synthetic stones if 
they have ``essentially the same optical, physical, and chemical 
properties as the stone named.'' The JVC proposed moving the portion of 
Sec. 23.21(d) that pertains to pearls to the pearls section and adding 
that it is unfair to use the word ``created'' to describe cultured or 
imitation pearls. AGTA and CPAA both supported the proposal, and 
Majorica opposed it.<SUP>280 No evidence was offered to explain why the 
use of the term ``created'' is unfair or deceptive as applied to 
cultured or imitation pearls. The Commission therefore has not included 
the proposed section regarding the term ``created'' in the Guides.
---------------------------------------------------------------------------

    \280\ AGTA (49) p.16; CPAA (193) p.7 (suggesting that the 
provision be modified to apply to ``cultured, simulated, or 
imitation pearls'' rather than to ``cultured or imitation pearls''); 
Majorica (240) p.6 (requesting no ``further restrictions'' be placed 
on the use of ``created'' or ``synthetic'').
---------------------------------------------------------------------------

    However, the term ``synthetic'' has been used with respect to 
gemstones to refer to a man-made substance that has all the physical, 
chemical and optical properties of the natural stone. Since cultured 
pearls do not have the same physical and optical properties as natural 
pearls, the use of this term may be deceptive. Furthermore, the use of 
the term ``synthetic'' to describe an imitation pearl might convince 
some consumers that the pearls were cultured rather than imitation. 
Thus, the Commission has included a new subsection, 23.20(k), which 
states that it is unfair or deceptive to use the word ``synthetic'' to 
describe cultured or imitation pearls.
    Finally, the JVC proposed a subsection stating that it is unfair to 
use the term ``semi-precious'' to describe any pearl, cultured pearl, 
``or man-made industry product.'' No evidence was offered to show that 
this use of ``semi-precious'' would be unfair or deceptive, and there 
was no comment on this proposal. In the absence of such evidence, the 
Commission has decided not to add this provision to the Guides at this 
time.
    d. Additional provisions proposed by commenters. CPAA proposed that 
several additional subsections be added to the section pertaining to 
``Misuse of terms.'' First, CPAA suggested a subsection stating that it 
is unfair to use the term ``orient'' to describe the properties of an 
imitation pearl.<SUP>281 CPAA stated that ``the term `orient' was first 
used in a gemological sense by the Gemological Institute of America in

[[Page 27205]]

order to explain and clarify quality points of natural and cultured 
pearls * * * many retailers and gemologists alike hold their [GIA] 
definitions to be the authoritative standard within the industry.'' 
<SUP>282 However, an article from the GIA quarterly journal Gems & 
Gemology was attached to Majorica's comment; the authors are all 
employees of GIA. The article states, ``An iridescence resembling the 
orient seen on some cultured pearls may also be observed on Majoricas 
[an imitation pearl].'' Thus, it appears that at least some imitation 
pearls can possess ``orient.'' Therefore, the Commission has not 
included this provision in the revised Guides.
---------------------------------------------------------------------------

    \281\ Comment 193, p.8 (``Orient is gemologically defined as a 
subdued iridescence, occurring when white light is divided into its 
separate and distinct spectral colors as it passes through and is 
refracted back from the nacre secreted by mollusks whether 
surrounding a nucleus or not.'').
    \282\ Comment 193, p.9.
---------------------------------------------------------------------------

    CPAA also proposed a new provision, stating that it is unfair to 
use the terms ``Japanese Pearls,'' ``Mallorca Pearls,'' ``Chinese 
Pearls,'' or any other regional designation to describe cultured or 
imitation pearls without including the words ``cultured, imitation or 
simulated.'' <SUP>283 CPAA explained that imitation pearl companies 
recently have used regional terms to describe their products, and that 
this misleads consumers about the true nature of the product.<SUP>284
---------------------------------------------------------------------------

    \283\ Id.
    \284\ CPAA (193) p.9 (explaining, for example, that the ``use of 
the term `Misaki Japanese Pearls' in several cases has led consumers 
to believe that they were purchasing Japanese cultured pearls 
instead of imitation pearl products'').
---------------------------------------------------------------------------

    Majorica made a similar suggestion, stating that there is continued 
abuse of terms such as ``Mallorca Pearl,'' ``Majorca Pearl,'' and 
``Mayorca Pearl'' and that they ``have numerous examples of customers 
and distributors who have been deceived into purchasing pearls under 
the label of `Majorca' or `Mallorca' pearls believing them to have 
special qualities related to the Island of Majorca or, for that matter, 
that they are MAJORICA pearls.'' <SUP>285
---------------------------------------------------------------------------

    \285\  Comment 240, pp.8-10. Unlike the CPAA proposal, Majorica 
proposed to prohibit the use of the term ``Mallorca'' or any similar 
expression connoting the name of the Island of Mallorca, Spain in 
combination with the word pearl. (The CPAA proposal would allow an 
imitation pearl to be described as a ``Mallorca imitation pearl.'') 
Majorica stated that it has sued distributors of pearls and has 
obtained relief which requires such distributors to ``to reduce the 
emphasis on [Mallorca] in their advertising and distribution.'' 
Majorica asserts that it is unfair to require it to go to the 
expense of litigation every time such an abuse occurs. Id. However, 
Majorica's specific complaint regarding the ``passing off'' of one 
manufacturer's product for another is already adequately addressed 
by caselaw under Section 5.
---------------------------------------------------------------------------

    The Commission has concluded that there is some evidence that 
regional descriptions are being used to mislead consumers. The 
Commission therefore has included a provision in the revised Guides 
that states that the regional description of a pearl should be 
accompanied by a description of whether the item is a cultured or 
imitation pearl.

4. Misrepresentation as to Cultured Pearls

    The JVC recommended no substantive changes in Sec. 23.17 of the 
current Guides. As noted above, this section describes unfair practices 
involving false, misleading, or deceptive statements about cultured 
pearls, including the manner in which they are produced and the 
thickness of the nacre coating.
    One commenter, Kenneth Russell, recommended that the Commission 
establish grades for cultured pearls based on the thickness of the 
nacre deposited by the mollusk, following the introduction by man of a 
mother-of-pearl bead. He noted that the thickness of the nacre ``mainly 
determines their wearable value'' and that this ``indexing'' 
information should accompany this product ``just as karatage serves to 
rank gold jewelry.'' <SUP>286 He stated that most cultured pearls 
consist of 90 to 95% nucleus and very little nacre.<SUP>287
---------------------------------------------------------------------------

    \286\ Comment 217, p.1 (suggesting that cultured pearls with a 
\1/4\ to \1/2\ mm. coating of nacre should be marked ``Service 
Grade'' and those with more than \1/2\ mm. marked ``Heirloom 
Grade'').
    \287\ Id. at p.2.
---------------------------------------------------------------------------

    The article attached to the Majorica comment stated that the 
thickness of the nacre in a cultured pearl ``will vary depending on the 
amount of time the nucleated mollusk was allowed to grow before 
harvest.'' <SUP>288 The article attached to the Rapaport comment quoted 
a pearl industry source as saying that some of the lowest-quality 
Chinese pearls should not be on the market because ``the nacre peels 
off the nucleus within a year.'' <SUP>289 The article notes that pearl 
grading is ``a non-standardized process that gives dealers a lot of 
room for opinion.'' It also notes that GIA has a grading system which 
``uses numerical grades to show differences in appearance, durability 
and value of pearl strands'' and that some companies use their own 
methods.<SUP>290
---------------------------------------------------------------------------

    \288\  ``Majorica Imitation Pearls,'' Gems and Gemology 187 
(Fall 1990), attached to Comment 240.
    \289\ ``Rapaport Diamond Report'' 26 (July 17, 1992) attached to 
Comment 233.
    \290\ Id.
---------------------------------------------------------------------------

    The literature indicates that the nacre on some cultured pearls 
might be so thin that they do not meet the expectations consumers have 
when an item is described as a cultured pearl. Section 23.17 in the 
current Guides admonishes against misrepresentations about the 
thickness of the nacre on cultured pearls or the quality of pearls. 
However, it is not unfair or deceptive to fail to grade cultured pearls 
that contain a coating of nacre that is thick enough to meet minimal 
consumer expectations.

F. Precious and Semi-precious Stones (Category V): Secs. 23.18-23.21

    Guides in this part apply primarily to colored gemstones, precious 
(rubies, sapphires, emeralds) and semi-precious (amethyst, topaz, etc.) 
stones. The Guides refer to three types of gemstones: natural (i.e., 
mined from the ground); synthetic stones, which are laboratory-created 
and which Sec. 23.21(d) describes as having ``essentially the same 
optical, physical, and chemical properties'' as natural stones; and 
imitation stones, which resemble natural stones but do not have the 
same properties.
1. Deception Generally: Sec. 23.18
    Section 23.18 states that any material misrepresentation with 
respect to precious or semi-precious gemstones is unfair. The JVC 
proposal omitted this section. Section 23.18 merely repeats the general 
admonition in Sec. 23.1 against material misrepresentations of any 
industry product. Thus, the Commission has deleted this provision from 
the revised Guides.
a. Disclosure of Treatment
    A Note following Sec. 23.18 states that any artificial coloring or 
tinting of a diamond or precious or semi-precious stone by ``coating, 
irradiating, or heating, or by use of nuclear bombardment, or by any 
other means'' should be disclosed and the fact that the coloring is not 
permanent, if such is the fact. The JVC proposed, in section 23.20(c) 
of its petition, a section in lieu of the Note which requires the 
disclosure of any enhancement ``by coating, application of colorless or 
colored oil, irradiation, surface diffusion, dyeing, heating or by use 
of nuclear bombardment, or by any other means.'' <SUP>291 This proposal 
would expand the recommended disclosure about enhancements relating to 
color to all enhancements (e.g., those related to concealing cracks). 
In addition, it explicitly covers enhancement by applications of 
colored or colorless oil, surface diffusion, or dyeing.<SUP>292
---------------------------------------------------------------------------

    \291\ Nassau (10) suggested, at p.1, three modifications to the 
JVC proposal: the addition of the word ``impregnation'' after the 
word ``coating''; the addition of the words ``wax, plastic, or 
glass'' after ``colored oil''; and the removal of the word 
``surface'' (i.e., in ``surface diffusion'').
    \292\ Although most of these techniques enhance color, 
application of colorless oil could arguably be used simply to cover 
inclusions. The current Guides recommend disclosure of techniques 
which artificially color gemstones, and the fact that the techniques 
are not explicitly mentioned may lead readers to assume that it need 
not be disclosed. Some comments gave this indication because they 
assumed that the disclosure of treatment with colorless oil was not 
currently advised.

---------------------------------------------------------------------------

[[Page 27206]]

    Numerous commenters noted that almost every natural gemstone is 
subject to some form of enhancement.<SUP>293 AGS stated that many new 
enhancement techniques have been developed since the Guides were issued 
and that ``[c]oating processes are developed daily.'' <SUP>294 NACSM 
stated that up to 95% of colored gemstones are dipped in oil and that 
this treatment is ``taken for granted by retailers and consumers 
alike.'' <SUP>295 It questioned the value of disclosures under these 
circumstances and contended they would clutter written advertisements 
and increase prices.<SUP>296 However, NACAA commented that its members 
receive complaints about failure to disclose stone enhancement.<SUP>297 
Although the Guides currently recommend disclosure of color 
enhancement, some comments indicated that there is little such 
disclosure in the marketplace.<SUP>298 However, some industry 
associations strongly encourage their members to disclose 
treatments.<SUP>299
---------------------------------------------------------------------------

    \293\ Lannyte (65) p.8 (also suggesting, at p.10, that the 
guides state that it is unfair to state that a gemstone has not been 
enhanced when it has been, a suggestion that has been incorporated 
into Sec. 23.1 of the revised Guides by including ``treatment'' in 
the list of attributes that should not be misrepresented); JGL (77) 
p.1; Majestic (115) p.1; Suberi (214) p.2; Bruce (218) p.12; NACSM 
(219) p.13; Impex (220) p.1; Best (225) pp.8-9.
    \294\ Comment 18, p.2; AGTA (49) p.5 (noting several 
technologies (e.g., diffusion-treated sapphires, irradiated topaz) 
that ``did not even exist on a commercial scale ten years ago''); 
GIA (81) p.2; Eisen (91) p.1; ArtCarved (155) p.1; LaPrad (181) p.1; 
IJA (192) p.1.
    \295\ Comment 219, p.13 and letter to Secretary, p.1. See also 
``Epoxy-Like Resins,'' Jewelers' Circular-Keystone 176 (June 1994) 
(stating that ``[t]he majority of emeralds sold today are epoxy 
resin impregnated'' and noted that oil and epoxy resin are both 
designed to ``soften or hide the effect of cracks and fissures'').
    \296\ Id.
    \297\ Comment 90, p.1.
    \298\ Lannyte (65) p.7; Impex (220) stated that the JVC proposal 
would ``defy standard industry practices.''
    \299\ See discussion infra of the 1990 Gemstone Enhancement 
Manual (attached to comment 49).
---------------------------------------------------------------------------

    The Commission is persuaded by the comments that many consumers do 
not have detailed knowledge about the nature and types of treatments 
used to enhance gemstones. However, consumers would expect their 
gemstone purchases to retain their appearance over time regardless of 
any treatments and to not require special care to retain their 
appearance. On the basis of the comments and for the reasons discussed 
below, the Commission has concluded that non-permanent treatments of 
various types (not just those that affect color), or any treatments 
that create special care requirements should be disclosed. There is no 
logical reason to limit disclosure to treatments that affect color. 
Further, consumers should be informed when the treatment is not 
permanent.<SUP>300
---------------------------------------------------------------------------

    \300\ By letter dated February 7, 1989, the JVC informed staff 
that it wished to revise its petition to ``include disclosure in the 
colored gemstone provision the permanency and/or non-permanency of 
enhancement.''
---------------------------------------------------------------------------

    Some comments argued that any treatment, even if it is permanent, 
may reduce the value of a stone and a failure to reveal treatment 
amounts to a representation that a stone is more valuable than it is. 
One commenter noted that treatments should be disclosed ``since the 
stone gives the appearance to the consumer that it is a higher grade 
than what it actually is.'' \301\ AGTA also stated that ``the 
difficulty in detecting treatments presents opportunities for 
misrepresentation of the value'' and that ``the potential for 
overcharging consumers if the enhancements are not disclosed at every 
level of the trade is very real.'' \302\ AGTA attached a May 1993 
notice it issued to its members in which it referred to the fact that a 
number of knowledgeable wholesalers purchased diffusion-treated 
sapphires without knowing that they were treated.\303\
---------------------------------------------------------------------------

    \301\ Bales (156) p. 10.
    \302\ Comment 49, p. 5 (stating that it sees examples of 
overcharging too frequently and listing as ``most notable 
examples,'' i.e., diffusion-treated sapphire, Yehuda-treated and 
laser-drilled diamonds, and irradiated topaz, sapphire, and 
diamond); Chatham (231) p. 24 (stating that consumers are deceived 
by treated natural stones that are passed off as more valuable than 
they actually are).
    \303\ AGTA recommended that diffusion-treated and irradiated 
gemstones always be described as ``chemically colored by 
diffusion,'' and, if the color does not permeate the entire gem, 
that fact should be revealed with a warning that re-cutting or re-
polishing is not recommended. Comment 49, p. 16. However, River 
(254) stated, at pp. 2-3, that many people find diffusion treated 
sapphire a better value, and that the problem of re-cutting is 
``blown out of proportion'' since very few stones are re-cut or re-
polished at a customer's request, and in the rare instance when a 
stone is broken, it is replaced. For these latter reasons, the 
Commission has not included the language suggested by AGTA (i.e., a 
warning about re-cutting or re-polishing) in the Guides. Further, it 
is not practical for the Guides to address every conceivable issue 
that may arise in a jewelry transaction.
---------------------------------------------------------------------------

    On the other hand, Service argued that failure to reveal treatment 
is not deceptive if the treatment is permanent, stating, ``[i]t is 
unreasonable to require a retailer to disclose what has happened to a 
stone in the manufacturing process if the change is permanent.'' 
Service agreed that if the change is not permanent, the customer 
``wants to know if the color or quality may degrade over time and what 
the customer must do, if anything, to maintain the stone's quality and 
color. Requiring this information to be provided is acceptable.''\304\
---------------------------------------------------------------------------

    \304\ Comment 222, p.5.
---------------------------------------------------------------------------

    The Commission has concluded that it is not unfair or deceptive to 
fail to disclose a treatment that is permanent or that does not create 
special care requirements. As the Commission stated in International 
Harvester, 104 F.T.C. at 948, it may be deceptive for a seller ``to 
simply remain silent, if he does so under circumstances that constitute 
an implied but false representation.'' These implied representations 
``may arise from the physical appearance of the product, or from the 
circumstances of a specific transaction, or they may be based on 
ordinary consumer expectations as to the irreducible minimum 
performance standards of a particular class of goods.'' Id. The 
Commission explained, however, that ``[i]ndividual consumers may have 
erroneous preconceptions about issues as diverse as the entire range of 
human error, and it would be both impractical and very costly to 
require corrective information on all such points.'' Id. at 
949.<SUP>305 Thus, if an express or implied representation is made (in 
advertising or at the point of sale) that might imply rarity and 
therefore lack of treatment--e.g., that the gemstones are of an 
exceptionally high quality--then the failure to reveal any treatment 
may be deceptive. However, if no such representation is made, consumers 
simply might not give any thought to whether the gemstones were 
treated, beyond assuming that all gemstones undergo some processing to 
achieve their finished state. Therefore, it is neither unfair nor 
deceptive to fail to reveal treatments that are permanent, and that do 
not create special care requirements.<SUP>306
---------------------------------------------------------------------------

    \305\ Numerous comments noted that disclosure of treatment of 
all gemstones would be expensive for retailers. Service (222) p.5 
(stating this is difficult because the stone probably changed hands 
a few times before being purchased by the retailer); Best (225) p.9 
(stating that the retailer may not know of the enhancement); Finlay 
(253) p.2 (stating that it would be an ``overwhelming task'' for the 
retailer to obtain information about enhancement from the 
manufacturers). Others commented (without further explanation) that 
disclosure would ``complicate'' sorting, advertising, and selling. 
Philnor (93) p.1; PanAmerican (101) p.1; Fame (102) p.1; Orion (113) 
p.1; Precision (121) p.1.
    \306\ The Commission does not believe that it would be unfair to 
fail to disclose the treatments because, even assuming there might 
be some consumer injury associated with such failure, the injury 
would be outweighed by the benefits to competition, see supra note 
305, associated with not requiring the disclosure. See International 
Harvester, 104 F.T.C. at 949.

---------------------------------------------------------------------------

[[Page 27207]]

    Nevertheless, most treatments of gemstones are not permanent, and 
most treatments create special care requirements. AGTA attached to its 
comment a copy of the 1990 Gemstone Enhancement Manual, which states, 
at p.3, that it was ``developed by a coalition of jewelry industry 
leaders representing the various trade organizations, gemological 
scientists, and the trade press.'' This Manual gives examples of 
treatments that are not permanent, or that create special care 
requirements.<SUP>307 What appears to be the most common treatment--
oiling--is definitely not permanent.<SUP>308 Although a new treatment 
with epoxy resin ``leads to a longer lasting improvement in appearance 
which is not possible with volatile compounds like oils and paraffin 
used traditionally,'' experts have suggested that a number of problems 
may occur even with this treatment and that disclosure is necessary 
because otherwise a seller ``could easily ask a price commensurate with 
a stone's appearance.'' <SUP>309
---------------------------------------------------------------------------

    \307\ For example, the Manual states that emeralds are usually 
oiled with colorless oil to improve appearance; the stability of 
this treatment is described as ``fair to good.'' According to the 
Manual, oiled emeralds should not be subjected to temperature 
changes, steaming, chemicals, or ultrasonic cleaning machines. 
Moreover, numerous other stones that are commonly treated to improve 
appearance (e.g., Amazonite--usually waxed; Jadite--impregnated with 
colorless wax; Lapis Lazuli--impregnated with colorless wax or oil; 
Malachite--coated with wax) should not be cleaned in ultrasonic 
machines, according to the Manual. Ultrasonic cleaning machines are 
now sold to the general public by mass retailers.
    \308\ An article entitled ``Emeralds'' in National Geographic, 
Vol. 178, July 1990, stated that oiling of emeralds probably lasts 
from a few months to a year or two ``if the emerald is kept away 
from heat and out of the sun.'' Id. at 68. The oiling process 
involves submerging vials of emeralds in boiling water and then 
placing the vials in a pressure chamber to drive the oil even deeper 
into the cracks in the emeralds. This is not a process that the 
average consumer could repeat. The article noted, at another point, 
that the oil evaporates or seeps out ``within a year or two'' and 
that oiling ``can puzzle and dismay emerald owners.'' Id. at p.49.
    \309\ ``Epoxy-Like Resins,'' supra, at 177. The article quotes 
experts who suggest that the filler may be harder to take out if it 
deteriorates and changes color, that it may turn cloudy over time, 
or that it may cause stress and increase the chances of gem 
breakage. Id. at 178.
---------------------------------------------------------------------------

    Further, as noted above, most consumers probably do not have 
detailed knowledge about the nature and type of treatments that are 
used to enhance gemstones. Therefore, if consumers are unaware of the 
non-permanency of a treatment or the special care requirements 
associated with a treatment, the gemstone may not meet their 
expectations if the color fades or inclusions appear, etc. Accordingly, 
the Commission has included a section in the revised Guides that states 
that non-permanent treatments and treatments that create special care 
requirements should be disclosed. This section explicitly states that 
certain treatments, such as application of colored or colorless oil or 
epoxy-like resins, surface diffusion, or dyeing, should be disclosed 
because they usually are either not permanent or create special care 
requirements. This recognizes that whether a treatment is permanent or 
invokes special care requirements may be dependent on factors such as 
the type of gemstone that is treated.
    Several commenters noted that the current Guides do not specify 
whether disclosure of treatment should appear in advertising (as 
opposed to at the point of sale). Several retailers commented that 
disclosure of enhancement in advertising would be burdensome and would 
have a disparate impact on large chains, which do advertise, as opposed 
to small jewelry stores, which generally do not advertise. NRF 
suggested that whatever enhancement disclosures are required should be 
limited to the point of sale.<SUP>310 Because the potential deception 
arises due to the appearance of the product, the Commission has 
determined that disclosure at the point of sale is adequate to prevent 
the deception, except in the case of any solicitations where the 
product can be purchased without first viewing it (e.g., mail, on-line, 
or telephone orders). In those cases there should be disclosure that 
stones have been treated in the solicitation or, in the case of 
televised shopping programs, on the air.
---------------------------------------------------------------------------

    \310\ NACSM (219) pp.9, 10, 13; Best (225) p.8; NRF (238) p.2.
---------------------------------------------------------------------------

    b. Disclosure of special care requirements. The current Guides do 
not recommend the disclosure of special care requirements for treated 
stones, and the JVC petition did not propose that special care 
requirements be disclosed. However, the permanency of some treatments 
is dependent on the care exercised by the consumer. The FRN solicited 
comment on whether the Guides should advise sellers to disclose to 
consumers in writing any special care requirements and whether the 
method of disclosure should be specified.
    Thirty-four comments addressed this issue. Seventeen comments 
stated that the Guides should not require such disclosure, with several 
stating that it would be a costly burden for the retailer.<SUP>311 
Eleven commenters favored the disclosure of special care 
requirements.<SUP>312 GIA and three other commenters stated that the 
Guides should require such disclosures if the stability of the 
enhancement may be affected by the care provided.<SUP>313 AGTA and CPAA 
both stated that they advocated responsible communication between 
retailers and their clients as to special care, but they deferred to 
the opinion of retail jewelers as to whether this should be required by 
the Guides.<SUP>314 AGTA suggested appending the current edition of the 
industry's Gemstone Enhancement Manual to the FTC guides to advise the 
industry about the current methods being used.<SUP>315
---------------------------------------------------------------------------

    \311\ JMC (1); Thorpe (7); Capital (19); G&B (30); Lannyte (65); 
Nowlin (109); McGee (112); Bridge (163); LaPrad (181); IJA (192); 
Bedford (210); Matthey (213); NACSM (219); MJSA (226); Preston 
(229); Sheaffer (249); and Solid Gold (261). Some of these comments 
indicated that such disclosure should be recommended, rather than 
required.
    \312\ Honora (15); Argo (17); AGS (18) p.3 (stating that 
``professional jewelers routinely disclose special care 
requirements''); Estate (23); Jabel (47) p.2 (suggesting that the 
``stone manufacturer might supply a `care and feeding' card for 
every type of stone he handles''); Skalet (61); NACAA (90); 
ArtCarved (155); Bales (156); Shire (221); and Leach (257).
    \313\ Comment 81, p.3; Schwartz (52) p.3 (stating that there 
should be disclosure since ``many, if not most, of gemstone 
enhancements are unstable . . . .''); Bruce (218) p.12 (stating that 
``it is only when a stone is not permanently changed and may revert 
back to another color or shade that a ticket should be attached 
letting the consumer know of this, as well as other precautions''); 
Service (222) p.3 (stating that it does not oppose disclosing ``the 
need for any particular care of a gemstone to insure its continued 
quality in appearance'').
    \314\ AGTA (49) and CPAA (193).
    \315\ Comment 49, p.10 (stating that the Manual, unlike the 
Guides, is revised frequently and ``if the guides attempt to address 
specific enhancements, the information may be obsolete before 
changes could be incorporated at the federal level''). But see River 
(254) p.2 (stating that the Manual uses letter codes to describe 
treatment, which it described as ``an arcane method of 
communicating'').
---------------------------------------------------------------------------

    However, none of the comments explained why failure to disclose 
special care requirements would be unfair or deceptive. Although 
failure to reveal a fact material to consumers can constitute deception 
by omission, the Commission has determined that it is not inherently 
deceptive to fail to reveal special care requirements. First, as 
discussed supra, the Commission has revised the Guides to state that 
sellers should disclose enhancements that result in special care 
requirements. Therefore, having been informed that the stone was 
``enhanced,'' a consumer acting reasonably in the circumstances could 
be expected to inquire about the process and its permanence, and that 
inquiry should result in disclosure of special care requirements. For 
example, Capital commented that ``as long as enhancement is faithfully 
disclosed, special care requirements will also be disclosed,'' since 
consumers will ask for

[[Page 27208]]

instructions and retailers will offer them to avoid future 
problems.<SUP>316
---------------------------------------------------------------------------

    \316\ Comment 19, p.2 (noting that trade associations provide 
the industry with material on disclosing care information, and that 
it is not necessary to include this in the Guides).
---------------------------------------------------------------------------

    Furthermore, according to the Gemstone Enhancement Manual, attached 
to the AGTA comment, special care requirements are quite common for 
many types of unenhanced stones. The Guides have not recommended the 
disclosure of special care requirements for these unenhanced stones. 
Because unenhanced stones have been sold for many years, the Commission 
presumes that over time consumers have become familiar with their 
characteristics and their care requirements. Similarly, consumers may 
expect that enhanced stones would require certain care requirements 
too. Therefore, the Commission believes that if the enhancement is 
revealed, it is not inherently unfair or deceptive to fail to reveal 
special care requirements. (Consumers who request, but do not receive 
special care requirements, presumably will choose to take their 
business elsewhere. Thus, sellers should have an incentive to provide 
such information.) However, since enhanced stones that have special 
care requirements are newer products in the marketplace, and consumers 
may not be as familiar with the requirements of these stones, the 
Commission has recommended that the seller disclose special care 
instructions to the consumer.
2. Deceptive Use of Names of Specific Stones: Sec. 23.19
    Section 23.19(a) in the current Guides states that it is unfair to 
use the unqualified name of a precious or semi-precious stone to 
describe a product which is not a natural stone. This section is not 
changed in the revised Guides (Sec. 23.23(a)).
    Section 23.19(b) states that it is unfair to use the name of a 
precious or semi-precious stone (or the words ``stone'' or 
``birthstone'') to describe a synthetic, imitation or simulated stone 
unless the name is immediately preceded by the word ``synthetic,'' 
``imitation,'' or ``simulated,'' whichever is applicable, or by some 
other word or phrase of like meaning, so as to disclose the fact that 
it is not a natural stone.\317\
---------------------------------------------------------------------------

    \317\ A Note following this section states that qualifying these 
terms by means of an asterisk, which reference a footnote 
explanation, ``is not to be regarded as compliance with the 
requirements of this section.'' The Commission believes that this 
section, which states that a qualifying term should immediately 
precede the name of the stone, adequately advises sellers of the 
proper disclosure. The Note is superfluous and the Commission has 
deleted it.
---------------------------------------------------------------------------

    Both the current Guides and the JVC petition allow the use of 
``synthetic'' or words or phrases of like meaning to describe created 
stones that have the same properties as a natural stone. The purpose of 
this section is to prevent the deceptive impression that an item is a 
natural stone, and any word or words that accomplish that goal are 
acceptable. In Chatham Research Laboratories, 64 F.T.C. 1064, 1075 
(1964), the Commission found that the phrase ``Chatham-Created 
Emeralds'' was not deceptive because the reasonable inference from the 
phrase was that ``such emeralds are Chatham created and must therefore 
be synthetic since they are not created by nature.'' Chatham's comment 
stated that after almost 30 years of use, there is no evidence that 
``Chatham-created'' is deceptive to consumers.\318\
---------------------------------------------------------------------------

    \318\ Comment 231, p.5.
---------------------------------------------------------------------------

    AGTA commented, however, that there should be no acceptable 
synonyms for the word ``synthetic.'' \319\ Other comments argued that 
the Guides should specifically identify terms other than ``synthetic'' 
that can be used, such as ``laboratory created,'' ``created,'' or 
``cultured.'' AGL noted that it introduced the term ``Laboratory Grown 
(Synthetic)'' some time ago because it seemed obvious that this would 
``increase the ability of a retailer to explain and the capacity of 
consumer to understand the basic differences between glass/plastic, 
i.e., imitations, and those products that are laboratory grown to 
emulate the characteristics and properties of a natural material.'' 
\320\
---------------------------------------------------------------------------

    \319\ Comment 49, p.17.
    \320\ Comment 230, p.3. AGL also noted that the colored stone 
industry opposed this change, citing ``the historical, `universally 
understood' application of the term `synthetic.''' However, AGL 
stated that there is a ``conscious desire to leave the consumer in a 
quandary regarding the difference between `synthetic' and 
`imitation' products. . . . to reduce the capacity of the synthetic 
material manufacturer to penetrate the U.S. marketplace with their 
products.'' Id.
---------------------------------------------------------------------------

    Chatham and numerous other commenters also suggested that synthetic 
stones appropriately could be described as ``cultured.'' Chatham, 
Kimberley, and Crystal argued that this term should only be used for 
synthetics that were created by the ``hydrothermal'' or ``flux'' method 
(which they use).\321\ Others argued that synthetics made by the 
``melt'' or ``flame-fusion'' process also should be allowed to describe 
the stones as ``cultured.'' \322\
---------------------------------------------------------------------------

    \321\ Chatham (231) pp.2, 31; Crystal (24) pp.1, 4; Kimberley 
(227) p.7 (stating that the hydrothermal process is the same process 
that creates ``natural'' emeralds); Matlins (205) pp.2-3, favored 
the use of terms such as ``created'' or ``laboratory-grown'' for 
flux-grown synthetic gems only, which she described as being very 
different from melt or ``flame-fusion'' synthetic products, in that 
the flux-grown products look more like natural stones and are more 
expensive to produce. Manning (159) p.2, which uses the melt method 
to produce rubies, argued that solution growers [by which it appears 
to be referring to flux-growers] should be allowed to describe their 
products as ``cultured'' and melt growers to describe their products 
as ``created'' or ``lab-grown'' because ``without the ability of 
solution growers to somehow separate their process from ours in fair 
descriptive language, they will be forced from the marketplace as 
too costly for the market to bear.'' Diamonique (224) p.3, stated 
without elaboration, that it favored ``cultured'' for gemstones that 
were produced by a method ``which replicates that growth process of 
natural gemstones.''
    \322\ ICT (189), which makes gemstones by the melt method, 
stated at p.3, that it objected to ``reserving the word `lab-
created,' `lab-grown,' or `created,' to describe flux or 
hydrothermal methods of growth only.'' Service (222) stated, at p.2, 
that it is ``unfair to allow sellers of low quality created stones 
to use the same term for their product as is used for the highest 
quality of created stones'' but suggested this issue should be 
addressed in a ``separate rulemaking.'' Friedman (234) stated, at 
p.3, that ``cultured'' would communicate to consumers ``that they 
were purchasing a true, high-value gemstone, identical to a natural 
gemstone and made by a process which included human intervention.'' 
It apparently favored the use of ``cultured'' for both types of lab-
created stones.
---------------------------------------------------------------------------

    Although some companies have used the term ``cultured'' to describe 
their products for some time,\323\ no actual evidence about consumer 
perceptions arising from the use of a term such as ``cultured ruby'' 
was submitted. However, in Chatham Research Laboratories, 64 F.T.C. at 
1074, the Commission found that the phrase ``Chatham Cultured 
Emeralds'' was deceptive. Further, several commenters indicated that 
they regarded the term ``cultured emerald'' as deceptive.\324\ Because 
there currently is insufficient evidence as to consumer perceptions 
regarding the use of the term ``cultured,'' the Commission has not 
included the term in the Guides as a ``safe harbor'' (e.g., an example 
of an adequate disclosure). Furthermore, the Commission has concluded 
that there is not enough evidence in the record to establish ``safe 
harbor'' terms by which makers of flux-grown gems could distinguish 
their products from other created gems. However, such manufacturers can 
distinguish their products from others by means of truthful 
advertising.
---------------------------------------------------------------------------

    \323\ Crystal (24) p.3 (stating that it uses the term 
``cultured'' to describe its ``Ramura Cultured Ruby''); Chatham 
(231) p.31 (stating that Crystal and Emsprit Cultured Emeralds have 
been using the term ``cultured'' for flux-grown gems).
    \324\ Krementz (208) p.1; Shire (221) p.1; River (254) p.3.
---------------------------------------------------------------------------

    Similarly, the Commission has determined that there is not 
sufficient evidence with respect to the consumer interpretation of a 
phrase such as ``created emerald'' (as opposed to

[[Page 27209]]

``laboratory created'' or ``Chatham-created'') to justify including it 
in the Guides as a safe harbor. As River stated, the description 
``laboratory grown'' is clear immediately, without further explanation. 
However, terms such as cultured, created and synthetic ``are not as 
clear to the general public and are more often misunderstood because 
they are not part of the common vocabulary in the special sense in 
which we use them.'' \325\
---------------------------------------------------------------------------

    \325\ Comment 254, p.3.
---------------------------------------------------------------------------

    Chatham argued that most consumers ``understand synthetic to mean 
fake, artificial, and otherwise of low quality.'' It also stated that 
it is essential that it ``be able to honestly and accurately educate 
consumers that the only difference between its gemstones and natural is 
the environment in which the crystals grow.'' \326\ The Commission is 
persuaded that the term ``synthetic,'' as applied to gemstones, is 
misunderstood by some consumers to mean something fake or artificial. 
Therefore, the Commission has included the phrases ``laboratory 
grown,'' ``laboratory-created,'' or ``[manufacturer name]-created'' in 
the revised Guides (now Sec. 23.23).\327\ Although the Commission has 
determined that these terms more clearly communicate the nature of the 
stone, sellers can still use the term ``synthetic.'' The Commission has 
also included an admonition against misusing the terms ``laboratory-
grown,'' ``laboratory-created,'' or ``[manufacturer name]-created.''
---------------------------------------------------------------------------

    \326\ Comment 231, pp.2, 5, 22; Manning (159) p.4 (stating that 
there is no way to change the public misunderstanding of 
``synthetic''); River (254) p.3 (stating that consumers 
misunderstand ``synthetic,'' and noting that ``their greatest 
experience is with synthetic fabrics'' so that ``it is difficult for 
a clerk in a retail store to explain that gemologists have a special 
meaning for the word synthetic'').
    \327\ Although the revised Guides no longer list the word 
``synthetic,'' some consumers may know the technical meaning that 
has been attributed to the word in the context of gemstones for many 
years, and they might be deceived into thinking that imitation 
stones described as ``synthetic'' have the same physical and optical 
properties as natural stones. Thus, the Commission has determined 
that the provision which limits the use of the word ``synthetic'' to 
certain circumstances continues to be useful.
---------------------------------------------------------------------------

    The JVC also proposed adding a Note stating that if the term 
``created'' is used to describe a synthetic stone, ``the name of the 
firm or company using this product-term must be disclosed in equal 
prominence and size type as the term `created' . . . [and] must be 
separated from the term `created by a dash (-) so as clearly to 
disclose the stone is man-made, i.e., Chatham-Created Emerald.'' AGTA 
proposed prohibiting any synonym for ``synthetic,'' but urged that, if 
the Commission decided to allow the continued use of the term 
``created,'' then ``the precise language'' from the Chatham action 
should be incorporated into the Guides.\328\ The effect of the Note 
proposed by the JVC (and ``urged'' by AGTA) would be to prohibit the 
use of ``created'' except in precisely the form mandated by the Note. 
However, there is no evidence as to how most consumers interpret a 
phrase such as ``created emerald.'' The Commission has thus determined 
that there is no basis for advising against all but one specific use of 
the term ``created.'' However, although the terms ``laboratory 
created'' and ``[manufacturer name]-created'' will be included in the 
list of ``safe harbor'' terms, the term ``created'' alone will not be 
included in this list.
---------------------------------------------------------------------------

    \328\ AGTA (49) argued, at p.17, that a phrase such as ``A 
`Chatham-created emerald ring' implies not that the emerald was 
created, but that the ring was manufactured by Chatham.'' (Emphasis 
added.) However, it provided no evidence that consumers interpret 
the phrase in that manner. If manufacturers or sellers of these 
items have reason to believe that consumers are misinterpreting this 
phrase, it would be unfair or deceptive not to correct the 
misunderstanding.
---------------------------------------------------------------------------

    In the FRN, the Commission also sought comment on whether foreign 
words or phrases like ``faux'' should be added ``to the list of terms 
in Section 23.24(b) [of the JVC petition] that are not to be used to 
describe industry products.'' Thirty-five comments addressed this 
question.\329\ The Postal Service stated that ``faux'' has been used 
``by disreputable promoters to confuse unsophisticated consumers and 
enhance the apparent value of their costume jewelry.'' \330\ Three 
other commenters stated that ``faux'' is only used to deceive and 
should be prohibited.\331\ Six commenters, including NACAA, stated that 
``faux'' should be prohibited because some consumers do not know what 
it means.\332\ Three stated that ``faux'' is confusing and 
misleading.\333\ Thirteen other comments stated that ``faux'' should be 
prohibited but provided no reasons.\334\ Nine comments believe the use 
of ``faux'' to describe industry products should be acceptable.\335\
---------------------------------------------------------------------------

    \329\ Only one of the comments focused on the issue of whether 
foreign words or phrases should be added to the list of terms that 
are not to be used to describe industry products. Sheaffer (249) 
stated, at p.5, that it is not necessary ``to identify and specify . 
. . the many foreign terms which might be misleading if used in 
connection with an industry product'' but instead believed it more 
desirable to add a general admonition that it would be unfair or 
deceptive ``to use any foreign term which may be accurate and 
appropriate in its native language'' but which is not otherwise 
generally used or understood.
    \330\ Comment 244, p.3.
    \331\ Schwartz (52); Bridge (163); and CPAA (193).
    \332\ Honora (15); Skalet (61); NACAA (90); Bedford (210); MJSA 
(226); and Preston (229). Bedford stated that a consumer might think 
that ``faux'' refers to the color of a ``faux emerald.''
    \333\ AGTA (49); Bruce (218); and Shire (221). AGTA gave an 
example, at p.11, of a consumer who thought that ``faux'' referred 
to the place of origin of a ``faux emerald.''
    \334\ JMC (1); Fasnacht (4); Sibbing (5); AGS (18); Estate (23); 
G&B (30); GIA (81); Nowlin (109); McGee (112); LaPrad (181); Lange 
(183); IJA (192); and Leach (257).
    \335\ Lannyte (65); Ross-Simons (67); ArtCarved (155); Bales 
(156); NACSM (219); ICT (189); Service (222); Best (225) and 
Franklin Mint (250). Two of these [NACSM (219) and ICT (189)] stated 
that ``faux'' has become part of the English language. Ross-Simons 
(67) stated that ``faux'' should be permitted because it romances 
the merchandise without deception.
---------------------------------------------------------------------------

    The evidence shows that many unsophisticated consumers do not know 
what the word ``faux'' means and that it has been used to deceive them. 
Thus, the Commission has added a Note to the Guides that states that 
the use of the word ``faux'' to describe a laboratory-created stone is 
not regarded as an adequate disclosure of the fact that it is not a 
natural stone.
    Finally, the JVC proposed the addition of a Note [following 
petition section 23.22] that states that descriptive words relating to 
species and varieties of gemstones must be in conformance with approved 
gemological terminology. No evidence was offered to show that there is 
a need for guidance in this area.<SUP>336 Thus, the Commission has not 
added this Note to the revised Guides.
---------------------------------------------------------------------------

    \336\ There was little comment on this suggestion. Lannyte (65) 
stated, at p.11, that ``it is totally inappropriate for a school to 
be THE authority on descriptive names as names will develop from 
within the trade usage in the same way as language usage changes. 
This smacks of censorship!''
---------------------------------------------------------------------------

3. Misuse of the Words ``Real,'' ``Genuine,'' ``Natural'': Sec. 23.20
    Section 23.20 states that it is unfair to use the words ``real,'' 
``genuine,'' ``natural,'' or similar terms, to describe any ``articles 
which are manufactured or produced synthetically or artificially, or 
artificially cultured or cultivated,'' if such use is likely to deceive 
consumers. The JVC has proposed [in section 23.23(a) of its petition] 
expanding this section to include the words ``precious'' or 
``cultured'' and to state that ``it must clearly be disclosed that a 
man-made industry product is not a gemstone.'' For the reasons 
discussed above, the Commission has not included the word ``cultured'' 
as a ``safe harbor'' term to describe man-made gemstones. However, 
there is not sufficient evidence to advise against the use of 
``cultured'' as applied to synthetic gemstones. Further, there is no 
evidence that it is being applied to imitation gemstones, where its use 
is more likely to be misleading. Thus, the Commission

[[Page 27210]]

has not added the word ``cultured'' to this section of the Guides.
    The Commission, however, has determined that the term ``precious'' 
<SUP>337 is deceptive when applied to synthetic or imitation gemstones 
because it implies rarity. Because synthetic or imitation gemstones can 
be produced in virtually unlimited quantities, they are not ``rare'' or 
``precious'' like natural gemstones. Therefore, the Commission has 
included the word ``precious'' in this section (Sec. 23.24 of the 
revised Guides).
---------------------------------------------------------------------------

    \337\ ``Precious'' stones are diamonds, emeralds, rubies, and 
sapphires. All other gemstones are ``semi-precious.''
---------------------------------------------------------------------------

    The JVC also proposed (in section 23.23(b) of its petition) a 
section which would in effect prohibit the use of the term ``semi-
precious'' to describe any gemstones. The Commission has determined 
that ``semi-precious'' is deceptive when applied to synthetic or 
imitation gemstones (because it implies they occur naturally) and has 
included it in Sec. 23.24 of the revised Guides.<SUP>338 The proposal 
to ban its use as to natural gemstones is discussed below, as is the 
proposal that the Guides state that ``it must clearly be disclosed that 
a man-made industry product is not a gemstone.''
---------------------------------------------------------------------------

    \338\ Several comments that opposed banning ``semi-precious'' 
stated that its use with respect to synthetic or imitation gems 
would be confusing. AGTA (49) p.11; Schwartz (52) p.3; GIA (81) p.4; 
MJSA (226) p.10.
---------------------------------------------------------------------------

4. Deceptive Use of ``Gem'' and ``Synthetic'': Sec. 23.21
    Section 23.21(a) in the current Guides states that it is unfair to 
use the word ``gem'' to refer to a pearl or a stone (whether precious 
or semi-precious) ``which does not possess the beauty, symmetry, 
rarity, and value necessary for qualification as a gem.'' Section 
23.21(b) states that the word ``gem'' may not be used to describe a 
synthetic product unless that product meets the requirements of 
23.21(a) and ``unless such word is immediately accompanied, with equal 
conspicuity, by the word `synthetic,' or by some other word or phrase 
of like meaning.* * *'' A Note to section 23.21 states that ``few 
cultured pearls or synthetic stones possess the necessary 
qualifications to properly be termed `gems' '' and that the use of the 
word ``gem'' therefore should be avoided. The Note also states that 
imitation pearls, diamonds, and other stones should not be described as 
``gems.'' Finally, the Note states that ``Not all diamonds or natural 
stones, including those classified as precious stones, possess the 
necessary qualifications to properly be termed `gems.' ''
    The current Guides do not contain any admonitions as to the use of 
the words ``gem stone'' other than the general admonition, in 
Sec. 23.18, against misleading representations used in connection with 
the sale of precious or semi-precious gemstones. Under the current 
Guides, few if any synthetic stones are likely to qualify as ``gems,'' 
but synthetic stones may be described as ``gemstones'' (for example, in 
an advertisement for various varieties of stones), as long as the term 
is so qualified as to disclose that the product is not a natural 
stone.<SUP>339 In addition, the Guides allow lower quality natural 
stones, which do not possess ``the beauty, symmetry, rarity, and value 
necessary for qualification as a gem'' to be referred to as gemstones 
as long as they are not of such low quality (e.g., industrial quality 
stones) that it would be deceptive to so describe them.
---------------------------------------------------------------------------

    \339\ A synthetic stone is not likely to meet the rarity 
criterion necessary to be described as a gem, although it is 
conceivable that a particularly beautiful and difficult to create 
stone could meet the rarity criterion. In a separate section of its 
petition [23.24(a)], the JVC also proposed the addition of a section 
that states that it is unfair to use the word ``gem'' to describe a 
synthetic or imitation stone. Diamonique (224) noted, at p.4, that 
``there are differing quality levels with natural gemstones, as 
there are with man-made gemstones. If the term `gem' is appropriate 
for natural material, it should also be appropriate for man-made 
material.'' The Commission has determined that the word ``gem'' may 
be appropriately used to describe a synthetic stone and has not 
added the proposed section to the Guides.
---------------------------------------------------------------------------

    The JVC proposed changing this scheme. It proposed that the Guides 
state that the word `gem' should not be used as a quality designation 
of gemstones. It also proposed that a definition of ``gemstone'' be 
added to the Guides, along with a provision stating that it is unfair 
to use the word ``gemstone'' to describe any object that does not meet 
the definition. The JVC defined gemstone as ``a naturally occurring 
substance which has been carefully fashioned into a jewel suitable for 
use in jewelry, for personal adornment, display, etc. A gemstone 
possesses beauty, rarity, durability and value.''
    This definition is similar to the definition of ``gem'' in the 
current Guides but it limits the use of ``gemstone'' to natural cut and 
polished stones, suitable for use in jewelry, that are also durable. 
The JVC has provided no evidence indicating that industry members or 
consumers have misunderstood the definition of ``gem'' in Sec. 23.21 in 
the current Guides, nor has it provided any evidence as to why the 
definition it suggests for ``gemstone'' (which omits symmetry and adds 
durability to the qualities a gem must possess and excludes any 
synthetic stone) is more accurate or useful than the definition of 
``gem'' in the current Guides.
    The part of the proposal that would prevent natural stones from 
being described as gemstones unless they possessed beauty, rarity, 
durability and value was not discussed by most comments. However, the 
House of Onyx stated, ``This is a broad statement that, if taken 
literally, would eliminate the vast majority of the Gemstones currently 
in the market.'' <SUP>340 For example, under the scheme proposed by the 
JVC, a natural emerald that did not possess, e.g., rarity, would not be 
a gemstone. The Commission has determined to retain the current Guides, 
which allow lower quality natural stones, which do not possess ``the 
beauty, symmetry, rarity, and value necessary for qualification as a 
gem'' to be referred to as gemstones.<SUP>341
---------------------------------------------------------------------------

    \340\ Comment 162, p.2 (adding, at p.3, that most gemstones are 
not durable ``in the true sense of the word,'' citing as examples 
amber, ivory, malachite, lapis lazuli, coral pearls, cameos, 
sodalite, and turquoise).
    \341\ One comment suggested that the words ``rarity and value'' 
be deleted from the current definition of gem in Sec. 23.21, arguing 
that beauty and durability are the two basic properties of all 
gemstones. Lannyte (65) pp.6, 11. However, this comment appears to 
have confused the definition of ``gemstone'' with ``gem.'' As noted, 
the current Guides suggest only a very limited use of the word 
``gem'' is appropriate.
---------------------------------------------------------------------------

    The proposed definition of ``gemstone'' also would prevent 
synthetic stones from being described as ``gemstones.'' The FRN 
solicited comment on this proposal. AGS commented simply that it is 
essential ``that a like size declaration of the words `synthetic, 
imitation, etc.' accompany the description of the stone.'' <SUP>342 
Service commented that the proposed definition of gemstone ``is not 
needed to avoid deception of the consumer. As long as the consumer is 
ultimately advised whether or not the stone was naturally occurring * * 
* the interest in full disclosure has been satisfied.'' <SUP>343 Best 
noted that ``gemstone'' is ``loosely used in the industry today to 
refer to both naturally occurring and laboratory

[[Page 27211]]

manufactured stones.'' <SUP>344 Friedman stated, ``[t]o our customers, 
the laboratory grown gems have gained acceptance as, and are, 
gemstones.'' <SUP>345 Chatham noted that it has used the terms 
``gemstone'' and ``gem'' virtually from its inception in 1946 and that 
the terms ``have been adopted and widely used by tradespeople in the 
jewelry industry * * * To date there has not been any suggestion (other 
than by the JVC) that consumers have been misled thereby.'' <SUP>346 
Chatham also noted that the proposal would place Chatham gemstones ``at 
a competitive disadvantage vis-a-vis their natural counterparts and 
would do so for no justifiable reason.'' <SUP>347
---------------------------------------------------------------------------

    \342\ Comment 18, p.3.
    \343\ Comment 222, p.4 (noting that this proposal creates 
problems for ``fair and competitive advertising''); Franklin (250) 
p.6 (stating that there is no reason the term should not be used for 
laboratory-created stones as long as it is properly qualified); 
Lannyte (65) p.9, 10 (asking ``How does one refer to gemstones made 
by man when discussing them generically?'' and suggesting that the 
Guides provide that it is unfair to use the word ``gemstone'' to 
refer to a synthetic stone without disclosing that it is ``not the 
unassisted product of nature'').
    \344\ Comment 225, attachment at p.8.
    \345\ Comment 234, p.2. Freidman did suggest that imitation gems 
should not be defined as gemstones. Id. at 3.
    \346\ Comment 231, p.5. Chatham also attached a declaration from 
Robert Miller, a merchant who has sold both Chatham-created 
gemstones and natural gemstones for ten years. He stated that a 
prohibition on the use of the words ``gem'' or ``gemstone'' ``would 
be inconsistent with current trade practice, in which the words 
`gemstone' and `gem' are an integral part of the marketing of 
Chatham products, as well as most other jewelry'' and that 
``prohibiting sellers from using these common-place terms would hurt 
our ability to communicate with our customers about the very nature 
of Chatham products'' and that the end result ``would be confusion 
on the part of consumers who would wrongly perceive that the 
prohibition is a negative reflection on the quality of Chatham 
gemstones.'' Miller declaration para. 8 and 9. Chatham also attached 
a declaration from Dr. Frederick Pough, who received a Ph.D. in 
Mineralogy from Harvard in 1935 and who has authored hundreds of 
articles on mineralogy. He states that the definitions proposed by 
the JVC ``would represent a dramatic departure from the way in which 
the terms `gemstone' and `gem' have been understood and used in the 
trade and in gemological circles for several decades'' and ``as it 
is currently and loosely used, and as it has been used for years, 
the term `gemstone' does not identify the source of the stone, or 
whether or not it is a `naturally occurring substance.''' Similarly, 
he stated ``under no current definition of `gem' of which I am 
aware, is the term limited to `naturally occurring substances.''' 
Pough declaration para. 8, 9, and 13.
    \347\ Comment 231, pp.5, 9. The eight other commenters who sell 
significant quantities of synthetic gemstones also believe it is not 
deceptive to use the term for synthetic stones as long as it is 
qualified to indicate that the stones are not natural stones: 
Crystal (24); Union Carbide (38); Manning (159); ICT (189); 
Kimberley (227); Friedman (234); Kyocera (242); and River (254).
---------------------------------------------------------------------------

    Although many commenters supported the JVC proposal, few gave any 
reason beyond stating that ``synthetics are not natural.'' GIA agreed 
that ``gemstone'' should be limited to natural stones because it 
implies that the material occurred in nature.<SUP>348 AGTA stated that 
synthetics ``emulate and often approximate the appearance of and have 
similar durability to that of natural gemstones,'' but they lack 
rarity, and allowing them to be referred to as ``gemstones'' will 
``further blur the distinction in the consumer's mind as to the 
important differences between the two. In all probability, this will 
result in higher consumer prices for synthetic and simulated 
materials.'' <SUP>349 Other commenters agreed that synthetics should 
not be described as gemstones.<SUP>350
---------------------------------------------------------------------------

    \348\  Comment 81, p.3 (stating ``We consider this to be of 
minor importance, but believe neither stone nor gemstone should be 
used to describe an artificial product.'').
    \349\ Comment 49, p.9.
    \350\ One of these, LaPrad (181) stated, at p.3, that 
``gemstone'' should also be prohibited as descriptive of any 
artificially colored natural stone.
---------------------------------------------------------------------------

    The current Guides permit the use of, e.g., ``synthetic ruby'' or 
``imitation ruby.'' The Commission is persuaded that consumers would 
understand that gemstones described as ``laboratory-created gemstones'' 
or ``imitation gemstones'' are not natural gemstones. Thus, the word 
``gemstone'' is not deceptive when applied to synthetic or imitation 
stones, if its use is properly qualified by a word or phrase that 
discloses that the stone is not natural. The Commission therefore has 
added the word ``gemstone'' to Sec. 23.19(b) of the current Guides, 
which states that the name of a precious or semi-precious gemstone as 
descriptive of a synthetic or imitation stone should be adequately 
qualified to disclose that it is not a natural stone. However, for the 
reasons described above, the Commission has not adopted the definition 
of ``gemstone'' suggested by the JVC nor changed the definition of 
``gem'' in Sec. 23.21 of the current Guides.
    As noted, the JVC also proposed adding a Note recommending that the 
word ``gem'' or ``similar term'' not be used as a quality designation 
or as descriptive of gemstones because no criteria for these terms 
exist and ``their use to describe, imply or represent quality could be 
misleading.'' However, the JVC cited no evidence that such terms have 
actually been misleading to consumers. Moreover, as Onyx noted, ``there 
are `Gem' quality Gemstones as well as `trash' quality in the same 
Gemstone.'' <SUP>351 Truthful, and indeed informative, use of the word 
``gem'' is possible and thus, the Commission has not adopted this 
proposal.
---------------------------------------------------------------------------

    \351\  Comment 162, p.3; NACSM (219) stated, at p.12, that this 
would ``limit the use of the English language;'' AGTA (49) stated, 
at p.16, that the Note should be stricken or, if retained, ``like 
language should be added to the diamond section.''
---------------------------------------------------------------------------

    The JVC also proposed adding a section to the Guides stating that 
``gemstone'' may not be used to describe any object ``not fashioned for 
use as jewelry or personal adornment, e.g., statues, ashtrays, boxes, 
etc.'' unless qualified by a term such as ``carving'' or ``engraving'' 
[Petition 23.20(b)]. No explanation was offered as to how such a use 
could deceive consumers.<SUP>352
---------------------------------------------------------------------------

    \352\  Onyx (162) p.3 (stating that the proposed prohibition 
``flies in the face of fact''); NACSM (219) p.13 (opposing the 
provision and describing it as a restrictive limitation for which no 
justification has been given); Service (222) p.5 (stating that there 
is no reason to prohibit a phrase such as ``gemstone jewelry box'').
---------------------------------------------------------------------------

    The Commission has not included this section in the Guides because 
items other than jewelry are sometimes made of gemstones and it would 
not be deceptive to so describe them.
    The JVC proposed that a section be added to the Guides stating that 
it is unfair to use the term ``semi-precious'' when referring to 
gemstones or any synthetic, imitation, or simulated stone. [Petition 
23.23(b)] The FRN solicited comment on this proposal.
    No explanation was offered as to why the term ``semi-precious'' was 
unfair or deceptive when applied to natural gemstones. Some commenters 
who favored the proposal stated that it is a ``misnomer'' or that it 
``gives a false impression of a gem having little intrinsic value; an 
impression which may not be correct.'' <SUP>353 However, sellers are 
not required to describe their wares as semi-precious; the import of 
the JVC's proposal would be to prohibit those who wish to so describe 
their wares from doing so. AGTA commented that, while it believes 
``semi-precious'' is denigrating to ``natural gemstones other than 
Ruby, Emerald, Sapphire and Diamond which are traditionally referred to 
in the trade as the `precious gemstones,''' it did not believe it 
should be illegal to so describe natural stones.<SUP>354 Skalet 
explained that the term ``semi-precious'' has been used in the jewelry 
and gemstone industry for generations ``as a reference to natural 
gemstones of moderate value and wide availability.'' <SUP>355 Based on 
the comments, the Commission has concluded that there is no basis for 
advising against the use of this term to describe natural gemstones.
---------------------------------------------------------------------------

    \353\  Thorpe (7) p.2; Capital (19) p.2.
    \354\  Comment 49, p.10
    \355\  Comment 61, p.5.
---------------------------------------------------------------------------

    Finally, the JVC also proposed redrafting all sections pertaining 
to precious and semi-precious stones, removing the terms ``precious'' 
and ``semi-precious'' and substituting ``gemstone.'' However, there is 
no valid purpose for this change, and the Commission has determined 
that substituting the term ``gemstone'' for ``precious and semi-
precious stones'' would make the Guides less clear.

[[Page 27212]]

5. Misuse of the Words ``Flawless,'' ``Perfect,'' Etc.
    The JVC proposed the addition of a new section [petition 23.21] 
that prohibits the use of the word ``perfect'' when applied to 
gemstones and limits ``flawless'' to gemstones that do not have 
blemishes. The JVC's definition of ``flawless'' is similar to the 
provision in Sec. 23.10 of the current Guides, which applies only to 
diamonds.<SUP>356 A claim that a colored stone is flawless when it is 
not is deceptive. The Commission has determined that the addition of 
this section clarifies the meaning of ``flawless.'' <SUP>357
---------------------------------------------------------------------------

    \356\  The JVC proposed that the Guides state that it is unfair 
``to use the word ``flawless'' as a quality description of any 
gemstone which discloses blemishes, inclusions, or clarity faults of 
any sort when examined under a corrected magnifier at 10-power, with 
adequate illumination, by a person skilled in gemstone grading.'' 
However, no reference was made, in the petition or the comments, to 
removal of blemishes by internal lasering of gemstones.
    \357\  There was little comment about this provision. Diamonique 
(224) stated, at p.4, that the change ``regarding the examination of 
gemstones under 10-power magnification is radical and would have 
far-reaching consequences. This proposed change replaces practices 
and guidelines currently in use worldwide, requiring examination of 
gemstones with the unaided eye.'' However, no other commenter stated 
that the proposal was a change from existing practices. Lannyte (65) 
suggested, at p.10, modifying the section to state that it is unfair 
``to use the words ``flawless'' or ``perfect'' or any other 
description which would lead a buyer to presume that such gemstone 
is totally without blemishes, inclusion or other faults when viewed 
by a skilled person under ten times magnification in adequate 
light.''
---------------------------------------------------------------------------

    Part (b) of the section proposed by the JVC prohibits the use of 
``perfect'' as a quality description ``of any gemstone other than a 
diamond.'' No reasons were offered as to why the use of ``perfect'' as 
applied to colored stones would always be deceptive, and numerous 
comments objected to this provision.<SUP>358 On the basis of the 
comments, the Commission has not included this provision. However, the 
Commission has determined that the industry may need guidance as to the 
use of ``perfect'' with respect to gemstones,<SUP>359 and has included 
a provision (like the provision for diamonds) that ``perfect'' should 
be used only for a gemstone that is flawless and not of inferior color 
or cut.
---------------------------------------------------------------------------

    \358\  Lannyte (65) p.11; ICT (189) p.2. AGTA (49) stated, at 
pp.15, 16, that it ``prefers that the term `perfect' be deleted from 
use in the trade for both diamonds and colored gems,'' but if the 
use of the term ``perfect'' is acceptable for diamonds, it should 
also be acceptable for colored gemstones. Otherwise, there ``would 
be a passive inference that colored gemstones are less desirable 
than diamonds. There are certainly as many `perfect,' i.e. flawless 
(under 10X magnification), top color, well-cut gemstones as there 
are diamonds.''
    \359\  Diamonique (224) p.3 (stating that ``the Guides should 
contain more specific guidelines in this area, including a 
definition of the term `perfect,' instead of simply limiting its 
use'').
---------------------------------------------------------------------------

    The JVC proposed that the Guides state it is unfair to use 
``flawless'' or ``perfect'' to describe synthetics or imitations. No 
reasons were offered as to why the use of ``flawless'' or ``perfect'' 
as applied to synthetic stones would always be deceptive. Thus, the 
Commission has concluded that there is not enough evidence to include 
this provision as to synthetic stones. However, because the terms imply 
that a stone is a finer quality and, accordingly, a greater value, when 
used to describe imitation stones, which are almost always flawless, 
they could be misleading.<SUP>360 Thus, the terms ``flawless'' and 
``perfect'' should not be used to describe imitation stones.
---------------------------------------------------------------------------

    \360\  NACSM (219) p.27 (stating that the proposal ``fails to 
take into account a clearly recognized difference in the marketplace 
between a `synthetic' . . . and an `imitation' stone''); Diamonique 
(224) p.3 (stating that ``cultured, synthetic and simulated 
gemstones would be described according to the same standards used 
for natural gemstones. To do otherwise would create confusion within 
the industry itself as well as among consumers'').
---------------------------------------------------------------------------

6. Misuse of the Words ``Reproduction,'' or ``Replica'': Sec. 23.21(c)
    Section 23.21(c) of the current Guides states that it is unfair to 
use the words ``reproduction,'' ``replica,'' or similar terms to 
describe cultured or imitation pearls or any imitation of precious or 
semi-precious stones. The JVC proposed changing this section so that it 
only prohibits the use of ``reproduction'' or ``replica'' when applied 
to synthetic or imitation stones [petition 23.24(b)]. If the nature of 
the material used in a reproduction or replica is adequately disclosed, 
as is advised by other sections of the Guides, it is not clear that the 
use of these terms would be deceptive or unfair.<SUP>361 Accordingly, 
the Commission has deleted this entire section from the Guides.
---------------------------------------------------------------------------

    \361\  NACSM (219) p.27 (stating that the attempt to ``ban'' the 
word ``reproduction'' is dubious); ISA (237A) p.15 (stating that 
this would prohibit the use of ``reproduction'' and ``replica'' to 
describe ``items which are in fact reproductions and replicas. We 
recommend more emphasis on section 23.1(a), the general paragraph 
which makes clear that the intent of the Guides is to prohibit 
deception and deceptive use of such terms'').
---------------------------------------------------------------------------

List of Subjects in 16 CFR Parts 19 and 23

    Advertising, Labeling, Trade practices, Watch bands and jewelry.
    Accordingly, Part 23 is revised to read as follows:

PART 23--GUIDES FOR THE JEWELRY, PRECIOUS METALS, AND PEWTER 
INDUSTRIES

Sec.
23.0  Scope and application.
23.1  Deception (general).
23.2  Misleading illustrations.
23.3  Misuse of the terms ``hand-made,'' ``hand-polished,'' etc.
23.4  Misrepresentation as to gold content.
23.5  Misuse of the word ``Vermeil.''
23.6  Misrepresentation as to silver content.
23.7  Misuse of words ``platinum,'' ``iridium,'' ``palladium,'' 
``ruthenium,'' ``rhodium,'' and ``osmium.''
23.8  Misrepresentation as to content of pewter.
23.9  Additional guidance for the use of quality marks.
23.10  Misuse of ``corrosion proof,'' ``noncorrosive,'' ``corrosion 
resistant,'' ``rust proof,'' ``rust resistant,'' etc.
23.11  Definition and Misuse of the word ``diamond.''
23.12  Misuse of the words ``flawless,'' ``perfect,'' etc.
23.13  Disclosing existence of artificial coloring, infusing, etc.
23.14  Misuse of the term ``blue white.''
23.15  Misuse of the term ``properly cut,'' etc.
23.16  Misuse of the words ``brilliant'' and ``full cut.''
23.17  Misrepresentation of weight and ``total weight.''
23.18  Definitions of various pearls.
23.19  Misuse of the word ``pearl.''
23.20  Misuse of terms such as ``cultured pearl,'' ``seed pearl,'' 
``Oriental pearl,'' ``natura,'' ``kultured,'' ``real,'' ``gem,'' 
``synthetic,'' and regional designations.
23.21  Misrepresentation as to cultured pearls.
23.22  Deception as to gemstones.
23.23  Misuse of the words ``ruby,'' ``sapphire,'' ``emerald,'' 
``topaz,'' ``stone,'' ``birthstone,'' ``gemstone,'' etc.
23.24  Misuse of the words ``real,'' ``genuine,'' ``natural,'' 
``precious,'' etc.
23.25  Misuse of the word ``gem.''
23.26  Misuse of the words ``flawless,'' ``perfect,'' etc.
Appendix to Part 23--Exemptions recognized in the assay for quality 
of gold alloy, gold filled, gold overlay, rolled gold plate, silver, 
and platinum industry products.

    Authority: Sec. 6, 5, 38 Stat. 721, 719; 15 U.S.C. 46, 45.


Sec. 23.0  Scope and application.

    (a) These guides apply to jewelry industry products, which include, 
but are not limited to, the following: gemstones and their laboratory-
created and imitation substitutes; natural and cultured pearls and 
their imitations; and metallic watch bands not permanently attached to 
watches.<SUP>1 These guides also apply to articles, including optical 
frames, pens and pencils, flatware, and

[[Page 27213]]

hollowware, fabricated from precious metals (gold, silver and platinum 
group metals), precious metal alloys, and their imitations. These 
guides also apply to all articles made from pewter. For the purposes of 
these guides, all articles covered by these guides are defined as 
``industry products.''
---------------------------------------------------------------------------

    \1\ The Guides for the Watch Industry, 16 C.F.R. Part 245, 
address watchcases and permanently attached watchbands.
---------------------------------------------------------------------------

    (b) These guides apply to persons, partnerships, or corporations, 
at every level of the trade (including but not limited to 
manufacturers, suppliers, and retailers) engaged in the business of 
offering for sale, selling, or distributing industry products.

    Note to paragraph (b): To prevent consumer deception, persons, 
partnerships, or corporations in the business of appraising, 
identifying, or grading industry products should utilize the 
terminology and standards set forth in the guides.

    (c) These guides apply to claims and representations about industry 
products included in labeling, advertising, promotional materials, and 
all other forms of marketing, whether asserted directly or by 
implication, through words, symbols, emblems, logos, illustrations, 
depictions, product brand names, or through any other means.


Sec. 23.1  Deception (general).

    It is unfair or deceptive to misrepresent the type, kind, grade, 
quality, quantity, metallic content, size, weight, cut, color, 
character, treatment, substance, durability, serviceability, origin, 
price, value, preparation, production, manufacture, distribution, or 
any other material aspect of an industry product.

    Note 1 to Sec. 23.1: If, in the sale or offering for sale of an 
industry product, any representation is made as to the grade 
assigned the product, the identity of the grading system used should 
be disclosed.

    Note 2 to Sec. 23.1: To prevent deception, any qualifications or 
disclosures, such as those described in the guides, should be 
sufficiently clear and prominent. Clarity of language, relative type 
size and proximity to the claim being qualified, and an absence of 
contrary claims that could undercut effectiveness, will maximize the 
likelihood that the qualifications and disclosures are appropriately 
clear and prominent.


Sec. 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 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.

    Note to Sec. 23.2: An illustration or depiction of a diamond or 
other gemstone that portrays it in greater than its actual size may 
mislead consumers, unless a disclosure is made about the item's true 
size.


Sec. 23.3  Misuse of the terms ``hand-made,'' ``hand-polished,'' etc.

    (a) It is unfair or deceptive to represent, directly or by 
implication, that any industry product is hand-made or hand-wrought 
unless the entire shaping and forming of such product from raw 
materials and its finishing and decoration were accomplished by hand 
labor and manually-controlled methods which permit the maker to control 
and vary the construction, shape, design, and finish of each part of 
each individual product.

    Note to paragraph (a): As used herein, ``raw materials'' include 
bulk sheet, strip, wire, and similar items that have not been cut, 
shaped, or formed into jewelry parts, semi-finished parts, or 
blanks.

    (b) It is unfair or deceptive to represent, directly or by 
implication, that any industry product is hand-forged, hand-engraved, 
hand-finished, or hand-polished, or has been otherwise hand-processed, 
unless the operation described was accomplished by hand labor and 
manually-controlled methods which permit the maker to control and vary 
the type, amount, and effect of such operation on each part of each 
individual product.


Sec. 23.4  Misrepresentation as to gold content.

    (a) It is unfair or deceptive to misrepresent the presence of gold 
or gold alloy in an industry product, or the quantity or karat fineness 
of gold or gold alloy contained in the product, or the karat fineness, 
thickness, weight ratio, or manner of application of any gold or gold 
alloy plating, covering, or coating on any surface of an industry 
product or part thereof.
    (b) The following are examples of markings or descriptions that may 
be misleading: <SUP>2
---------------------------------------------------------------------------

    \2\  See Sec. 23.4(c) for examples of acceptable markings and 
descriptions.
---------------------------------------------------------------------------

    (1) Use of the word ``Gold'' or any abbreviation, without 
qualification, to describe all or part of an industry product, which is 
not composed throughout of fine (24 karat) gold.
    (2) Use of the word ``Gold'' or any abbreviation to describe all or 
part of an industry product composed throughout of an alloy of gold, 
unless a correct designation of the karat fineness of the alloy 
immediately precedes the word ``Gold'' or its abbreviation, and such 
fineness designation is of at least equal conspicuousness.
    (3) Use of the word ``Gold'' or any abbreviation to describe all or 
part of an industry product that is not composed throughout of gold or 
a gold alloy, but is surface-plated or coated with gold alloy, unless 
the word ``Gold'' or its abbreviation is adequately qualified to 
indicate that the product or part is only surface-plated.
    (4) Use of the term ``Gold Plate,'' ``Gold Plated,'' or any 
abbreviation to describe all or part of an industry product unless such 
product or part contains a surface-plating of gold alloy, applied by 
any process, which is of such thickness and extent of surface coverage 
that reasonable durability is assured.
    (5) Use of the terms ``Gold Filled,'' ``Rolled Gold Plate,'' 
``Rolled Gold Plated,'' ``Gold Overlay,'' or any abbreviation to 
describe all or part of an industry product unless such product or part 
contains a surface-plating of gold alloy applied by a mechanical 
process and of such thickness and extent of surface coverage that 
reasonable durability is assured, and unless the term is immediately 
preceded by a correct designation of the karat fineness of the alloy 
that is of at least equal conspicuousness as the term used.
    (6) Use of the terms ``Gold Plate,'' ``Gold Plated,'' ``Gold 
Filled,'' ``Rolled Gold Plate,'' ``Rolled Gold Plated,'' ``Gold 
Overlay,'' or any abbreviation to describe a product in which the layer 
of gold plating has been covered with a base metal (such as nickel), 
which is covered with a thin wash of gold, unless there is a disclosure 
that the primary gold coating is covered with a base metal, which is 
gold washed.
    (7) Use of the term ``Gold Electroplate,'' ``Gold Electroplated,'' 
or any abbreviation to describe all or part of an industry product 
unless such product or part is electroplated with gold or a gold alloy 
and such electroplating is of such karat fineness, thickness, and 
extent of surface coverage that reasonable durability is assured.
    (8) Use of any name, terminology, or other term to misrepresent 
that an industry product is equal or superior to, or different than, a 
known and established type of industry product with reference to its 
gold content or method of manufacture.
    (9) Use of the word ``Gold'' or any abbreviation, or of a quality 
mark implying gold content (e.g., 9 karat), to describe all or part of 
an industry product that is composed throughout of

[[Page 27214]]

an alloy of gold of less than 10 karat fineness.

    Note to paragraph (b) Sec. 23.4: The provisions regarding the 
use of the word ``Gold,'' or any abbreviation, as described above, 
are applicable to ``Duragold,'' ``Diragold,'' ``Noblegold,'' 
``Goldine,'' ``Layered Gold,'' or any words or terms of similar 
meaning.

    (c) The following are examples of markings and descriptions that 
are consistent with the principles described above:
    (1) An industry product or part thereof, composed throughout of an 
alloy of gold of not less than 10 karat fineness, may be marked and 
described as ``Gold'' when such word ``Gold,'' wherever appearing, is 
immediately preceded by a correct designation of the karat fineness of 
the alloy, and such karat designation is of equal conspicuousness as 
the word ``Gold'' (for example, ``14 Karat Gold,'' ``14 K. Gold,'' or 
``14 Kt. Gold''). Such product may also be marked and described by a 
designation of the karat fineness of the gold alloy unaccompanied by 
the word ``Gold'' (for example, ``14 Karat,'' ``14 Kt.,'' or ``14 
K.'').
    Note to paragraph (c)(1): Use of the term ``Gold'' or any 
abbreviation to describe all or part of a product that is composed 
throughout of gold alloy, but contains a hollow center or interior, 
may mislead consumers, unless the fact that the product contains a 
hollow center is disclosed in immediate proximity to the term 
``Gold'' or its abbreviation (for example, ``14 Karat Gold-Hollow 
Center,'' or ``14 K. Gold Tubing,'' when of a gold alloy tubing of 
such karat fineness). Such products should not be marked or 
described as ``solid'' or as being solidly of gold or of a gold 
alloy. For example, when the composition of such a product is 14 
karat gold alloy, it should not be described or marked as either 
``14 Kt. Solid Gold'' or as ``Solid 14 Kt. Gold.''

    (2) An industry product or part thereof, on which there has been 
affixed on all significant surfaces, by any process, a coating, 
electroplating, or deposition by any means, of gold or gold alloy of 
not less than 10 karat fineness that is of substantial thickness,<SUP>3 
and the minimum thickness throughout of which is equivalent to one-half 
micron (or approximately 20 millionths of an inch) of fine gold,<SUP>4 
may be marked or described as ``Gold Plate'' or ``Gold Plated,'' or 
abbreviated, as, for example, G.P. The exact thickness of the plate may 
be marked on the item, if it is immediately followed by a designation 
of the karat fineness of the plating which is of equal conspicuousness 
as the term used (as, for example, ``2 microns 12 K. gold plate'' or 
``2<greek-m> 12 K. G.P.'' for an item plated with 2 microns of 12 karat 
gold.)

    \3\ The term ``substantial thickness'' means that all areas of 
the plating are of such thickness as to assure a durable coverage of 
the base metal to which it has been affixed. Since industry products 
include items having surfaces and parts of surfaces that are subject 
to different degrees of wear, the thickness of plating for all items 
or for different areas of the surface of individual items does not 
necessarily have to be uniform.
    \4\ A product containing 1 micron (otherwise known as 
1<greek-m>) of 12 karat gold is equivalent to one-half micron of 24 
karat gold.
---------------------------------------------------------------------------

    Note paragraph (c)(2) to paragraph (b): If an industry product 
has a thicker coating or electroplating of gold or gold alloy on 
some areas than others, the minimum thickness of the plate should be 
marked.

    (3) An industry product or part thereof on which there has been 
affixed on all significant surfaces by soldering, brazing, welding, or 
other mechanical means, a plating of gold alloy of not less than 10 
karat fineness and of substantial thickness <SUP>5 may be marked or 
described as ``Gold Filled,'' ``Gold Overlay,'' ``Rolled Gold Plate,'' 
or an adequate abbreviation, when such plating constitutes at least \1/
20\th of the weight of the metal in the entire article and when the 
term is immediately preceded by a designation of the karat fineness of 
the plating which is of equal conspicuousness as the term used (for 
example, ``14 Karat Gold Filled,'' ``14 Kt. Gold Filled,'' ``14 Kt. 
G.F.,'' ``14 Kt. Gold Overlay,'' or ``14K. R.G.P.''). When conforming 
to all such requirements except the specified minimum of \1/20\th of 
the weight of the metal in the entire article, the terms ``Gold 
Overlay'' and ``Rolled Gold Plate'' may be used when the karat fineness 
designation is immediately preceded by a fraction accurately disclosing 
the portion of the weight of the metal in the entire article accounted 
for by the plating, and when such fraction is of equal conspicuousness 
as the term used (for example, ``\1/40\th 12 Kt. Rolled Gold Plate'' or 
``\1/40\ 12 Kt. R.G.P.'').
---------------------------------------------------------------------------

    \5\ See footnote 3.
---------------------------------------------------------------------------

    (4) An industry product or part thereof, on which there has been 
affixed on all significant surfaces by an electrolytic process, an 
electroplating of gold, or of a gold alloy of not less than 10 karat 
fineness, which has a minimum thickness throughout equivalent to .175 
microns (approximately <SUP>7/<INF>1,000,000ths of an inch) of fine 
gold, may be marked or described as ``Gold Electroplate'' or ``Gold 
Electroplated,'' or abbreviated, as, for example, ``G.E.P.'' When the 
electroplating meets the minimum fineness but not the minimum thickness 
specified above, the marking or description may be ``Gold Flashed'' or 
``Gold Washed.'' When the electroplating is of the minimum fineness 
specified above and of a minimum thickness throughout equivalent to two 
and one half (2\1/2\) microns (or approximately <SUP>100/
<INF>1,000,000ths of an inch) of fine gold, the marking or description 
may be ``Heavy Gold Electroplate'' or ``Heavy Gold Electroplated.'' 
When electroplatings qualify for the term ``Gold Electroplate'' (or 
``Gold Electroplated''), or the term ``Heavy Gold Electroplate'' (or 
``Heavy Gold Electroplated''), and have been applied by use of a 
particular kind of electrolytic process, the marking may be accompanied 
by identification of the process used, as for example, ``Gold 
Electroplated (X Process)'' or ``Heavy Gold Electroplated (Y 
Process).''
    (d) The provisions of this section relating to markings and 
descriptions of industry products and parts thereof are subject to the 
applicable tolerances of the National Stamping Act or any amendment 
thereof.<SUP>6

    \6\ Under the National Stamping Act, articles or parts made of 
gold or of gold alloy that contain no solder have a permissible 
tolerance of three parts per thousand. If the part tested contains 
solder, the permissible tolerance is seven parts per thousand. For 
full text, see 15 U.S.C. 295, et seq.
---------------------------------------------------------------------------

    Note 4 to paragraph (d) : Exemptions recognized in the assay of 
karat gold industry products and in the assay of gold filled, gold 
overlay, and rolled gold plate industry products, and not to be 
considered in any assay for quality, are listed in the Appendix.


Sec. 23.5  Misuse of the word ``Vermeil.''

    (a) It is unfair or deceptive to represent, directly or by 
implication, that an industry product is ``vermeil'' if such mark or 
description misrepresents the product's true composition.
    (b) An industry product may be described or marked as ``vermeil'' 
if it consists of a base of sterling silver coated or plated on all 
significant surfaces with gold, or gold alloy of not less than 10 karat 
fineness, that is of substantial thickness <SUP>7 and a minimum 
thickness throughout equivalent to two and one half (2\1/2\) microns 
(or approximately <SUP>100/<INF>1,000,000ths of an inch) of fine gold.

    \7\ See footnote 3.
---------------------------------------------------------------------------

    Note 1 to Sec. 23.5: It is unfair or deceptive to use the term 
``vermeil'' to describe a product in which the sterling silver has 
been covered with a base metal (such as nickel) plated with gold 
unless there is a disclosure that the sterling silver is covered 
with a base metal that is plated with gold.

    Note 2 to Sec. 23.5: Exemptions recognized in the assay of gold 
filled, gold overlay, and rolled gold plate industry products are 
listed in the Appendix.


Sec. 23.6  Misrepresentation as to silver content.

    (a) It is unfair or deceptive to misrepresent that an industry 
product

[[Page 27215]]

contains silver, or to misrepresent an industry product as having a 
silver content, plating, electroplating, or coating.
    (b) It is unfair or deceptive to mark, describe, or otherwise 
represent all or part of an industry product as ``silver,'' ``solid 
silver,'' ``Sterling Silver,'' ``Sterling,'' or the abbreviation 
``Ster.'' unless it is at least <SUP>925/<INF>1,000ths pure silver.
    (c) It is unfair or deceptive to mark, describe, or otherwise 
represent all or part of an industry product as ``coin'' or ``coin 
silver'' unless it is at least <SUP>900/<INF>1,000ths pure silver.
    (d) It is unfair or deceptive to mark, describe, or otherwise 
represent all or part of an industry product as being plated or coated 
with silver unless all significant surfaces of the product or part 
contain a plating or coating of silver that is of substantial 
thickness.<SUP>8
---------------------------------------------------------------------------

    \8\ See footnote 3.
---------------------------------------------------------------------------

    (e) The provisions of this section relating to markings and 
descriptions of industry products and parts thereof are subject to the 
applicable tolerances of the National Stamping Act or any amendment 
thereof.<SUP>9

    \9\ Under the National Stamping Act, sterling silver articles or 
parts that contain no solder have a permissible tolerance of four 
parts per thousand. If the part tested contains solder, the 
permissible tolerance is ten parts per thousand. For full text, see 
15 U.S.C. 294, et seq.
---------------------------------------------------------------------------

    Note 1 to Sec. 23.6: The National Stamping Act provides that 
silverplated articles shall not ``be stamped, branded, engraved or 
imprinted with the word `sterling' or the word `coin,' either alone 
or in conjunction with other words or marks.'' 15 U.S.C. 297(a).

    Note 2 to Sec. 23.6: Exemptions recognized in the assay of 
silver industry products are listed in the Appendix.


Sec. 23.7  Misuse of words ``platinum,'' ``iridium,'' ``palladium,'' 
``ruthenium,'' ``rhodium,'' and ``osmium.''

    It is an unfair trade practice to use the words ``platinum,'' 
``iridium,'' ``palladium,'' ``ruthenium,'' ``rhodium,'' or ``osmium,'' 
or any abbreviations thereof, as a marking on, or as descriptive of, 
any industry product or part thereof, under any circumstance or 
condition having the capacity and tendency or effect of deceiving 
purchasers or prospective purchasers as to the true composition of such 
product or part.

    Note 1 to Sec. 23.7: Commercial Standard CS66-38, issued by the 
National Bureau of Standards of the U.S. Department of Commerce, 
covers the marking of articles made wholly or in part of platinum. 
Markings on industry products which are in compliance with the 
requirements of CS66-38 will be regarded as among those fulfilling 
the requirements relating thereto which are contained in this 
section.

    Note 2 to Sec. 23.7: See also Sec. 23.9 entitled ``Additional 
guidance for the use of quality marks.''


Sec. 23.8  Misrepresentation as to content of pewter.

    (a) It is unfair or deceptive to mark, describe, or otherwise 
represent all or part of an industry product as ``Pewter'' or any 
abbreviation if such mark or description misrepresents the product's 
true composition.
    (b) An industry product or part thereof may be described or marked 
as ``Pewter'' or any abbreviation if it consists of at least 900 parts 
per 1000 Grade A Tin, with the remainder composed of metals appropriate 
for use in pewter.


Sec. 23.9  Additional guidance for the use of quality marks.

    As used in these guides, the term ``quality mark'' means any 
letter, figure, numeral, symbol, sign, word, or term, or any 
combination thereof, that has been stamped, embossed, inscribed, or 
otherwise placed on any industry product and which indicates or 
suggests that any such product is composed throughout of any precious 
metal or any precious metal alloy or has a surface or surfaces on which 
there has been plated or deposited any precious metal or precious metal 
alloy. Included are the words ``gold,'' ``karat,'' ``carat,'' 
``silver,'' ``sterling,'' ``vermeil,'' ``platinum,'' ``iridium,'' 
``palladium,'' ``ruthenium,'' ``rhodium,'' or ``osmium,'' or any 
abbreviations thereof, whether used alone or in conjunction with the 
words ``filled,'' ``plated,'' ``overlay,'' or ``electroplated,'' or any 
abbreviations thereof. Quality markings include those in which the 
words or terms ``gold,'' ``karat,'' ``silver,'' ``vermeil,'' 
``platinum'' (or platinum group metals), or their abbreviations are 
included, either separately or as suffixes, prefixes, or syllables.
    (a) Deception as to applicability of marks. (1) If a quality mark 
on an industry product is applicable to only part of the product, the 
part of the product to which it is applicable (or inapplicable) should 
be disclosed when, absent such disclosure, the location of the mark 
misrepresents the product or part's true composition.
    (2) If a quality mark is applicable to only part of an industry 
product, but not another part which is of similar surface appearance, 
each quality mark should be closely accompanied by an identification of 
the part or parts to which the mark is applicable.
    (b) Deception by reason of difference in the size of letters or 
words in a marking or markings. It is unfair or deceptive to place a 
quality mark on a product in which the words or letters appear in 
greater size than other words or letters of the mark, or when different 
markings placed on the product have different applications and are in 
different sizes, when the net impression of any such marking would be 
misleading as to the metallic composition of all or part of the 
product. (An example of improper marking would be the marking of a gold 
electroplated product with the word ``electroplate'' in small type and 
the word ``gold'' in larger type, with the result that purchasers and 
prospective purchasers of the product might only observe the word 
``gold.'')

    Note 1 to Sec. 23.9: Legibility of markings. If a quality mark 
is engraved or stamped on an industry product, or is printed on a 
tag or label attached to the product, the quality mark should be of 
sufficient size type as to be legible to persons of normal vision, 
should be so placed as likely to be observed by purchasers, and 
should be so attached as to remain thereon until consumer purchase.

    Note 2 to Sec. 23.9: Disclosure of identity of manufacturers, 
processors, or distributors. The National Stamping Act provides that 
any person, firm, corporation, or association, being a manufacturer 
or dealer subject to section 294 of the Act, who applies or causes 
to be applied a quality mark, or imports any article bearing a 
quality mark ``which indicates or purports to indicate that such 
article is made in whole or in part of gold or silver or of an alloy 
of either metal'' shall apply to the article the trademark or name 
of such person. 15 U.S.C. 297.


Sec. 23.10  Misuse of ``corrosion proof,'' ``noncorrosive,'' 
``corrosion resistant,'' ``rust proof,'' ``rust resistant,'' etc.

    (a) It is unfair or deceptive to:
    (1) Use the terms ``corrosion proof,'' ``noncorrosive,'' ``rust 
proof,'' or any other term of similar meaning to describe an industry 
product unless all parts of the product will be immune from rust and 
other forms of corrosion during the life expectancy of the product; or
    (2) Use the terms ``corrosion resistant,'' ``rust resistant,'' or 
any other term of similar meaning to describe an industry product 
unless all parts of the product are of such composition as to not be 
subject to material damage by corrosion or rust during the major 
portion of the life expectancy of the product under normal conditions 
of use.
    (b) Among the metals that may be considered as corrosion (and rust) 
resistant are: Pure nickel; Gold alloys of not less than 10 Kt. 
fineness; and Austenitic stainless steels.


Sec. 23.11  Definition and misuse of the word ``diamond.''

    (a) A diamond is a natural mineral consisting essentially of pure 
carbon

[[Page 27216]]

crystallized in the isometric system. It is found in many colors. Its 
hardness is 10; its specific gravity is approximately 3.52; and it has 
a refractive index of 2.42.
    (b) It is unfair or deceptive to use the unqualified word 
``diamond'' to describe or identify any object or product not meeting 
the requirements specified in the definition of diamond provided above, 
or which, though meeting such requirements, has not been symmetrically 
fashioned with at least seventeen (17) polished facets.

    Note 1 to paragraph (b): It is unfair or deceptive to represent, 
directly or by implication, that industrial grade diamonds or other 
non-jewelry quality diamonds are of jewelry quality.

    (c) The following are examples of descriptions that are not 
considered unfair or deceptive:
    (1) The use of the words ``rough diamond'' to describe or designate 
uncut or unfaceted objects or products satisfying the definition of 
diamond provided above; or
    (2) The use of the word ``diamond'' to describe or designate 
objects or products satisfying the definition of diamond but which have 
not been symmetrically fashioned with at least seventeen (17) polished 
facets when in immediate conjunction with the word ``diamond'' there is 
either a disclosure of the number of facets and shape of the diamond or 
the name of a type of diamond that denotes shape and that usually has 
less than seventeen (17) facets (e.g., ``rose diamond'').

    Note 2 to paragraph (c): Additional guidance about imitation and 
laboratory-created diamond representations and misuse of words 
``gem,'' ``real,'' ``genuine,'' ``natural,'' etc., are set forth in 
Secs. 23.23, 23.24, and 23.25.


Sec. 23.12  Misuse of the words ``flawless,'' ``perfect,'' etc.

    (a) It is unfair or deceptive to use the word ``flawless'' to 
describe any diamond that discloses flaws, cracks, inclusions, carbon 
spots, clouds, internal lasering, or other blemishes or imperfections 
of any sort when examined under a corrected magnifier at 10-power, with 
adequate illumination, by a person skilled in diamond grading.
    (b) It is unfair or deceptive to use the word ``perfect,'' or any 
representation of similar meaning, to describe any diamond unless the 
diamond meets the definition of ``flawless'' and is not of inferior 
color or make.
    (c) It is unfair or deceptive to use the words ``flawless'' or 
``perfect'' to describe a ring or other article of jewelry having a 
``flawless'' or ``perfect'' principal diamond or diamonds, and 
supplementary stones that are not of such quality, unless there is a 
disclosure that the description applies only to the principal diamond 
or diamonds.


Sec. 23.13  Disclosing existence of artificial coloring, infusing, etc.

    If a diamond has been treated by artificial coloring, tinting, 
coating, irradiating, heating, by the use of nuclear bombardment, or by 
the introduction or the infusion of any foreign substance, it is unfair 
or deceptive not to disclose that the diamond has been treated and that 
the treatment is not or may not be permanent.


Sec. 23.14  Misuse of the term ``blue white.''

    It is unfair or deceptive to use the term ``blue white'' or any 
representation of similar meaning to describe any diamond that under 
normal, north daylight or its equivalent shows any color or any trace 
of any color other than blue or bluish.


Sec. 23.15  Misuse of the term ``properly cut,'' etc.

    It is unfair or deceptive to use the terms ``properly cut,'' 
``proper cut,'' ``modern cut,'' or any representation of similar 
meaning to describe any diamond that is lopsided, or is so thick or so 
thin in depth as to detract materially from the brilliance of the 
stone.

    Note to Sec. 23.15: Stones that are commonly called ``fisheye'' 
or ``old mine'' should not be described as ``properly cut,'' 
``modern cut,'' etc.


Sec. 23.16  Misuse of the words ``brilliant'' and ``full cut.''

    It is unfair or deceptive to use the unqualified expressions 
``brilliant,'' ``brilliant cut,'' or ``full cut'' to describe, 
identify, or refer to any diamond except a round diamond that has at 
least thirty-two (32) facets plus the table above the girdle and at 
least twenty-four (24) facets below.

    Note to Sec. 23.16: Such terms should not be applied to single 
or rose-cut diamonds. They may be applied to emerald-(rectangular) 
cut, pear-shaped, heart-shaped, oval-shaped, and marquise-(pointed 
oval) cut diamonds meeting the above-stated facet requirements when, 
in immediate conjunction with the term used, the form of the diamond 
is disclosed.


Sec. 23.17  Misrepresentation of weight and ``total weight.''

    (a) It is unfair or deceptive to misrepresent the weight of a 
diamond.
    (b) It is unfair or deceptive to use the word ``point'' or any 
abbreviation in any representation, advertising, marking, or labeling 
to describe the weight of a diamond, unless the weight is also stated 
as decimal parts of a carat (e.g., 25 points or .25 carat).

    Note 1 to paragraph (b): A carat is a standard unit of weight 
for a diamond and is equivalent to 200 milligrams (\1/5\ gram). A 
point is one one hundredth (\1/100\) of a carat.

    (c) If diamond weight is stated as decimal parts of a carat (e.g., 
.47 carat), the stated figure should be accurate to the last decimal 
place. If diamond weight is stated to only one decimal place (e.g., .5 
carat), the stated figure should be accurate to the second decimal 
place (e.g., ``.5 carat'' could represent a diamond weight between 
.495-.504).

    (d) If diamond weight is stated as fractional parts of a carat, a 
conspicuous disclosure of the fact that the diamond weight is not exact 
should be made in close proximity to the fractional representation and 
a disclosure of a reasonable range of weight for each fraction (or the 
weight tolerance being used) should also be made.

    Note to paragraph (d): When fractional representations of 
diamond weight are made, as described in paragraph d of this 
section, in catalogs or other printed materials, the disclosure of 
the fact that the actual diamond weight is within a specified range 
should be made conspicuously on every page where a fractional 
representation is made. Such disclosure may refer to a chart or 
other detailed explanation of the actual ranges used. For example, 
``Diamond weights are not exact; see chart on p.X for ranges.''


Sec. 23.18  Definitions of various pearls.

    As used in these guides, the terms set forth below have the 
following meanings:
    (a) Pearl: 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.
    (b) Cultured Pearl: 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.
    (c) Imitation Pearl: A manufactured product composed of any 
material or materials that simulate in appearance a pearl or cultured 
pearl.
    (d) Seed Pearl: A small pearl, as defined in (a), that measures 
approximately two millimeters or less.

[[Page 27217]]

Sec. 23.19  Misuse of the word ``pearl.''

    (a) It is unfair or deceptive to use the unqualified word ``pearl'' 
or any other word or phrase of like meaning to describe, identify, or 
refer to any object or product that is not in fact a pearl, as defined 
in Sec. 23.18(a).
    (b) It is unfair or deceptive to use the word ``pearl'' to 
describe, identify, or refer to a cultured pearl unless it is 
immediately preceded, with equal conspicuousness, by the word 
``cultured'' or ``cultivated,'' or by some other word or phrase of like 
meaning, so as to indicate definitely and clearly that the product is 
not a 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.
    (d) It is unfair or deceptive to use the terms ``faux pearl,'' 
``fashion pearl,'' ``Mother of Pearl,'' or any other such term to 
describe or qualify an imitation pearl product 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.


Sec. 23.20  Misuse of terms such as ``cultured pearl,'' ``seed pearl,'' 
``Oriental pearl,'' ``natura,'' ``kultured,'' ``real,'' ``gem,'' 
``synthetic,'' and regional designations.

    (a) 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.
    (b) It is unfair or deceptive to use the term ``seed pearl'' or any 
word, term, or phrase of like meaning to describe, identify, or refer 
to a cultured or an imitation pearl, without using the appropriate 
qualifying term ``cultured'' (e.g., ``cultured seed pearl'') or 
``simulated,'' ``artificial,'' or ``imitation'' (e.g., ``imitation seed 
pearl'').
    (c) It is unfair or deceptive to use the term ``Oriental pearl'' or 
any word, term, or phrase of like meaning to describe, identify, or 
refer to any industry product other than a pearl taken from a salt 
water mollusk and of the distinctive appearance and type of pearls 
obtained from mollusks inhabiting the Persian Gulf and recognized in 
the jewelry trade as Oriental pearls.
    (d) It is unfair or deceptive to use the word ``Oriental'' to 
describe, identify, or refer to any cultured or imitation pearl.
    (e) It is unfair or deceptive to use the word ``natura,'' 
``natural,'' ``nature's,'' or any word, term, or phrase of like meaning 
to describe, identify, or refer to a cultured or imitation pearl. It is 
unfair or deceptive to use the term ``organic'' to describe, identify, 
or refer to an imitation pearl, unless the term is qualified in such a 
way as to make clear that the product is not a natural or cultured 
pearl.
    (f) It is unfair or deceptive to use the term ``kultured,'' ``semi-
cultured pearl,'' ``cultured-like,'' ``part-cultured,'' ``pre-mature 
cultured pearl,'' or any word, term, or phrase of like meaning to 
describe, identify, or refer to an imitation pearl.
    (g) It is unfair or deceptive to use the term ``South Sea pearl'' 
unless it describes, identifies, or refers to a pearl that is taken 
from a salt water mollusk of the Pacific Ocean South Sea Islands, 
Australia, or Southeast Asia. It is unfair or deceptive to use the term 
``South Sea cultured pearl'' unless it describes, identifies, or refers 
to a cultured pearl formed in a salt water mollusk of the Pacific Ocean 
South Sea Islands, Australia, or Southeast Asia.
    (h) It is unfair or deceptive to use the term ``Biwa cultured 
pearl'' unless it describes, identifies, or refers to cultured pearls 
grown in fresh water mollusks in the lakes and rivers of Japan.
    (i) It is unfair or deceptive to use the word ``real,'' 
``genuine,'' ``precious,'' or any word, term, or phrase of like meaning 
to describe, identify, or refer to any imitation pearl.
    (j) It is unfair or deceptive to use the word ``gem'' to describe, 
identify, or refer to a pearl or cultured pearl that does not possess 
the beauty, symmetry, rarity, and value necessary for qualification as 
a gem.

    Note to paragraph (j): Use of the word ``gem'' with respect to 
cultured pearls should be avoided since few cultured pearls possess 
the necessary qualifications to properly be termed ``gems.'' 
Imitation pearls should not be described as ``gems.''

    (k) It is unfair or deceptive to use the word ``synthetic'' or 
similar terms to describe cultured or imitation pearls.
    (l) It is unfair or deceptive to use the terms ``Japanese Pearls,'' 
``Chinese Pearls,'' ``Mallorca Pearls,'' or any regional designation to 
describe, identify, or refer to any cultured or imitation pearl, unless 
the term is immediately preceded, with equal conspicuousness, by the 
word ``cultured,'' ``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 a cultured or imitation 
pearl.


Sec. 23.21  Misrepresentation as to cultured pearls.

    It is unfair or deceptive to misrepresent the manner in which 
cultured pearls are produced, the size of the nucleus artificially 
inserted in the mollusk and included in cultured pearls, the length of 
time that such products remained in the mollusk, the thickness of the 
nacre coating, the value and quality of cultured pearls as compared 
with the value and quality of pearls and imitation pearls, or any other 
material matter relating to the formation, structure, properties, 
characteristics, and qualities of cultured pearls.


Sec. 23.22  Deception as to gemstones.

    It is unfair or deceptive to fail to disclose that a gemstone has 
been treated in any manner that is not permanent or that creates 
special care requirements, and to fail to disclose that the treatment 
is not permanent, if such is the case. The following are examples of 
treatments that should be disclosed because they usually are not 
permanent or create special care requirements: coating, impregnation, 
irradiating, heating, use of nuclear bombardment, application of 
colored or colorless oil or epoxy-like resins, wax, plastic, or glass, 
surface diffusion, or dyeing. This disclosure may be made at the point 
of sale, except that disclosure should be made in any solicitation 
where the product can be purchased without viewing (e.g., direct mail 
catalogs, on-line services), and in the case of televised shopping 
programs, on the air. If special care requirements for a gemstone arise 
because the gemstone has been treated, it is recommended that the 
seller disclose the special care requirements to the purchaser.


Sec. 23.23  Misuse of the words ``ruby,'' ``sapphire,'' ``emerald,'' 
``topaz,'' ``stone,'' ``birthstone,'' ``gemstone,'' etc.

    (a) It is unfair or deceptive to use the unqualified words 
``ruby,'' ``sapphire,'' ``emerald,'' ``topaz,'' or the name of any 
other precious or semi-precious stone to describe any product that is 
not in fact a natural stone of the type described.
    (b) It is unfair or deceptive to use the word ``ruby,'' 
``sapphire,'' ``emerald,'' ``topaz,'' or the name of any other precious 
or semi-precious stone, or the word ``stone,'' ``birthstone,'' 
``gemstone,'' or similar term to describe a laboratory-grown, 
laboratory-created, [manufacturer name]-created, synthetic, imitation, 
or simulated stone, unless such word or name is immediately preceded 
with equal conspicuousness by the word ``laboratory-grown,'' 
``laboratory-created,'' ``[manufacturer

[[Page 27218]]

name]-created,'' ``synthetic,'' or by the word ``imitation'' or 
``simulated,'' so as to disclose clearly the nature of the product and 
the fact it is not a natural gemstone.

    Note to paragraph (h): The use of the word ``faux'' to describe 
a laboratory-created or imitation stone is not an adequate 
disclosure that the stone is not natural.

    (c) It is unfair or deceptive to use the word ``laboratory-grown,'' 
``laboratory-created,'' ``[manufacturer name]-created,'' or 
``synthetic'' with the name of any natural stone to describe any 
industry product unless such industry product has essentially the same 
optical, physical, and chemical properties as the stone named.


Sec. 23.24  Misuse of the words ``real,'' ``genuine,'' ``natural,'' 
``precious,'' etc.

    It is unfair or deceptive to use the word ``real,'' ``genuine,'' 
``natural,'' ``precious,'' ``semi-precious,'' or similar terms to 
describe any industry product that is manufactured or produced 
artificially.


Sec. 23.25  Misuse of the word ``gem.''

    (a) It is unfair or deceptive to use the word ``gem'' to describe, 
identify, or refer to a ruby, sapphire, emerald, topaz, or other 
industry product that does not possess the beauty, symmetry, rarity, 
and value necessary for qualification as a gem.
    (b) It is unfair or deceptive to use the word ``gem'' to describe 
any laboratory-created industry product unless the product meets the 
requirements of paragraph (a) of this section and unless such word is 
immediately accompanied, with equal conspicuousness, by the word 
``laboratory-grown,'' ``laboratory-created,'' or ``[manufacturer-name]-
created,'' ``synthetic,'' or by some other word or phrase of like 
meaning, so as to clearly disclose that it is not a natural gem.

    Note to Sec. 23.25: In general, use of the word ``gem'' with 
respect to laboratory-created stones should be avoided since few 
laboratory-created stones possess the necessary qualifications to 
properly be termed ``gems.'' Imitation diamonds and other imitation 
stones should not be described as ``gems.'' Not all diamonds or 
natural stones, including those classified as precious stones, 
possess the necessary qualifications to be properly termed ``gems.''


Sec. 23.26  Misuse of the words ``flawless,'' ``perfect,'' etc.

    (a) It is unfair or deceptive to use the word ``flawless'' as a 
quality description of any gemstone that discloses blemishes, 
inclusions, or clarity faults of any sort when examined under a 
corrected magnifier at 10-power, with adequate illumination, by a 
person skilled in gemstone grading.
    (b) It is unfair or deceptive to use the word ``perfect'' or any 
representation of similar meaning to describe any gemstone unless the 
gemstone meets the definition of ``flawless'' and is not of inferior 
color or make.
    (c) It is unfair or deceptive to use the word ``flawless,'' 
``perfect,'' or any representation of similar meaning to describe any 
imitation gemstone.

Appendix to Part 23--Exemptions Recognized in the Assay for Quality of 
Gold Alloy, Gold Filled, Gold Overlay, Rolled Gold Plate, Silver, and 
Platinum Industry Products

    (a) Exemptions recognized in the industry and not to be 
considered in any assay for quality of a karat gold industry product 
include springs, posts, and separable backs of lapel buttons, posts 
and nuts for attaching interchangeable ornaments, metallic parts 
completely and permanently encased in a nonmetallic covering, field 
pieces and bezels for lockets,<SUP>1 and wire pegs or rivets used 
for applying mountings and other ornaments, which mountings or 
ornaments shall be of the quality marked.
---------------------------------------------------------------------------

    \1\ Field pieces of lockets are those inner portions used as 
frames between the inside edges of the locket and the spaces for 
holding pictures. Bezels are the separable inner metal rings to hold 
the pictures in place.

    Note: Exemptions recognized in the industry and not to be 
considered in any assay for quality of a karat gold optical product 
include: the hinge assembly (barrel or other special types such as 
are customarily used in plastic frames); washers, bushings, and nuts 
of screw assemblies; dowels; springs for spring shoe straps; metal 
parts permanently encased in a non-metallic covering; and for 
oxfords,<SUP>2 coil and joint springs.
---------------------------------------------------------------------------

    \2\ Oxfords are a form of eyeglasses where a flat spring joins 
the two eye rims and the tension it exerts on the nose serves to 
hold the unit in place. Oxfords are also referred to as pince nez.
---------------------------------------------------------------------------

    (b) Exemptions recognized in the industry and not to be 
considered in any assay for quality of a gold filled, gold overlay 
and rolled gold plate industry product, other than watchcases, 
include joints, catches, screws, pin stems, pins of scarf pins, hat 
pins, etc., field pieces and bezels for lockets, posts and separate 
backs of lapel buttons, bracelet and necklace snap tongues, springs, 
and metallic parts completely and permanently encased in a 
nonmetallic covering.

    Note: Exemptions recognized in the industry and not to be 
considered in any assay for quality of a gold filled, gold overlay 
and rolled gold plate optical product include: screws; the hinge 
assembly (barrel or other special types such as are customarily used 
in plastic frames); washers, bushings, tubes and nuts of screw 
assemblies; dowels; pad inserts; springs for spring shoe straps, 
cores and/or inner windings of comfort cable temples; metal parts 
permanently encased in a non-metallic covering; and for oxfords, the 
handle and catch.

    (c) Exemptions recognized in the industry and not to be 
considered in any assay for quality of a silver industry product 
include screws, rivets, springs, spring pins for wrist watch straps; 
posts and separable backs of lapel buttons; wire pegs, posts, and 
nuts used for applying mountings or other ornaments, which mountings 
or ornaments shall be of the quality marked; pin stems (e.g., of 
badges, brooches, emblem pins, hat pins, and scarf pins, etc.); 
levers for belt buckles; blades and skeletons of pocket knives; 
field pieces and bezels for lockets; bracelet and necklace snap 
tongues; any other joints, catches, or screws; and metallic parts 
completely and permanently encased in a nonmetallic covering.
    (d) Exemptions recognized in the industry and not to be 
considered in any assay for quality of an industry product of silver 
in combination with gold include joints, catches, screws, pin stems, 
pins of scarf pins, hat pins, etc., posts and separable backs of 
lapel buttons, springs, and metallic parts completely and 
permanently encased in a nonmetallic covering.
    (e) Exemptions recognized in the industry and not to be 
considered in any assay for quality of a platinum industry product 
include springs, winding bars, sleeves, crown cores, mechanical 
joint pins, screws, rivets, dust bands, detachable movement rims, 
hat-pin stems, and bracelet and necklace snap tongues. In addition, 
the following exemptions are recognized for products marked in 
accordance with section 23.8(b)(5) of these Guides (i.e., products 
that are less than 500 parts per thousand platinum): pin tongues, 
joints, catches, lapel button backs and the posts to which they are 
attached, scarf-pin stems, hat pin sockets, shirt-stud backs, vest-
button backs, and ear-screw backs, provided such parts are made of 
the same quality platinum as is used in the balance of the article.

    By direction of the Commission.
Donald S. Clark,
Secretary.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

             Appendix--List of Commenters and Abbreviations             
------------------------------------------------------------------------
         Abbreviation                  No.               Commenter      
------------------------------------------------------------------------
A&D Gem......................  187                 A & D Gem Corp.      

[[Page 27219]]

                                                                        
A&Z..........................  29                  A & Z Pearls, Inc.   
ADS..........................  197                 American Diamond     
                                                    Syndicate.          
Affro........................  138                 Affro Gems.          
AGL..........................  230                 American Gemological 
                                                    Laboratories.       
AGS..........................  18                  American Gem Society.
AGTA.........................  49                  The American Gem     
                                                    Trade Association,  
                                                    Inc.                
Alarama......................  51                  Alarama Jewelry Co., 
                                                    Inc.                
Alfille......................  247                 E.J. Alfille, Ltd.   
Alie.........................  106                 A.E. Alie & Sons,    
                                                    Inc.                
Almond.......................  63                  Almond Jewelers Inc. 
AMG..........................  79                  AM-Gold Products,    
                                                    Inc.                
APG..........................  89                  American Pewter      
                                                    Guild, Ltd.         
Argo.........................  17                  Argo & Lehne         
                                                    Jewelers.           
Armel........................  32                  Armel Manufacturing  
                                                    Co.                 
ArtCarved....................  155                 ArtCarved.           
Artisans.....................  124                 Artisans Jewelers,   
                                                    Inc.                
Assael.......................  136                 Assael Int'l Inc.    
Assured......................  148                 Assured Loan Co.     
Astoria......................  56                  Astoria Jewelry Mfg. 
                                                    Co., Inc.           
Atlantic.....................  135                 Atlantic Gem Corp.   
Aviv.........................  40 and 41           Aviv Inc.            
AWA..........................  236                 American Watch       
                                                    Association.        
AWI..........................  116                 American Watchmakers 
                                                    Institute.          
Bales........................  156                 Bales Diamond Center 
                                                    & Mfg. Inc.         
Bedford......................  210                 Bedford Jewelers,    
                                                    Inc.                
Benrus.......................  22                  Benrus Watch Co.,    
                                                    Inc.                
Best.........................  225                 Best Products Co.,   
                                                    Inc.                
Black Hills..................  59                  Black Hills Gold     
                                                    Jewelry.            
Bogo.........................  201                 Jerry Bogo Co.       
Boston.......................  125                 Boston Findings &    
                                                    Jewelers Supply Co.,
                                                    Inc.                
Brant........................  133                 Brant Laird Antiques.
Brasilia.....................  143                 Brasilia Gems, Inc.  
Bridge.......................  163                 Ben Bridge.          
Brilliance...................  68                  Brilliance-Diamond   
                                                    Importers.          
Bruce........................  218                 Donald Bruce & Co.   
Canada.......................  209                 Consumer & Corporate 
                                                    Affairs Canada.     
Capital......................  19                  Capital Mfg./L.      
                                                    Dershowitz Co.      
Capitol Ring.................  191                 Capitol Ring Co.,    
                                                    Inc.                
Catholyte....................  34                  Catholyte, Inc.      
Chatham......................  231                 Chatham Created Gems.
Cheviot......................  104                 Cheviot Jewelry Co.  
Citizen......................  228                 Citizen Watch Co. of 
                                                    America, Inc.       
Classique....................  96                  Classique D'Or, Inc. 
Cockrell.....................  134                 Charles Cockrell.    
Collins......................  12                  Collins Jewelry.     
Colormasters.................  149                 Colormasters Gem     
                                                    Corp.               
Commercial...................  202                 Commercial Mineral   
                                                    Co.                 
Consumers....................  158                 Consumers.           
Courtship....................  36                  Courtship Int'l Ltd. 
CPAA.........................  193                 Cultured Pearl       
                                                    Association of      
                                                    America, Inc.       
Cross........................  165                 A.T. Cross Co.       
Crystal......................  24                  J.O. Crystal Co.,    
                                                    Inc.                
David........................  194                 W.B. David & Co.,    
                                                    Inc.                
Day..........................  132                 Day Co.              
De'Nicole....................  175                 De'Nicole Designs.   
DeMarco......................  161                 Joseph DeMarco.      
Dendritics...................  167                 Dendritics, Inc.     
Diamonique...................  224                 Diamonique Corp.     
Diastar......................  99                  Diastar Inc.         
Disons.......................  55                  Disons Gems, Inc.    
DMIA.........................  26                  Diamond Manufacturers
                                                    & Importers         
                                                    Association of      
                                                    America, Inc.       
Eastern......................  173                 Eastern Gems, Inc.   
Eaton's......................  248                 Eaton's.             
Eisen........................  91                  Susan Eisen.         
Emkay........................  146                 Emkay Int'l, Inc.    
Empire.......................  44                  Empire Silver Co.,   
                                                    Inc.                
Estate.......................  23                  Estate Jewelers.     
Evvco........................  73                  Evvco Enterprises,   
                                                    Inc.                
Fabrikant....................  53                  M. Fabrikant & Sons. 
Faleck.......................  50                  Faleck & Margolies   
                                                    Manufacturing, Corp.
Fame.........................  102                 Fame Jewelry Inc.    
Fargotstein..................  70                  S. Fargotstein &     
                                                    Sons, Inc.          

[[Page 27220]]

                                                                        
Fashion......................  35                  Fashion Line Ltd.    
Fasnacht.....................  4                   Fasnacht's Jewelry.  
Fine.........................  141                 Fine Emerald Inc.    
Finlay.......................  253                 Finlay Fine Jewelry  
                                                    Corp.               
Fischer......................  87                  Fischer Pewter, Ltd. 
Flyer........................  95                  J & H Flyer.         
Foster.......................  100                 Foster, Inc.         
Francis......................  139                 Mrs. James B.        
                                                    Francis.            
Franklin.....................  250                 The Franklin Mint.   
Friedman.....................  234                 A.A. Friedman, Co.,  
                                                    Inc.                
G&B..........................  30                  Gudmundson & Buyck   
                                                    Jewelers.           
Gehrkens.....................  206                 Kenneth A. Gehrkens. 
Gem Vault....................  147                 The Gem Vault.       
Gem Gallery..................  131                 The Gem Gallery.     
Gemtron......................  145                 Gemtron Corp.        
General......................  88                  General Findings.    
GIA..........................  81                  Gemological Institute
                                                    of America.         
Gold Institute...............  13                  Gold Institute.      
Golden West..................  179                 Golden West          
                                                    Manufacturing       
                                                    Jewelers, Inc.      
Goldman......................  60                  Frederick Goldman,   
                                                    Inc.                
Gray.........................  127                 Gray & Co.           
Green........................  6                   Green Brothers.      
Guyot........................  82                  Maurice F. Guyot Jr. 
Handy........................  62                  Handy & Harman.      
Hansen.......................  174                 Dr. Gary R. Hansen.  
Harten.......................  259                 Harten.              
Harvey.......................  75                  E.B. Harvey & Co.,   
                                                    Inc.                
Heritage.....................  215                 Heritage Metalworks, 
                                                    Inc.                
Honora.......................  14 and 15           Honora Jewelry Co.,  
                                                    Inc.                
H.R. Diamonds................  195                 H.R. Diamonds, Ltd.  
ICT..........................  189                 ICT, Inc.            
IJA..........................  192                 Indiana Jewelers     
                                                    Association.        
Ijadi........................  171                 Ijadi Gem, Inc.      
Imperial.....................  117                 Imperial Jade Mining,
                                                    Inc.                
Impex........................  220                 Impex Diamond Corp.  
ISA..........................  237 and 237A        International Society
                                                    of Appraisers.      
JA...........................  3                   Jewelers of America, 
                                                    Inc.                
Jabel........................  47                  Jabel Inc.           
JCWA or Japan Watch..........  216                 Japan Clock & Watch  
                                                    Association.        
Jeffery......................  21                  Robert K. Jeffery.   
Jewelmasters.................  110                 N.E.I. Jewelmasters  
                                                    of N.J. Inc.        
JGL..........................  77                  JGL Inc.             
JMC..........................  1                   Jewelry Merchandising
                                                    Consultants.        
JVC..........................  212                 Jewelers Vigilance   
                                                    Committee, Inc.     
K's..........................  45 and 98           K's Merchandise.     
Kast.........................  198                 Joe Kast.            
Kennedy......................  9                   Kennedy's Jewelers.  
Kimberley....................  227                 Kimberley Created    
                                                    Emerald, Inc.       
King.........................  11                  King's Jewelry.      
KingStone....................  166                 KingStone Gem        
                                                    Importers, Ltd.     
Kittle.......................  246                 Clare Adams Kittle.  
Knight.......................  256                 George R. Knight, Jr.
Korbelak.....................  27 and 169          A. Korbelak.         
Krementz.....................  208                 Krementz & Co.       
Kurgan.......................  107                 I. Kurgan & Co., Inc.
Kwiat........................  203                 Kwiat, Inc.          
Kyocera......................  242                 Kyocera America, Inc.
Lance........................  84                  The Lance Corp.      
Landstrom's..................  241                 Landstrom's.         
Lange........................  183                 M. Lange Co., Inc.   
Lannyte......................  65                  Lannyte Co.          
LaPrad.......................  181                 Robert E. LaPrad.    
Leach........................  257                 Leach & Garner Co.   
Lee..........................  153                 Stewart M. Lee.      
Leer.........................  114                 Leer Gem Ltd.        
Light Touch..................  54                  The Light Touch.     
Limon........................  235                 Robert Limon.        
Little.......................  164                 Little & Co., Inc.   
Littman......................  2                   Littman & Barclay    
                                                    Jewelers.           
London Star..................  20                  London Star Ltd.     
LP Gems......................  168                 L.P. Gems, Inc.      
Luria........................  28                  L. Luria & Son.      

[[Page 27221]]

                                                                        
M&L..........................  105                 M & L Jewelry        
                                                    Manufacturing Inc.  
Majestic.....................  115                 Majestic Setting Inc.
Majorica.....................  240                 Majorica Jewelry,    
                                                    Ltd.                
Manning......................  159                 Manning Int'l.       
MAR..........................  37 and 42           M.A.R. Creations Inc.
Mark.........................  207                 Richard C. Mark.     
Mason........................  170                 Mason-Kay Inc.       
Mastro.......................  190                 Mastro Jewelry Corp. 
Matlins......................  205                 Antoinette Leonard   
                                                    Matlins.            
Matthey......................  213                 Johnson Matthey.     
Mayfield's...................  185                 Mayfield's Co.       
McGee........................  112                 McGee & Son.         
MCM..........................  152                 MCM Gems.            
Mendelson....................  33                  Mike Mendelson &     
                                                    Assoc., Inc.        
Mikimoto.....................  72                  Mikimoto (America)   
                                                    Co., Ltd.           
MJSA.........................  226                 Manufacturing        
                                                    Jewelers &          
                                                    Silversmiths of     
                                                    America, Inc.       
Moon & Star..................  172                 Moon & Star.         
Morton.......................  199                 Morton Jewelers.     
Mueller......................  151                 Ralph Mueller &      
                                                    Assoc.              
Murray's.....................  264                 Murray's.            
Nabavian.....................  144                 Nabavian Gem Co. Inc.
NACAA........................  90                  National Association 
                                                    of Consumer Agency  
                                                    Administrators.     
NACSM........................  219                 National Association 
                                                    of Catalog Showroom 
                                                    Merchandisers, Inc. 
Nassau.......................  10                  Kurt Nassau, PhD.    
NAWC.........................  251                 North American Watch 
                                                    Corp.               
New Era......................  129                 New Era Gems.        
New Castle...................  122                 Kings of New Castle, 
                                                    Inc.                
Newhouse.....................  76                  Leon M. Newhouse.    
Nowlin.......................  109                 Nowlin Jewelry, Inc. 
NRF..........................  238                 National Retail      
                                                    Federation.         
NY Gold......................  39                  The New York Gold &  
                                                    Diamond Exchange    
                                                    Inc.                
Obodda.......................  177                 H. Obodda.           
Ocean........................  176                 Ocean Gem.           
Odi-Famor....................  58                  ODI/FAMOR, Inc.      
Onyx.........................  162                 House of Onyx.       
Orion........................  94 and 113          Orion Diamond        
                                                    Manufacturing Co.,  
                                                    Inc.                
Oroco........................  69                  Oroco Manufacturing, 
                                                    Inc.                
Overstreet...................  8                   Overstreet's Jewelry.
PanAmerican..................  57 and 101          Pan-American Diamond 
                                                    Corp.               
PGI..........................  245                 Platinum Guild Int'l 
                                                    U.S.A. Jewelry, Inc.
Phillips.....................  204                 Phillips Jewelers,   
                                                    Inc.                
Philnor......................  93                  Philnor Inc.         
Postal Service...............  244                 United States Postal 
                                                    Service.            
Pounder's....................  130                 Pounder's Jewelry.   
Precision....................  121                 Precision Design Inc.
Preston......................  229                 F.J. Preston & Son   
                                                    Inc.                
Ransom.......................  184                 King's Ransom.       
Rapaport.....................  233                 Rapaport Corp.       
Raphael......................  78                  Raphael Jewelry Co., 
                                                    Inc.                
Rare Earth...................  137                 Rare Earth Gallery.  
Renaissance..................  74                  Renaissance.         
Reys.........................  260                 Rey's Jewelers.      
River........................  254                 River Gems &         
                                                    Findings.           
Roisen.......................  31                  Michal Ferman, Roisen
                                                    & Ferman, Inc.      
Ross Simons..................  67                  Ross-Simons Jewelers.
Rosy Blue....................  108                 Rosy Blue Inc.       
Roubins......................  128                 A. R. Roubins Sons,  
                                                    Inc.                
Russell......................  217                 Kenneth M. Russell.  
Salisbury....................  86                  Salisbury Pewter,    
                                                    Inc.                
Sarantos.....................  182                 Susan E. Sarantos.   
Saturn.......................  46                  Saturn Rings, Inc.   
Schaeffer....................  211                 H.K. Schaeffer & Co. 
Schneider....................  119                 Wm. Schneider Inc.   
Schwartz.....................  52                  Charles Schwartz.    
SCI..........................  180                 Stanley Creations,   
                                                    Inc.                
SDGL.........................  140                 San Diego Gemological
                                                    Laboratories.       
Seagull......................  111 and 120         Seagull Pewter &     
                                                    Silversmiths Ltd.   
Service......................  222                 Service Merchandise. 
Sheaffer.....................  249                 Sheaffer Inc.        
Shire........................  221                 Maurice Shire Inc.   
Shor.........................  258                 Russell Shor.        
Sibbing......................  5                   Sibbing's Jewelry.   

[[Page 27222]]

                                                                        
Siegel.......................  255                 Siegel & Assoc., Inc.
Simmons......................  71                  R.F. Simmons Co.,    
                                                    Inc.                
Sites........................  123                 Sites Jewelers.      
Skalet.......................  61                  Skalet Inc.          
Soft Wear....................  142                 Soft Wear Jewelry.   
Solid Gold...................  261                 Solid Gold Jewelers. 
Stanley......................  83                  Loyd Stanely.        
Stern........................  157                 Louis P. Stern Assoc.
Stieff.......................  25                  Kirk Stieff.         
Suberi.......................  214                 Suberi Brothers Inc. 
Swezey.......................  92                  Swezey of Westport   
                                                    Inc.                
Swiss Federation.............  232                 The Federation of the
                                                    Swiss Watch         
                                                    Industry.           
Taylor.......................  186                 Taylor Gem Corp.     
Thorpe.......................  7                   Thorpe & Co.         
TIC..........................  66                  Tin Information      
                                                    Center.             
Timex........................  239                 Timex Corp.          
TransAmerican................  43                  TransAmerican Jewelry
                                                    Co., Inc.           
Tru-Kay......................  196                 Tru-Kay Manufacturing
                                                    Co.                 
Tsavomadini..................  150                 Tsavomadini Inc.     
Ultimate.....................  243                 Ultimate Trading     
                                                    Corp.               
Ultra Blue...................  160                 Ultra Blue Mfg.      
Union Carbide................  38                  Union Carbide.       
Univ. Point..................  126                 Universal Point.     
Universal....................  178                 Universal Pewter     
                                                    Corp.               
USWC.........................  118                 U.S. Watch Council   
                                                    Inc.                
Vardi........................  97                  Vardi Stonehouse,    
                                                    Inc.                
Verstandig...................  154                 Verstandig & Sons,   
                                                    Inc.                
Vijaydimon...................  80 and 103          Vijaydimon (U.S.A.)  
                                                    Inc.                
Von's........................  16                  Von's Diamond        
                                                    Jewelry.            
Web..........................  85                  Web Silver Co., Inc. 
Weinman......................  263                 Weinman Bros, Inc.   
Weitz........................  200                 Sid Weitz, Inc.      
Werdiger.....................  48                  Michael Werdiger,    
                                                    Inc.                
WGC..........................  223                 World Gold Council.  
Winston......................  252                 Winston Studio &     
                                                    Imports.            
Woodbury.....................  64                  Woodbury Pewterers,  
                                                    Inc.                
Zahm.........................  188                 Philip Zahm.         
------------------------------------------------------------------------


[FR Doc. 96-13524 Filed 5-29-96; 8:45 am]
BILLING CODE 6750-01-P