What are the FTC Jewelry Guidelines?
The FTC's newly revised "Guides for the Jewelry, Precious Metals and Pewter Industry" go into effect this month. Are these Guides law? Are they enforceable?
The March issue of IM News discussed an important change in the FTC guidelines for jewelry. The Jewelry Guides now say that any treatment that significantly affects a gem's value should be disclosed.
Does this mean that disclosure is the law? What is the FTC, and what is the force of its rulings?
The Federal Trade Commission supports federal antitrust and consumer protection laws. It works to eliminate practices that are unfair or deceptive or that threaten consumers' opportunities to exercise informed choice.
The FTC's Jewelry Guides have existed in some form since 1918. They are particularly important because jewelry is an area where quality is hard for consumers to judge for themselves and they must rely on descriptions provided by sellers. Strictly speaking, the FTC's Jewelry Guides are not law, but they are highly regarded by the jewelry industry. They set a standard for ethical merchandising and the jewelry industry encourages voluntary compliance.
This update of the Jewelry Guides came in response to petitions by two jewelry trade organizations urging that laser-drilling be listed as a treatment requiring disclosure. The FTC then solicited industry responses on the proposed revision and received 40 comments. The petition and comments give the Commission a larger context, ensure that all relevant aspects of a change are considered, and help clarify the language of the guidelines.
In forming its revisions, the Commission considered such factors as industry support for disclosure, self-regulation within the industry, possible additional costs for retailers that might be passed on to the consumer, technological advances that make it increasingly difficult for consumers to detect treatments, the difference in price between treated and untreated stones, whether non-disclosure misleads consumers, and the economic injury consumers suffer from non-disclosure.
The Commission concluded that not only laser-drilling but all treatments that significantly affect value should be disclosed. In their comments, the commission said that technology changes so quickly, it would be pointless to name all the treatments that should be disclosed. The guiding principle is not to mislead the consumer.
FOR AGENTS & UNDERWRITING
The new FTC Guides go into effect April 10, 2001. You might take this opportunity to discuss with policyholders the FTC's role in protecting consumers, noting that the FTC thinks the issue of gem-treatment disclosure is important. If a submitted appraisal or sales receipt does not mention that the gem is treated, and the valuation is significant, require the appraiser or retailer to assure in writing that the gem is untreated. (An ACORD >78/79 appraisal warrants that any gem treatments are disclosed.)
The FTC Guides do not specifically mention disclosure on the appraisal. Some retailers may technically follow the guidelines by disclosing treatments verbally but leave out mention of them on appraisals. In settling a claim for a damaged stone, have the stone inspected in a gem lab to see if it has been treated. A treatment that has broken down is not damage for which the insurer is liable.
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