Pandora announced in May that it would discontinue its use of mined diamonds and instead, incorporate lab-grown stones into its offerings. “Known for affordable charms beloved by young shoppers from China to the U.S.,” Bloomberg reported that the Danish jewelry company “makes more pieces of jewelry than any other company in the world.” And it is hardly the only company trying its hand in the lab-grown market; Swarovski is betting on lab-grown stones, while De Beers has some lab-grown offerings (by way of its LightBox collection), which, as Wired puts it, are created in “a laboratory where chemical processes are used to simulate the intense heat and pressure required to form the stones in the Earth.” The result is stones that they are “chemically and structurally identical to mined [ones], but without the supposed ethical concerns.”
As “younger shoppers are driving growth across consumer goods, and are more concerned about factors such as a brand’s purpose and a product’s cost to the planet than previous generations were at their age,” Bloomberg’s Andrea Felsted says it is “no surprise that diamonds are getting a makeover” and that cost – both in terms of a consumer’s wallet and the planet is an important factor. Given the growing rise in popularity of mined diamond alternatives, it is also not surprising that the advertising in this space is coming under the microscope of regulators and watch dogs, such as the National Advertising Division (“NAD”), which recently issued recommendations about how lab-grown sparklers should – and should not be – described to consumers.
In two recent proceedings, both of which centered on advertising claims about lab-grown diamonds, the NAD – which provides independent self-regulation and dispute resolution services in an effort to “guide the truthfulness of advertising across the U.S.” – took on claims by the Natural Diamond Council (“NDC”) and Diamond Foundry. In the initial matter, the NAD considered claims made by the NDC that compared mined diamonds with man-made ones, including the carbon emissions associated with diamond mining versus diamond manufacturing, the scarcity of mined diamonds, and the resale value of mined diamonds versus man-made stones, as well as claims that described mined diamonds as “real.”
According to the NAD, the NDC’s pro-mined-diamond claims were challenged by Diamond Foundry, Inc., a manufacturer of lab-grown diamonds that garnered itself a valuation of $1.8 billion after a $200 million funding round in April. Among a number of challenged NDC advertising claims: the company’s assertions that “natural diamonds produce 3 times less carbon emissions per carat than lab-grown diamonds,” as well as that “the cost [of lab-grown diamonds] continues to decline due to mass production,” and that as a result, “they have little to no resale value.”
The NAD asserted in a release in late April that the evidence maintained by the NDC “was not sufficiently reliable to support its comparative carbon emissions claims,” and thus, recommended that the company discontinue “the implied claim that mined diamonds are better for the environment than man-made diamonds.” On the resale front, the NDC’s claim that lab-created diamonds “have no resale value and [their] prices are falling rapidly” also conveys “an unsupported message” and should be removed from its advertising campaigns.
In a separate proceeding a month later initiated by the NDC, the NAD recommended that Diamond Foundry modify its advertising in order to “clearly and conspicuously disclose” the origin of its laboratory-grown diamonds, and that the company discontinue the use of certain terms that “could create confusion about the origin of” its diamonds. The NDC challenged “certain social media advertising in which Diamond Foundry-brand diamonds were advertised simply as ‘diamonds,’ without any accompanying description or disclosures identifying the diamonds as lab grown,” according to the NAD. On this front, the NAD determined that Diamond Foundry must make “an effective disclosure that its diamonds are man-made” and should “distinguish its lab-grown diamonds from mined diamonds” in order to comply with the Federal Trade Commission Jewelry Guides.
In terms of other terminology, the NAD determined that Diamond Foundry’s use of “created diamonds,” “diamonds created aboveground,” “sustainably created” or “sustainably grown,” and “world positive,” do not sufficiently communicate that the diamonds are laboratory-grown and unmined. As a result, the NAD held that consumers may be confused and unable to distinguish between the origins of Diamond Foundry’s lab-grown diamonds and competing mined diamonds. For this reason, NAD recommended that the claims be discontinued.
Finally, both matters took into account to use of the word “real” to refer to lab-grown diamonds. In the first proceeding, the NAD recommended that the NDC discontinue the implied claim that man-made diamonds are not “real” diamonds,” as well as express claims, such as ones that state that “there are many laboratory-grown and synthetic diamonds on the market. These are also made of carbon, but without the Earthly origins of real diamonds, they lack the unique qualities infused by nature.” Meanwhile, in the subsequent case, the NAD said that it has “some concern that the plain header on [Diamond Foundry’s] webpage that reads ‘Real’ may lead to confusion as to the diamonds’ origins.” With that in mind, the NAD suggested that in order to avoid conveying the “misleading message that the lab-grown are mined diamonds,” Diamond Foundry should “modify its claims on this page to more prominently disclose the man-made origin of its diamonds.”
And still yet, the NAD recommended that Diamond Foundry discontinue social media claims that its lab-grown diamonds are “real” diamonds or modify the claims to make clear that its lab-grown diamonds are not mined diamonds. The NAD found that, “without context explaining that the ‘real’ diamonds are created in a laboratory and not mined, consumers may reasonably take away the unsupported message that Diamond Foundry’s diamonds are mined diamonds.”
The proceedings come as “the cost of producing lab-grown diamonds has declined materially over the past five years, and quality has improved so much that even diamond dealers cannot tell the difference,” according to Fortune, which cites a recent diamond-specific report from Morgan Stanley. As a result of rising quality and corresponding demand, particularly among millennials, “The number of market players is surging,” with Swarovski executive Nadja Swarovski, for one, saying that she “expects the number of participants in the lab-grown diamond market to be ‘totally disruptive’ in the coming years.”
Not everyone is on board, of course. Tiffany & Co., which is on the midst of a marketing revamp after being bought up by luxury goods conglomerate LVMH last year, remains steadfast in its position that “lab-grown diamonds are not a luxury material.” Andy Hart, an SVP at Tiffany & Co., previously asserted that the 183-year-old jewelry company does not “see a role for [lab-grown diamonds] in a luxury brand.” While he said that non-mined diamonds “have their use, and they have their place, luxury consumers will continue to desire the rarity and amazing story of natural diamonds.”