Diamonds are not the FTC’s Best Friend: Lab-Grown Diamond Companies Clash with the FTC

 

Diamonds. The symbol of love. The symbol of wealth. And now, the symbol of what some might call an FTC scandal?

For those of you that don’t know, the Federal Trade Commission, aka the FTC, is “is a bipartisan federal agency with a unique dual mission to protect consumers and promote competition.” In other words, these are the people who come after companies when they are using unfair competitive tactics in their advertising or are straight up lying to consumers about what their product actually is or does. If you claim to be “all-natural” on your label, you better believe the FTC is going to double-check to make sure you really are.

According to Yahoo! Finance, the FTC issued warning letters for misleading advertising practices to eight lab-grown diamond companies, one of which is Diamond Foundry, backed by Leonardo DiCaprio.

DiCaprio is not only an award-winning actor but also a well-known environmentalist and conservationist. Diamond mining has been known to have a negative impact on the environment as it causes issues like earth displacement, deforestation, and energy and water usage. Lab mined diamond companies intend to be the more “eco-friendly” option, which makes DiCaprio the perfect investor and consequential face of such a brand.

The issue is, however,  that Diamond Foundry and the seven other lab mined companies have advertised their diamonds in ways that might lead consumers to believe that the diamonds are mined instead of lab-made and are more environmentally friendly than those that are actually mined. Confusing, right?

How could these companies claim to be have more environmental benefits than those diamonds that are mined but also claim to be mined diamonds? Yeah, I’m definitely confused.

The FTC directed these companies to their Green Guides that advises brands on how to market and “quantify their claims to avoid deceiving customers,” according to Forbes. What the FTC wants is for these companies to prove that their diamond sourcing is more eco-friendly than that of mined diamonds.

Regarding the mining issue, the FTC noted that these brands needed to clearly disclose in their advertising that these diamonds are in fact made in a lab, not mined. Ada Diamonds specifically was flagged by the FTC because of its advertising campaign that featured a lab diamond hashtag, which is not enough of a disclosure that is compliant with FTC standards.

Most of the companies in question responded positively to the letters from the FTC, which is good PR on their parts.

“The DPA welcomes the FTC’s warning to synthetic diamond manufacturers against misleading consumers with their marketing tactics,” The Diamond Producers Association said in a statement reported by Yahoo! Finance, “This warning is an important step toward transparency and consumer protection.”

Other companies found issue with the FTC’s letters. Alex Weindling, the founder of Clean Origin, which has not yet received a warning letter, said in a statement published by Yahoo! Finance, “I happen to believe that when you dig a crater that is visible from space that it is less environmentally thoughtful than growing a diamond — just my opinion,” adding that the publicity from these letters will further mining companies’ interests in eliminating lab-grown diamonds.

We are about 1% of the [diamond] industry, but we are about 90% of their focus.” Weindling said.

The companies that have received these warning letters have 10 days to address how they will make changes with the issues mentioned within their advertising, according to Yahoo! Finance.

If your company is struggling with FTC compliance issues or you are unsure if you are compliant, get in contact with our advertising law attorneys today.

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