FTC May Change Treatment Disclosure Rules

The Federal Trade Commission recently proposed an addition to the Guides for the Jewelry Industry that would mandate disclosure of most treatments—including laser-drilling and, possibly, the new Lazare Kaplan International-General Electric color-improving “process.”

The proposed change reads: “Permanent treatments that do not require special care should be disclosed if the treatment has a significant effect on the stone’s value, and if a consumer, acting reasonably under the circumstances, could not ascertain that the stone has been treated.”

FTC has extended the period it will accept comments on the proposal until Aug. 31. It will use the comments to decide whether the rule should become part of the Guides. Comments should be sent to FTC at 600 Pennsylvania Ave., Room H-159, Washington, DC 20580.

The new rule grew out of the Jewelers Vigilance Committee’s efforts to mandate disclosure of laser drilling. JVC executive director Cecilia Gardner argued in a petition to FTC that nondisclosure of laser drilling was an unfair trade practice, since drilled stones sell for less than those that aren’t drilled. FTC attorneys responded with the proposed language that will cover all treatments with value differentials.

Gardner acknowledges that the new rule could force disclosure of some mundane and routine treatments, such as heating of sapphires. But she says that sapphire heating is “a gray area.… I don’t think it will be affected, frankly.”

Another possible gray area is the new LKI-GE process. LKI says it’s selling the “processed” stones at prices comparable to those of “nonprocessed” ones—which means they may not fall under the new guideline. But, says Gardner, “I don’t think anyone would pay the same for a regular stone as a Lazare-GE processed stone.”—Rob Bates

More Home-Shopping Competition for Jewelers

Television shopping channel QVC has made a grand entrance into the diamond market with its launch of a new line of diamond jewelry. The 40-piece “Promise Diamond” collection consists of solitaire rings, pendants, earrings, anniversary bands, and men’s rings in 14k yellow and white gold. Price points range between $185 and $5,800. Ladies’ rings with a center stone of .25 ct. or more, like the three diamond engagement rings at left, will be laser-inscribed with a Gemological Institute of America certification number. “With the success of our gold, silver, and gemstone collections, diamonds were the next step to help us meet our customers’ growing demand for higher-end merchandise,” says John Calnon, QVC’s vice president, jewelry. QVC collaborated with two other companies on the collection. De Beers sightholder Leo Schachter Diamonds LLC manufactured the stones (rated D, E, or F color), and jewelry manufacturer Frederick Goldman designed the settings, which include an infinity symbol that doubles as a security measure—an attempt to replace the original stone damages the symbol and reveals the tampering. —Richard Dalglish

Retailing – Silverman’s Jewelers Is Going Out of Business

Silverman’s Jewelers, the country’s 25th largest jewelry chain, is being sold—reportedly to Samuels Jewelers of Austin, Texas—and its inventory liquidated. The firm is based in El Paso, Texas.

Stuart Fetter, chairman and chief executive officer of Silverman’s, confirmed to JCK that all 30 stores (in 14 states) will be sold as a group. Silverman’s 20,000-sq.-ft. jewelry factory, which supplies the stores, would be sold separately. The stores operate under the names Silverman’s Factory Jewelers, Nathan Jewelers, and Wayne Jewelers. They have been holding “Going Out of Business” sales since early June, and all were expected to close their doors in July.

The jewelry chain’s parent firm, Silverman Jewelers Consultants Inc. of Mount Pleasant, S.C., also headed by Fetter, isn’t part of the sale, he says. Though one of the largest U.S. liquidators of jewelry and other commodities, it isn’t handling the liquidation of Silverman’s Jewelers. Also unaffected is the parent firm’s Canadian joint venture with D.G. Jewellery of Canada, called Silverman Retail Solutions Inc.

Fetter declined to discuss reasons for sale or potential buyers but said the company would issue a statement when the transaction closed. In an interview with the El Paso Times, though, Fetter said the stores were being sold because they “have not been profitable.” He added that “one of the downfalls of the company” was that it is “very expensive to run a factory [and] you really have to have enough stores to operate the size [of factory] that Silverman’s has.”

The company was founded in 1934 by jeweler Henry J. Silverman and for many years made and sold jewelry to U.S. wholesalers and retail jewelers. In 1984, it opened its first factory showroom and began expanding nationally. In 1997, Silverman Jewelers Consultants bought controlling interest in Silverman’s Jewelers and accelerated expansion. Between 1997 and 1998, the firm grew from 18 stores in 10 states to 30 in 14. At one point, the company expected to have 100 stores by 2001.—William George Shuster

Counterfeit Watch Offers Plague the ’Net

Counterfeit watches are moving quickly from street-corner sales to Internet e-commerce. And both Internet retailers and consumers are being victimized by a growing number of sophisticated imitations of more expensive watch brands, says Deborah Bennett of the U.S. Customs Service’s Trade Analysis Section.

The counterfeits carry price tags in the thousands of dollars, look very authentic, are packaged in boxes associated with the brands, and come with “certificates of authenticity” and warranties that even experts are hard-pressed to identify as bogus, she warned at a seminar at the recent JCK Show in Las Vegas. It’s only when the duped consumer takes the watch to a jeweler for repair or service that the watches are found to be “high-end fakes,” says Bennett.

Bennett urges watchmakers to register their brands and trademarks with the Customs Service. The cost is only $190; the benefit is “thousands of Customs officers to watch for and seize such counterfeit goods on your behalf,” she says. Retailers and consumers can also use the federal Fraud Hotline to report bogus watches and those selling them, including Internet sites. The hotline number is (800) ITS-FAKE.

Other Internet skullduggery discussed at the seminar, sponsored by the Jewelers Vigilance Committee, included misuse of jewelry trade names and trademarks. For example, the name “Geological Institute of America” and the acronym GIA are being misused by some jewelry and gem Web sites. Violators can be sued for trademark infringement—if the mark is registered with the United States Patent and Trademark Office (PTO), says Andrew D. Lawrence, PTO senior attorney. For information, call (703) 308-9000 or visit www.uspto.gov. Trademark owners also can ask JVC to contact and warn online violators.

A Web site in violation whose server is outside the United States can complicate enforcement, but not always. Unauthorized use of the registration symbol (®) is a criminal offense in some countries. So a Web site infringing on a trademark can be sued by the U.S. owner of that mark in the country where the site originates.

Meanwhile, FTC has begun periodically surfing Internet Web sites for compliance with its Guides for the Jewelry Industry governing proper descriptions and disclosure, reports Elaine Kolish, associate director of FTC’s enforcement division. Those who fail to comply may be investigated.—William George Shuster

Hirsch Speidel Reorganizes, Will Cut 200 Jobs

Hirsch Speidel, the world’s largest maker of watchbands, is restructuring its U.S. operations and will eliminate about 200 of the 420 jobs at its Providence, R.I., location. The layoffs were scheduled to begin this month.

Company officials cited a decline in orders and the need to be more competitive. The company also had run-ins with its unions last summer over alleged efforts to cut costs. Union officials claimed it wanted to reduce vacation time and overtime pay, according to the Providence Journal-Bulletin.

Ironically, the downsizing comes during the 40th anniversary year of the Twist-o-Flex watchband, probably Speidel’s best-known and most successful product, still made in Providence. Hirsch Speidel makes metal and leather watchbands as well as neckchains, identification bracelets, and children’s jewelry. It sells to more than 10,000 retail jewelry stores and mass-merchandise stores worldwide.—William George Shuster

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