Questioning the real value of lab-grown diamonds

T h ere's something fascinating about diamonds, even those grown in the laboratory. Over the years, I have kept a close eye on the evolution of the man-made diamond industry and welcomed the Federal Trade Commission's recently revised jewellery guidelines, which state that: "The Commission no longer defines a 'diamond' by using the term 'natural' because it is no longer accurate … when it is now possible to create products that have essentially the same optical, physical and chemical properties as mined diamonds." The commission went on to caution marketers that it would be deceptive to use the terms “real”, “genuine”, “natural”, or “synthetic” to imply that a lab-grown diamond is not, in fact, “an actual diamond”. This is a major boost to the man-made diamond industry, which has been plagued by authenticity issues. Sure, these stones are not as rare or worth as much money as their mined counterparts, which take millions of years to form in the belly of our planet – a factor that’s a big part of the appeal to scores of diamond lovers. However, not only do these stones have the same look and composition, but they also come with the promise of being ethically created, with no comparable destruction to human life or the environment. The low cost also means buyers have more choice when it comes to how much they want to spend on a piece of jewellery. That’s the opinion I expressed to Jean-Marc Lieberherr, chief executive of the Diamond Producers Association. The organisation is outspoken in its opposition to laboratory-grown diamonds – which it unabashedly continues to label as “synthetic”. The issue is undeniably complex and in the exchange that ensued, Lieberherr made some strongly worded points that were entirely legitimate, even to a man-made-diamond supporter like myself. Given that a lab-grown gem has exactly the same composition as a mined one, why does the DPA not agree with the new FTC ruling? While diamonds created naturally in the earth and diamonds manufactured artificially in a factory have the same physical characteristics, they are not identical and they don’t have the same value. A synthetic stone can be differentiated from a natural diamond by its growth structure and inclusions. The quick, artificial growth process leaves marks inside the stone, which can be easily identified with the right equipment. The naturally occurring inclusions in a natural diamond, meanwhile, were formed billions of years ago; they often contain perfectly preserved elements of great scientific value. Inclusions in synthetic diamonds are effectively defects created during the manufacturing process. Finally, synthetic diamonds are treated for colour most of the time, as they are off-colour when they come out of the “press”. From a consumer-protection point of view, a natural diamond is a precious stone, inherently rare and valuable, whereas a synthetic diamond is an industrial product with no inherent value. They are hardly the same thing. You’ve said that your primary concern is that consumers can be fooled into paying more for a lab-grown diamond than it is worth. However, if jewellers and brands have become more ethical following the Kimberley Process, isn’t the onus on them to differentiate these diamonds and charge for them accordingly? Wouldn’t it be better to educate consumers and jewellers? The real consumer risk is two-fold. Firstly, they could be fooled into paying top dollar for a stone that has no value and cannot be resold. [Some] synthetic diamond manufacturers try to charge close to the price of a natural stone by arguing that they are the same as natural diamonds. In reality, they are not, and their value is very different because one is rare and one is an industrial product. Second, if synthetic diamond manufacturers succeed in creating confusion in the mind of the consumer about the difference between the two products, it could devalue natural diamonds. Seventy per cent of American women own diamonds, three pieces on average. They are a favourite asset class among consumers, accompanying their most important and cherished memories. If confusion between natural, rare diamonds and cheap, lab-grown stones devalues the gem – due to insufficient disclosures and differentiation – consumers are set to lose, not gain, and eventually a whole industry could be impacted. Yes, education is key, and we are investing heavily in it. But we are concerned that the FTC has not considered the potential unintended consequences of their revisions to the Jewellery Guides, which give synthetic diamond makers the freedom to market their products as actual diamonds. Also, the Kimberley Process has not been around for that long. Surely there is a chance that consumers can be “fooled” by unethical companies or errant jewellers into buying blood diamonds? Whereas this issue will not come up at all when it comes to lab-grown diamonds. Consumers should feel good about buying diamonds created naturally in the earth. The modern diamond mining industry has gone through a profound transformation over the past 20 years. Conflict diamonds have been virtually eradicated, strict standards have been established through the Kimberley Process, and transparency has significantly increased. More than 99.8 per cent of natural diamonds on the market are now [guaranteed to be] conflict- free, as certified through this process. What about the destruction caused to the environment in our quest to find diamonds under the planet’s surface, and the damage caused by the poor working conditions of mining communities? The diamond industry, in fact, supports the livelihood of more than 10 million people across the globe, mostly in India and Southern Africa. Diamonds contribute US$8.4 billion (Dh30.8bn) per year to African economies, and billions more around the world. Revenue from the industry has enabled local governments to invest in public healthcare, education, roads, electricity and sanitation. The manufactured diamond industry cannot stand behind a similar record. The natural diamond industry also has some of the strictest regulations of any industry in the world. Conversely, most synthetic diamond production takes place in Asia, and increasingly China, which are not subject to nearly the same level of controls and scrutiny. While some players operate in a responsible manner, many others make unsubstantiated and, at times, highly questionable eco-friendly and ethical sourcing claims. For example, for all their eco-friendly claims, the carbon footprint of a synthetic diamond produced using the widely adopted Chemical Vapor Deposition method, is similar to that of a natural diamond. This is because operations use fossil-fuel-generated electricity. ____________________ Read more: Would you buy fine jewellery off the internet? Saving for a ring? Buying a diamond can now be a far cheaper exercise De Beers' entry into synthetic diamonds shakes up lab stones producers The lab-grown gems threatening the diamond industry ____________________ What is your opinion on De Beers’ decision to enter the man-made diamond market? De Beers has been the leader in synthetic diamond technology [for industrial purposes] for decades through their subsidiary Element Six. As it becomes clear that the category will become mainstream, it is not surprising that De Beers has decided to leverage their advantages rather than leave it to others. However, this decision does not change the fact that their core business is diamonds and will – in my view – remain the same. From the DPA’s perspective, De Beers has clarified the real value of synthetic diamonds through their very transparent pricing [US$800 per carat]. Many women buy jewellery based on its aesthetic value – an attractive sparkly stone, whether mined or man-made, will always appeal. Don’t you think they should have a choice as to how much they are willing to spend on such an object? Yes, of course consumers should have a choice, and we believe that synthetic diamonds have an attractive value proposition: a nice-looking stone at an affordable price, for wearing every day without fear of losing it, for example. What concerns us is when consumers are confused and deceived by the very ambiguous communication of some synthetic diamond producers that aims to blur the line between a natural and a synthetic diamond by suggesting they are identically rare and valuable, which is not the case. This is why we are concerned about the revised FTC guide. It leaves too much room for ambiguous claims, and we know it will be abused. What do you think the resale value of a man-made diamond should or could be, in the near or distant future? The resale value of a lab-manufactured diamond is nothing – as is the case with any industrial product that can be created in unlimited quantities at a low cost.

Questioning the real value of lab-grown diamonds

Jean-Marc Lieberherr, CEO of the Diamond Producers Association, tells us why he doesn’t trust man-made diamonds