Guides for the Metallic Watch Band Industry and Guides for the Jewelry Industry
Federal RegisterMay 30, 1996
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SUMMARY: The Federal Trade Commission (``Commission'') announces that
it has concluded a review of its Guides for the Metallic Watch Band
Industry (``Watch Band Guides'') and Guides for the Jewelry Industry
(``Jewelry Guides''). The Commission rescinds the Watch Band Guides in
a document published elsewhere in this issue of the Federal Register.
The Commission is consolidating certain provisions of the Watch Band
Guides with the Jewelry Guides. The Commission is renaming the Guides
for the Jewelry Industry the Guides for the Jewelry, Precious Metals
and Pewter Industries. The Commission also revises the Jewelry Guides
by defining the scope and application of the Guides and adding new
provisions regarding the use of the terms ``vermeil'' and ``pewter.''
The Commission is also making substantive changes to the existing
provisions of the Jewelry Guides, as discussed in detail herein. The
Commission is not making any changes to the provisions regarding the
use of the word ``platinum'' at this time and will request additional
comment on possible revisions to this section in a separate Federal
Register notice.
EFFECTIVE DATE: May 30, 1996.
ADDRESSES: Requests for copies of this document should be sent to the
Public Reference Branch, Room 130, Federal Trade Commission,
Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Constance M. Vecellio, Attorney, 202-
326-2966, or Laura J. DeMartino, Attorney, 202-326-3030, Division of
Enforcement, Federal Trade Commission, Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission revises the Guides for the Jewelry Industry and the
Guides for the Metallic Watch Band Industry (``Guides''), 16 CFR Parts
23 and 19, respectively, as described in detail below. The Commission
will announce the results of its review of the Guides for the Watch
Industry, 16 CFR Part 245, which was conducted at the same time as the
review of the other Guides, in a separate notice. The Commission
published a Federal Register Notice (``FRN'') soliciting public comment
on amendments to the Guides on June 12, 1992, in response to a petition
from the Jewelers Vigilance Committee, Inc. (``JVC'').\1\ The comment
period, as extended, ended on September 25, 1992.\2\
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\1\ 57 FR 24996 (June 12, 1992). The JVC, located at 401 East
34th Street, NY, NY 10016, is a trade association that was formed in
1912 to promote ethical practices in the jewelry industry. Its
initial petition is dated April 15, 1986; additional proposed
revisions were submitted on February 20, 1989.
\2\ 57 FR 34532 (Aug. 5, 1992).
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The FRN solicited comment on the JVC's proposal to revise the
Guides.\3\ The FRN summarized the major amendments proposed by the JVC,
as well as revisions that Commission staff was proposing. In addition
to requesting comment on the proposed revisions generally, the FRN
asked for comment on 34 questions.
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\3\ Because of its 71-page length, the JVC proposal was not
published. But, the proposal, and a document showing how the current
Guides would be changed by the JVC proposal, was placed on the
public record for inspection and is available in the Public
Reference Room of the Commission.
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The Commission received 263 comments. In the remainder of this
notice, the comments are cited to by an abbreviation of the commenter's
name and the document number assigned to the comment on the public
record. A list of the commenters, including the abbreviations and
document numbers used to identify each commenter, is attached as an
Appendix.\4\
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\4\ In summary, the comments are from 19 trade associations, 85
diamond dealers, 53 colored stone dealers, 37 retail jewelers, 10
synthetic gemstone manufacturers, 12 pewter manufacturers, 10 watch
manufacturers, 9 general manufacturers, 5 gemologist/appraisers, 7
precious metals firms, 3 catalog houses, 2 manufacturer
representatives, 2 writing implement manufacturers, 3 pearl dealers,
and one each from: The Canadian Government, the U.S. Postal Service,
the National Association of Consumer Agency Administrators, a
scientist who works with laser technology and crystal growth, an
economics professor, an importer, a retired trade association
executive, and an editor of Jewelers Circular-Keystone, and a trade
magazine.
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The revisions are discussed section-by-section by category.\5\
Below, Part II addresses the standard regulatory review questions that
were included in the FRN. Part III discusses general issues regarding
the proposed revisions to the Guides. Part IV analyzes the proposed
revisions to the Jewelry Guides section-by-section (including the Watch
Band Guides, now consolidated with the Jewelry Guides).
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\5\ Various sections of the Guides that pertain to particular
subject areas are referred to as ``categories,'' in the Appendix to
the current Guides, i.e., Category I: Jewelry industry products in
general; Category II: precious metals; Category III: diamonds,
genuine and imitation; Category IV: pearls, genuine, cultured and
imitation; Category V: gemstones, genuine, synthetic and imitation.
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II. Regulatory Review and Related Questions
As part of the Commission's ongoing program to review all of its
rules and guides periodically, the FRN included questions about the
Guides' economic impact and continuing relevance, any compliance
burdens, changes needed to minimize their economic impact, their
relation to other federal or state laws or regulations, and the effect
of any changed conditions since the Guides were issued. The Commission
also solicited comment on general issues regarding the Guides, such as
whether the JVC's proposed provisions accurately reflect accepted
practices, technology or nomenclature used in the trade; whether
proposed changes would result in a lessening of competition or
increased prices; and whether the JVC's petition to revise should be
rejected and the current Guides retained. Because these questions
concern fundamental issues about whether the Guides should be retained,
deleted or revised, the Commission addresses them first.
A. Summary of the Comments
All but one of the 37 comments specifically addressing the economic
impact of the Guides stated that any compliance costs are far
outweighed by the benefits to the industry and to consumers.\6\ None of
the comments provided any figures or estimates of the monetary costs
incurred in complying with the Guides.
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\6\ E.g., Fasnacht (4) p.1 (the Guides have a positive economic
impact by creating a level playing field); Schwartz (52) (the Guides
have a positive impact on the industry by establishing standards
that offer consumers protection without undue cost); JMC (1); Thorpe
(7); King (11); Gold Institute (13); Honora (15); Argo (17); AGS
(18); AGTA (49); Estate (23); G&B (30); Jabel (47); Skalet (61);
Handy (62); Lannyte (65); Newhouse (76); GIA (81); Nowlin (109);
McGee (112); ArtCarved (155); Bales (156); Bridge (163); LaPrad
(181); IJA (192); CPAA (193); Mark (207); Canada (209); Bedford
(210); JVC (212); Matthey (213); Bruce (218); Service (222); MJSA
(226); Preston (229); Timex (239); and Sheaffer (249).
Service (222) agreed with regard to the current Guides, but
thought that the compliance costs associated with the proposed
revisions outweighed the benefits.
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Thirty-eight comments specifically addressed the continuing need
for the Guides and all agreed that there is a continuing need, with
most stating that the Guides protect consumers and industry.\7\ One
comment stated,
[[Page 27179]]
``Without the guides to serve as a reference manual, every manufacturer
or producer would have their own interpretation [of what constitutes
fair industry practices].'' \8\
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\7\ The commenters are the same as in footnote 6 supra, with the
addition of Eisen (91). With regard to the current Guides, Best
(225) stated, at p.2, that the Guides ``are well developed and
provide protection to consumers and to reputable jewelers against
otherwise false and deceptive practices. The Guides offer a great
measure of certainty to jewelers' business practices as historical
application and interpretation have better defined the parameters of
acceptable conduct. This certainty has value because it contributes
to an efficient and free flow of information to consumers in the
marketplace.'' AGTA (49), at p.2, stated: ``If consumers cannot be
confident that what they are paying for is what they have been told
it is, our trade cannot survive. The FTC guides provide a structure
upon which our industry has built regulations for the consumer's
protection, which is ultimately our own as a trade. Therefore, AGTA
endorses their continued existence, timely revision, and a strong
enforcement.''
\8\ Skalet (61) p.1.
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Twenty-nine comments specifically addressed the burdens of
complying with the Guides. Seven comments stated there are no
compliance burdens.\9\ Three also stated that, if everyone complies,
the burdens of compliance are evenly distributed and will not benefit
one business at the expense of another.\10\ Ten comments stated that
the burdens are minimal \11\ and six thought the burdens were ``worth
it.'' \12\ The seven comments that itemized the burdens (``testing and
planning,'' ``monitoring suppliers,'' ``controls,'' ``measurements,''
``record keeping,'' ``time,'' and ``personnel''), concluded that the
costs are acceptable because of the benefits received.\13\ None of the
comments identified the extent of the costs in money or in time.
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\9\ Fasnacht (4); Honora (15); G&B (30); Lannyte (65); Newhouse
(76); CPAA (193); and Bedford (210).
\10\ Honora (15); G&B (30); and Newhouse (76).
\11\ JMC (1); King (11); AGS (18); Estate (23); Schwartz (52);
Handy (62); Nowlin (109); Bridge (163); MJSA (226); and Preston
(229).
\12\ Argo (17); AGTA (49); Bales (156); LaPrad (181); Mark
(207); and Matthey (213).
\13\ Jabel (47); Skalet (61); McGee (112); ArtCarved (155); IJA
(192); Canada (209); and MJSA (226).
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Although 29 comments responded to the question regarding changes
needed to minimize the economic effect of the Guides, they did not
offer detailed explanations or suggestions. Fifteen comments stated
that no changes are necessary.14 Six comments stated that the
changes proposed by the JVC are sufficient to minimize their economic
effects.15 Two comments recommended simplifying the Guides to
avoid misunderstandings (e.g., about the proper use of
terminology).16 Canada stated that harmonizing standards with
Canada would minimize the economic effect on entities subject to the
Guides' requirements, reduce costs and promote international trade, by
not requiring manufacturers to mark products for domestic use
differently than those made for foreign use.17
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\14\ JMC (1); Fasnacht (4); Thorpe (7); Honora (15); Argo (17);
Estate (23); G&B (30); Jabel (47); Schwartz (52); Skalet (61); Handy
(62); McGee (112); LaPrad (181); IJA (192); and Mark (207).
\15\ AGTA (49); GIA (81); Bridge (163); Bedford (210); JVC
(212); and Preston (229).
\16\ ArtCarved (155) and Matthey (213).
\17\ Comment 209, p.1.
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Twenty-seven comments addressed the relation of the Guides to
federal, state or local laws or regulations. Twenty-one comments
specifically stated either that there is no conflict or overlapping or
that they are unaware of any.18 Six stated that if there was any
duplication, it should not deter the Commission from approving
comprehensive guidelines.19 (No examples of duplication were
provided.) However, the Postal Service stated that the Guides ``overlap
with Postal authority, sometimes undermining our position in false
representation and fraud actions.'' 20 The Postal Service stated
that the Guides do not adequately address the situation where the
consumer purchases jewelry before actually seeing it. The Postal
Service proposed changes to the Guides to help remedy this
problem.21 As discussed below, the Commission has revised the
Guides to mitigate this problem.
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\18\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15);
Argo (17); Handy (62); Lannyte (65); GIA (81); NACAA (90); McGee
(112); ArtCarved (155); Bridge (163); IJA (192); Phillips (204);
Bedford (210); JVC (212); Matthey (213); Best (225); MJSA (226); and
Preston (229).
\19\ Estate (23); G&B (30); Jabel (47); AGTA (49); LaPrad (181);
and CPAA (193).
\20\ Comment 244, p.1. The Postal Service enforces 39 U.S.C.
3005, which prohibits persons from obtaining mail or property
through the mail by means of false representation. The Postal
Service also brings actions under the criminal mail and wire fraud
statutes, 18 U.S.C. 1341, 1342 & 1345. Id.
\21\ Comment 244, pp.1-3.
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Thirty-one comments discussed economic or technological changes
since the Guides were issued and the effect on the Guides. Three
comments 22 stated that economic and technological changes have
had no effect on the Guides and 28 comments stated that such changes
have had an effect on the Guides.23 The changes the commenters
specified, which they thought should be reflected in the Guides, are
new gemstone enhancement techniques,24 laser treatment of
diamonds,25 fracture-filling of diamonds,26 new methods of
metal plating,27 diffusion-treated sapphires,28 advanced
testing techniques,29 new synthetic gemstones,30 and possible
new platinum products.31
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\22\ JMC (1); Handy (62); and McGee (112).
\23\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15);
Argo (17); AGS (18); Estate (23); AGTA (49); Lannyte (65); Newhouse
(76); GIA (81); Eisen (91); McGee (112); ArtCarved (155); Bales
(156); Bridge (163); LaPrad (181); IJA (192); CPAA (193); Mark
(207); Canada (209); Bedford (210); Matthey (213); MJSA (226);
Preston (229); Timex (239); and Sheaffer (249).
\24\ AGS (18); AGTA (49); GIA (81); Eisen (91); ArtCarved (155);
LaPrad (181); and IJA (192).
\25\ Fasnacht (4); Thorpe (7); Honora (15); ArtCarved (155); and
Preston (229).
\26\ Thorpe (7); Estate (23); ArtCarved (155); IJA (192); and
Preston (229).
\27\ Newhouse (76); ArtCarved (155); Canada (209); and Preston
(229).
\28\ Thorpe (7); Honora (15); and Preston (229).
\29\ ArtCarved (155); LaPrad (181); and Preston (229).
\30\ Honora (15) and ArtCarved (155).
\31\ ArtCarved (155).
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On the economic side, Richard C. Mark commented on the dramatic
increase in the price of gold since the Guides were most recently
revised, which, he stated, increases the significance of any rules
dealing with gold.32 Another comment stated that greater economic
advantage to the trade would occur if national and international
standards are uniform.33
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\32\ Comment 207, p.2. In 1957, when the Guides were last
revised, gold cost $35 an ounce. The current price fluctuates
between $350 and $400 per ounce.
\33\ Matthey (213) p.1 (stating that ``Competition on a global
as well as a national basis make the establishment of standards and
clear definitions of terminology even more critical'').
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Twenty-four comments addressed whether proposed provisions
accurately reflect accepted practices, technology or nomenclature used
in the trade. Fourteen comments stated that there are no requirements
in the JVC proposal that do not fairly and accurately reflect trade
practices.34 Some comments, however, identified parts of the
proposed Guides that they contended are contrary to accepted industry
practices. Specifically, Best and Service Merchandise stated that the
JVC's proposed diamond weight tolerances, restrictions on the use of
the term ``point,'' and proposed disclosures regarding gemstone
enhancement do not conform with accepted trade practices.35 Other
responses to this question were not directly responsive because they
did not contend the JVC's proposals were out of step with current trade
practices, but instead proposed adding new terms and standards to the
Guides.36
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\34\ JMC (1); Fasnacht (4); Argo (17); Capital (19); Estate
(23); Jabel (47); Skalet (61); Handy (62); Newhouse (76); GIA (81);
McGee (112); ArtCarved (155); IJA (192); and Bedford (210).
\35\ Best (225) p.4 and pp.7-8 and Service (222) p.1 and 5 of
letter and p.3 of comment. See also MJSA (226) p.7 (opposing
proposed diamond weight tolerances as contrary to industry
practice).
\36\ For example, AGTA (49) suggested banning certain terms in
use that relate to synthetic gemstones and plated gold jewelry. See
also Lannyte (65); Eisen (91); CPAA (193); and Matthey (213). (Their
proposals are discussed under the appropriate categories infra.)
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Thirty-one comments directly responded to the question regarding
[[Page 27180]]
whether any proposed changes to the Guides would result in a lessening
of competition, barriers to entering the industry or increased prices
to consumers. Twenty-five answered ``no'' or ``probably not.'' 37
But, numerous comments regarding the JVC's proposed weight tolerances
for diamonds believed a narrow tolerance requirement (as the JVC
proposed) would increase costs to consumers.38 Jabel stated that
paperwork and the printing of definitions and descriptions the JVC
proposed as new requirements may increase consumer prices.39
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\37\ JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); King (11);
Honora (15); Argo (17); AGS (18); Estate (23); G&B (30); AGTA (49);
Schwartz (52); Skalet (61); Handy (62); Lannyte (65); GIA (81);
Nowlin (109); McGee (112); ArtCarved (155); IJA (192); CPAA (193);
Mark (207); Canada (209); Bedford (210); and Matthey (213). In
addition, most of the 72 comments supporting a different tolerance
for diamond weights indicated that requiring the merchant to state
more accurately the weight or weights of diamonds would result in
increased costs to consumers.
\38\ E.g., Service (222) and Best (225) (implementation of the
JVC proposal would result in lessened competition and higher prices,
particularly for low margin jewelry retailers, which would be passed
on to consumers). The comments opposing the proposed diamond weight
tolerance and alleging consequential costs are listed and examined
in detail in the discussion of diamonds below.
\39\ Comment 47, p.2.
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Preston commented that, although he was not specifically aware of
any proposals that would lessen competition, produce barriers to entry
or increase prices to consumers, he thought these results could occur
on a modest scale.40 Thorpe stated, on the other hand, but without
giving any reasons, that the JVC proposal would increase competition
based on quality, value and service, and that the proposal would lower
prices to consumers by allowing them to shop and compare ``on a level
playing field.'' 41 Bales recommended that the Guides allow
products of less than 10 karat gold to be sold as a karat gold product
because it would increase competition in the industry.42 Other
comments, while not specifically responding to this question, stated
that the JVC's proposal to prohibit the use of the term ``gemstone'' to
describe synthetic or imitation products would be
anticompetitive.43
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\40\ Comment 229.
\41\ Comment 7, p.2.
\42\ Bales (156) suggested that a quality mark be permitted on a
product called Balesium that is 4\1/2\ karat gold. See discussion
below regarding the 10 karat minimum standard for karat gold.
\43\ Service (222) p.1 and p.4; Best (225) p.3; AGL (230) p.3;
NRF (238) pp.1-2; Kyocera (242) p.1; River (254) p.1. Dealers in
synthetics, which are materials made in a laboratory that have the
same chemical, physical and optical properties as a natural
gemstone, contend they should be able to describe their products as
gemstones with appropriate qualification to indicate that they are
laboratory made.
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One hundred eighty-one comments responded to the question of
whether the JVC's petition to revise should be rejected and the current
Guides retained. Many comments stated that the petition to revise
should not be rejected.44 For example, AGTA affirmatively favored
revising the Guides and 56 AGTA members filed individual comments
endorsing the AGTA position. Twenty three other comments did not
respond specifically to Question 34, but endorsed revision of the
Guides.45
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\44\ E.g., JMC (1); Fasnacht (4); Thorpe (7); King (11); Gold
Institute (13); Argo (17); AGS (18); Capital (19); Estate (23); G&B
(30); Jabel (47); AGTA (49); Schwartz (52); Skalet (61); Handy (62);
GIA (81); Nowlin (105); McGee (112); ArtCarved (155); Bales (156);
LaPrad (181); IJA (192); CPAA (193); Mark (207); Canada (209);
Bedford (210); Matthey (213); and Preston (229).
\45\ JMC (1); Littman (2); JA (3); Overstreet (8); Kennedy (9);
Collins (12); Von's (16); Jeffery (21); Stanley (83); General (88);
APG (89); NACAA (90); Eisen (91); Alie (106); AWI (116); USWC (118);
Krementz (208); JVC (212); WGC (223); MJSA (226); Swiss Federation
(232); AWA (236); and ISA (237A).
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Service Merchandise and Best recommended rejecting the petition to
revise in favor of retaining the current Guides.46 Service
Merchandise stated that the proposed revisions are anti-competitive and
offer insufficient benefit to the affected industries or their
consumers to justify the additional efforts and costs that they allege
will result.47 Additionally, 72 comments recommended rejecting the
JVC proposal and retaining the current Guides, apparently because of
their objection to the JVC's proposal regarding diamond weight
tolerances.48
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\46\ Comment 222 and Comment 225.
\47\ Comment 222, p.1.
\48\ These 72 comments, mostly using one of four form letters,
also urged that all proposed changes be rejected. One writer from
this group indicated that he had a change he would like to suggest
but stated ``my understanding is that it [the JVC proposal] must be
accepted in whole or rejected in total.'' Comment 60, p.1. Staff
contacted this commenter, Richard Goldman, president of Frederick
Goldman, Inc., who indicated that the group to which he belongs was
advised, by a person he did not identify, that the JVC proposal had
to be accepted or rejected in its entirety. Thus, this group's
opposition to all other proposed revisions appears to be based on a
false premise.
These 72 commenters are: London Star (20); Luria (28); Armel
(32); Mendelson (33); Fashion (35); Courtship (36); MAR (37); NY
Gold (39); Aviv (40) and (41); TransAmerican (43); Saturn (46);
Faleck (50); Alarama (51); Fabrikant (53); Light Touch (54); Disons
(55); Astoria (56); PanAmerican (57) and (101); Odi-Famor (58);
Black Hills (59); Goldman (60); Almond (63); Brilliance (68); Oroco
(69); Fargotstein (70); Simmons (71); Mikimoto (72); Evvco (73);
Renaissance (74); Harvey (75); JGL (77); Raphael (78); AMG (79);
Vijaydimon (80); Philnor (93); Orion (94); Flyer (95); Classique
(96); Vardi (97); K's (98); Diastar (99); Foster (100); Fame (102);
Cheviot (104); M&L (105); Kurgan (107); Rosy Blue (108); NEI (110);
Leer (114); Majestic (115); Imperial (117); Schneider (119);
Precision (121); New Castle (122); Stern (157); Consumers (158);
Ultra Blue (160); DeMarco (161); Little (164); Golden West (179);
Stanley (180); Mastro (190); Capitol Ring (191); Bogo (201);
Schaeffer (211); Suberi (214); Impex (220); Landstrom's (241);
Ultimate (243); and Murrays (264).
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B. Conclusion
The comments largely favor retention of the Guides and state that
there is a continuing need for the Guides. The comments indicate that
the benefits of the Guides outweigh the costs, and present no
persuasive evidence that the Guides have outlived their usefulness or
impose substantial economic burdens. Accordingly, the Commission is
retaining the Guides.
Many comments recommended that the Guides be revised to reflect
changed technologies, and the Commission has considered these comments
in amending the specific provisions of the Guides, discussed below. The
comments that favored rejecting the JVC proposal and retaining the
Guides as they exist now usually did so because of a particular JVC
recommendation. The objections to those proposals also are addressed as
they occur in the different Guide categories.
III. Changes to the Form of the Guides
A. Legal Language Used in the Guides
The legal language in the Guides has been revised to conform to the
Commission's view on deception and unfairness as expressed in its
Policy Statements on Deception and Unfairness.49 Specifically, the
phrase ``it is an unfair trade practice,'' generally has been revised
to state ``it is unfair or deceptive to * * *.''
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\49\ Statement on Deception, appendix to Cliffdale Assocs.,
Inc., 103 F.T.C. 110, 1734-84 (1984) and Statement on Unfairness,
appendix to International Harvester Co., 104 F.T.C. 949, 1072
(1984).
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B. Consolidation of the Guides
Detachable metallic watch bands are the subject of the Guides for
the Metallic Watch Band Industry (``Watch Band Guides''), 16 CFR Part
19. Metallic watch bands that are permanently attached to the watch are
included in the Guides for the Watch Industry, 16 CFR Part 245. The JVC
proposed combining the Watch and Metallic Watch Band Guides with the
Jewelry Guides and the FRN solicited comment on this proposal. Thirty
comments addressed this issue, and 22 stated the Guides should be
consolidated.50 Most
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of those who gave reasons for favoring consolidation mentioned the
Watch Band Guides rather than the Watch Guides.51
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\50\ JMC (1); Fasnacht (4); Gold Institute (13); Benrus (22);
Estate (23); G&B (30); Jabel (47); Skalet (61); Lannyte (65);
Newhouse (76); Nowlin (109); McGee (112); ArtCarved (155); Bales
(156); Bedford (210); Bridge (163); IJA (192); Canada (209); Matthey
(213); Bedford (210); MJSA (226); and Leach (258).
\51\ E.g., Bedford (210) commented, at p.3, that ``as watch
bands are mostly sold and fitted by jewelers, it would seem
appropriate * * * that they be combined with the jewelry
guidelines.'' However, no commenters identified themselves as
watchband manufacturers.
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Six of the eight comments opposing consolidating the Guides were
from watch manufacturers or trade associations.52 The reasons
given for opposition were primarily related to the consolidation of the
Watch Guides, not the Watch Band Guides. The American Watch Association
stated that the Guides correctly reflect the fact that watches and
jewelry are different products, ``by imposing substantially different
definitions and standards for watches and jewelry.'' 53 For
example, the minimum thickness in the Watch Guides for gold
electroplated watches is about 100 times thicker than the minimum
thickness for gold electroplated jewelry in the Jewelry Guides.54
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\52\ USWC (118); JCWA (216); NACSM (219); Best (225); Citizen
(228); Swiss Federation (232); AWA (236); and Timex (239). Only one
comment from the affected industry, Benrus (22), favored
consolidation of the Watch Guides.
\53\ Comment 236, p.1. See also Swiss Federation (232) p.1 (the
industries are separate and consolidating the Guides would make use
of the Guides difficult) and Citizen (228) p.5 (watches and jewelry
are dissimilar and should not be combined).
\54\ See also JCWA (216) p.4 (favoring separate Guides because
the application of materials and quality demands differ for watches
and jewelry); Timex (239) pp.9-10 (opposing consolidation if doing
so would create any additional compliance obligations); Swiss
Federation (232) p.38 (stating that jewelry, watch and watch band
companies are separate industries, with separate trade
associations).
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Based on the comments, the Commission has determined not to combine
the Guides for the Watch Industry with the other two Guides. The Guides
for the Watch Industry will remain as separate Guides and are discussed
in another Federal Register notice. However, the Commission has
determined to consolidate the Guides for the Metallic Watch Band
Industry with the Jewelry Guides.55 The Watch Band Guides
primarily concern ``fineness'' standards for precious metals, which are
the same as those contained in the Jewelry Guides.56 Thus, unlike
the Guides for the Watch Industry, the Watch Band Guides share many
common elements with the Jewelry Guides.57 Therefore,
consolidation of these two Guides eliminates unnecessary
duplication.58
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\55\ JCWA (216), Citizen (228), and AWA (236) stated that all
three Guides should be kept separate, but none of these provide
reasons for keeping the Watch Band Guides separate.
\56\ ``Fineness'' refers to the amount of precious metal in an
article.
\57\ For example, the provisions for gold electroplated metal
watch bands in the Watch Band Guides are the same as those for gold
electroplated metal products included in the Guides for the Jewelry
Industry.
\58\ More than half of the material in the Metallic Watch Band
Guides duplicates material in the Jewelry Guides.
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IV. Category-By-Category Explanation of Revisions
This section discusses specific proposed revisions on which the
Commission sought comment in the FRN and additional issues raised by
the comments. This discussion includes a summary and analysis of the
comments on each issue and a discussion of the revisions that the
Commission has made. (In some instances there were no comments on
particular proposals.)
A. Pre-Category I--Scope and Application: Sec. 23.0
Section 23.0 in the current Guides is captioned ``Definitions,''
and gives definitions for: ``diamond,'' ``pearl,'' ``cultured pearl''
and ``imitation pearl.'' In the JVC proposal, section 23.0 is titled
``Scope and Application,'' and the definitions appear in the sections
that specifically address these products. The Commission has determined
that this organizes the Guides in a more helpful fashion and adopts
these changes.
Part (a) of section 23.0, as proposed by the JVC, lists industry
products to which the Guides apply and part (b) defines industry
members. The term ``industry products'' is used throughout the Guides,
but it is not explicitly defined. To avoid any uncertainty about their
intended coverage, the revised Guides include a definition of
``industry products.''
The JVC petition specifically suggested that the term ``industry
products'' include pens, pencils and optical frames containing gold or
silver. The FRN sought comment on whether provisions applying to the
gold or silver content of pens, pencils and optical products should be
included in the Guides, and whether they should be the same as the
current provisions for jewelry. Thirty-one comments addressed this
issue, and 25 favored including these products, including two major
manufacturers of writing implements, Sheaffer and A.T. Cross.59
The six commenters that opposed the inclusion of these products simply
stated that they saw no need for the inclusion of these products or
that they were not ``really'' jewelry products.60
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\59\ Fasnacht (4); Gold Institute (13); Estate (23); Korbelak
(27); G&B (30); Jabel (47); Schwartz (52); Skalet (61) p.3 (stating
that the items are typically sold in jewelry, department and gift
stores, and thus should be subject to the same standards as jewelry
sold in the same store); Handy (62); Lannyte (65); Newhouse (76);
McGee (112); Bales (156); Bridge (163) p.2 (stating that the
metallic content of the items is more likely to be misrepresented if
they are not included in the Guides); Cross (165) p.1 (favoring
inclusion, because the mislabeling of these products, ``especially
by counterfeiters, has caused confusion by customers and harmed the
business of legitimate manufacturers''); IJA (192); Tru-Kay (196)
p.1 (stating that the public would find different standards for the
metal content of these items as opposed to jewelry confusing); Mark
(207) p.3 (same as Tru-Kay); Canada (209); Bedford (210); MJSA (226)
p.3 (stating that without inclusion in the Guides, there may be more
misrepresentation of metallic content); Preston (229); Sheaffer
(249) p.2 (favoring inclusion, but objecting to ``unnecessary and
arbitrary limitations'' on the use of the term `Plate' to describe
gold electroplated articles); Franklin (250); and Knight (256).
Although no current manufacturers of eyeglass frames commented,
Knight (256) stated, at p.2, that ``We at one time owned the largest
manufacturer of gold filled and rolled gold plate frames in the
U.S.A. and they followed the jewelry guides.''
\60\ LaPrad (181); Nowlin (109); ArtCarved (155); Service (222);
Franklin (250); and NACSM (219).
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The comments generally indicate that pens, pencils, and opticals
made of precious metals are viewed by consumers as similar to jewelry
because of their metallic content and where they are sold. Thus,
consumers would tend to expect that claims about such products would be
guided by the same standards that apply to other industry products.
Because consumers' expectations about the meaning of terms such as
``gold'' are likely to be the same for any product, the Commission is
including these items in the Guides. These products and detachable
metallic watch bands are now specifically listed in Sec. 23.0(a) of the
revised Guides. The title of the Guides is now the Guides for the
Jewelry, Precious Metals, and Pewter Industries to reflect the coverage
of the Guides.61
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\61\ See infra for a discussion of the inclusion of items made
from pewter.
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Although the JVC petition did not list hollowware or flatware as
``covered products,'' section 23.6A of the JVC petition addresses
sterling hollowware and flatware. The Franklin Mint objected to this
because these items are not jewelry.62 However, these items are
commonly sold in jewelry stores, and at least one of the commenters
simply presumed that these items were covered
[[Page 27182]]
by the Guides.63 As with pens and pencils made of precious metal,
the Commission believes that consumers would tend to expect that claims
about silver or gold hollowware or flatware would be guided by the same
standards that apply to other industry products. Therefore, these
products also are included in the list of industry products covered by
the Guides.
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\62\ Comment 250, p.3. The Franklin Mint stated that ``industry
products'' should be limited to jewelry, which it defined as an
ornamental item worn on or about one's person for personal
adornment. (The Franklin Mint primarily markets objects that are not
used for personal adornment, but which incorporate or are made of
precious metals or gemstones, so that its proposal would exempt most
of the products it carries from the application of the Guides.)
\63\ See Gold Institute (13).
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The Guides also refer to ``industry members,'' but do not define
this term or give examples. The JVC proposed that the Guides state they
apply to ``every firm (a person, group of persons, or corporation)
engaged in the business of selling'' industry products. One commenter
noted that the Guides need to clarify that purchasers at all levels of
the industry are protected by the Guides, since it is commonly assumed
by courts that merchants are experts who should know better than to
rely on suppliers' representations as being accurate.64
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\64\ ISA (237) p.12 (stating further that the Guides should
``address all issues of intended disclosure to resellers of jewelry
products so that this information can accurately and completely be
passed on to the ultimate consumer'').
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The Commission agrees that it would be useful to clarify that
retailers, as well as consumers, are meant to be protected from
deceptive practices addressed by the Guides. Therefore, the revised
Guides state that they apply to persons, partnerships, or corporations
at every level of the trade.
The JVC also proposed, in section 23.0(b), including in the
description of industry members (in addition to sellers) those who are
engaged in ``identifying, grading, appraising, promoting the sale of or
counseling the purchase or barter of industry products.'' The FRN
specifically requested comment on whether the Guides should be expanded
to include appraisals of jewelry in addition to sales and offers to
sell jewelry.
Thirty-five comments addressed this question.65 The comments
generally favored including appraisers of jewelry industry products
among those subject to the Guides. The main effect of including
appraisers (or those ``identifying'' and ``grading'' industry products)
among those covered by the Guides would be to ensure that they would be
guided by the same definitions and standards as those selling the
products. To confirm the value of an intended purchase, consumers often
seek an appraisal because they rarely independently have the knowledge
to determine the quality or value of jewelry.66 The Commission has
concluded that it would be unfair or deceptive for appraisers to
ascribe meanings to standard terms that are used in the jewelry
industry that are different from the meanings attached to those terms
by the sellers of the products. Thus, appraisers and those
``identifying'' and ``grading'' industry products are advised to follow
the admonitions of the Guides.67
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\65\ E.g., AGS (18); AGTA (49); GIA (81); IJA (192); and ISA
(237 and 237A).
\66\ An ``independent'' appraisal is one done by a person who
has no commercial relationship to the seller and does not sell
competitive merchandise. In other words, the person who does the
appraisal does not stand to benefit beyond his appraisal fee.
\67\ The Commission is omitting from the list those who promote
the sale, or counsel the purchase or barter, of industry products,
because this language is unnecessarily specific, and because such
persons are already covered by the language of the Guides (e.g.,
persons who sell or offer for sale industry products).
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However, 29 of the comments also recommended that the content of
appraisals be covered by the Guides. Fifteen of these stated this
change should be effective with this revision.68
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\68\ JMC (1); Sibbing (5); Thorpe (7) p.2 (stating that
appraisals are sometimes used to make a sale by showing the consumer
``a signed document stating an inflated value''); King (11); Estate
(23); G&B (30) p.7 (noting that ``you are going to have to
understand appraisals are subjective''); Jabel (47); Skalet (61) p.3
(suggesting that ``appraisers should be certified or licensed and
should have no connection with those who are making the sale'');
Lannyte (65) p.4 (proposing that the Guides state that ``an
appraisal has to be qualified as to the purpose of appraisal and the
market level of the value quoted''); Eisen (91) p.1 (suggesting that
the Guides should provide for ``a statement on no conflict of
interest, disallowance of a percentage fee, and a resume with the
appraiser's qualifications''); McGee (112); ArtCarved (155); LaPrad
(181); AGL (230) pp.4-6 (proposing that the Guides state that it is
unfair for a seller to provide an appraisal to a consumer when the
appraiser is also the supplier of the item being appraised, and
recommending that the Guides specify certain required content of
appraisals of diamonds or colored stones (e.g., ``appropriate
tolerance information for each element that impacts on the value of
the gemstone''); and ISA (237) and (237A) p.5 (stating that
important problems are misrepresentation of qualifications and
overstating of value to justify the selling price). Only one
comment, LaPrad (181), proposed standards to use (those of the
Appraisal Foundation).
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However, if the Guides were to regulate the content of appraisals,
standards for establishing a value would be needed.69 Fourteen
comments, including those of the American Gem Society, the American Gem
Trade Association, and the Gemological Institute of America,
recommended including appraisals in the Guides when there is adequate
agreement on what the standards for appraisals should be.70
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\69\ ISA (237A) noted, at p.18, that a New York City ordinance
requires that appraisals state that ``the opinions of appraisers can
vary up to 25%.'' ISA stated that the opinions of appraisers,
``depending on marketplace, variances in grading, and geographical
market locations, as well as various purposes and functions and the
method of value conclusion can cause appraisers to vary in their
opinions of value for amounts potentially greater than 25%.'' Id.
\70\ AGS (18); AGTA (49); GIA (81); IJA (192); Fasnacht (4);
Honora (15); Bridge (163); Mark (207); Bedford (210); Matthey (213);
MJSA (226); and Preston (229) p.6 (stating that there are different
formats and standards used for jewelry appraisals and that ``[t]here
is no overall agreement within the industry on precisely what does
or does not constitute the ultimate desirable appraisal'').
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Although the Commission has determined that for the sake of
consistency for consumers purchasing industry products, the Guides will
state that those who appraise, identify or grade industry products
should follow the Guides, they do not otherwise purport to guide these
industries.71
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\71\ ISA (237) noted, at p.2, that its members are appraisers in
more than ``130 subspecialty areas of the major personal property
disciplines * * *.'' It stated, at p.7, that while it prefers to
have its own industry guide, it favors the inclusion of appraisals
in the Guides, because ``many times we serve as expert witnesses in
court and rely on the content of the guides to inform the court as
to what is or is not acceptable.'' The Commission believes ISA's
concerns will be satisfied by the language added to the Guides.
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The JVC proposal included, in section 23.0(c), a description of the
behavior (claims and representations) to which the Guides apply. It is
similar to Sec. 23.1(b) of the current Guides, but does not list the
specific forms of advertising (periodicals, radio, television) that are
described in Sec. 23.1(b). The Commission's authority, however, is
broader than the items currently listed as advertising in the Guides,
and therefore the specific list unnecessarily limits the scope of the
Guides. The National Retail Federation comment stated that such
specifically enumerated limitations are helpful as they may prevent
other representations, such as in-store signs or flyers, from being
treated as advertising.72 However, that is not the intent of that
section. Accordingly, Sec. 23.0(c) of the revised Guides encompasses
express and implied claims in all types of advertising and promotion.
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\72\ Comment 238, p.1.
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B. Category I: Secs. 23.1-23.4
Guides in this part apply to all industry products regardless of
their composition.
Section 23.1(a) of the current Guides contains a list of
attributes, such as origin and durability, which industry members are
advised not to misrepresent. The JVC proposal omits ``manufacture''
from the list (possibly in error). The Commission has found no basis in
the record for deleting ``manufacture'' from the list of items not to
be misrepresented.
The JVC proposed adding the following attributes to the list of
[[Page 27183]]
characteristics that should not be misrepresented: ``clarity,''
``enhancement,'' ``future value,'' and ``prospects of resale.'' The
Commission believes that the term ``clarity'' is unnecessarily
specific, as it is already covered by the current Guides under
``grade'' and ``quality.'' Therefore, this term has not been included.
``Enhancement'' is the term used by the trade to describe the treatment
of gemstones to improve their color or otherwise improve their
appearance. However, the Commission has determined that a more accurate
term is ``treatment'' and has added this term, in lieu of
``enhancement,'' to the list of attributes that should not be
misrepresented. The Commission has determined that the third term,
``future value'' should not be added to the Guides, because the Guides
already list ``value,'' and ``future value'' is subsumed in value. The
Commission also has determined that ``prospects of resale'' should not
be added to the Guides. Representations regarding the prospects of
resale go to the investment of gems, and the Commission has concluded
that the sale of investment gems is unsuitable for treatment in guides.
The JVC proposed adding five additional parts to Sec. 23.1, which
would be designated as follows: Misrepresentation of the character or
identity of business; Misuse of the term ``certified,'' etc.; Deception
(as to gemstone investments); Misuse of the term ``investment
quality''; and Deception as to warranties on gemstone investments.
Discussion of each of these proposed additions follows.
Misrepresentation of the character or identity of business was the
caption of a section of the Jewelry Guides that was in effect from 1957
to 1979. This section admonished sellers from, for example,
misrepresenting themselves as wholesalers or as offering wholesale
prices.73 NACAA commented that it is important to prohibit such a
misrepresentation, noting that ``retailers use phrases such as `factory
direct' to imply that items are less expensive, when in fact they
obtain their merchandise through jobbers and other outside sources.''
74 However, Sec. 23.1 warns against misrepresentation as to the
``manufacture'' or ``distribution'' of industry products and this
provision would encompass misrepresentations about the nature of the
seller's business.
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\73\ The JVC also proposed expanding this section by adding
``investment broker'' and ``independent testing laboratory'' to the
list of examples of trade designations that firms are not to use
falsely. ISA (237) recommended adding ``gemological laboratory'' and
``appraisal facility'' to the list.
\74\ Comment 90, p.2.
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Misuse of the term ``certified,'' etc. was the caption of a section
in the Guides that were in effect between 1957 and 1979 and which the
JVC proposed reinstating. This section stated that it was an unfair
trade practice to refer to an industry product as ``certified'' unless
the identity of the certifier and the specific matter to be certified
is disclosed; the certifier examines the product, makes the
certification, and is qualified to certify; and the certifier makes
available a certificate that includes certain information about the
certifier and the certification.75
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\75\ The JVC also proposed requiring the disclosure of any
business relationship between the certifier and the seller.
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Thirty-two comments favored requiring the seller to make available
to the purchaser a certificate disclosing the name of the certifier and
the matters and qualities certified.76 The term ``certified'' or
certificates of authenticity are likely to be used as a way of giving
credence to a quality claim. If, in fact, the product is not
``certified'' in a valid manner or a certificate misrepresents the
qualities of the item, the seller is not complying with the Guides'
admonition in Sec. 23.1 not to misrepresent important qualities or
otherwise deceive purchasers. For this reason, the Commission is not
including a provision relating to certificates in the Guides.77
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\76\ JMC (1); Fasnacht (4); Thorpe (7); King (11); Honora (15);
Argo (17); AGS (18); Capital (19); Estate (23); G&B (30); Jabel
(47); AGTA (49); Schwartz (52); Skalet (61); Lannyte (65); Newhouse
(76); GIA (81); NACAA (90); Nowlin (109); McGee (112); ArtCarved
(155); Bridge (163); LaPrad (181); IJA (192); Matlins (205); Bedford
(210); Matthey (213); Bruce (218); MJSA (226); Preston (229); ISA
(237A); and Leach (257).
Opposed to this provision are: Bales (156) p.5 (stating that it
would raise costs and eliminate many smaller jewelers); NACSM (219);
Service (222); and Franklin (250).
With respect to the issue of whether there should be a
disclosure that there is subjectivity in the grading and appraising
of diamonds and colored stones, a comment form AGTA (49) and 56
individual AGTA members opposed disclosure, stating at p.6, that the
degree of subjectivity is ``better addressed by those in the
business of operating laboratories for certificates * * * and to
those associations governing appraisers.'' However, ISA (237A)
stated at p.21, that appraisal reports should disclose that diamond
and colored stone gradings are subjective in nature. Thorpe (7), AGS
(18), Schwartz (52), Skalet (61), NACAA (90), Bruce (218), and
Preston (229) were also in favor of the disclosure of the degree of
subjectivity in grading.
\77\ Certificates have no accepted meaning in the industry and
are not defined in the standard dictionary for the industry
[``Jewelers' Dictionary'' (3d ed. 1976)]. See AGTA (49) p.5
(favoring the proposal, but stating that since ``there are no
nationally accepted standards for certification,'' the requirement
that a certificate state the name of the certifier ``is no assurance
of either expertise or quality''); NACSM (219) p.24 (stating that
the proposed section was ``vague and broad in that it could be
construed to make any sales slip identifying the product a
certification''); Service (222) p.2 (stating that the current Guides
``are sufficient to prevent deception with certifications and
appraisals'').
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However, some commenters suggested that the Guides address
misrepresentation of the system of grading that was used in any
certificate or grading report.78 There are several different
diamond color grading systems in general use, each having its own
standards and terminology, and several grading systems for colored
stones.79
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\78\ Rapaport (233) p.1 (stating that misuse of GIA color and
clarity terminology by sellers (as opposed to appraisers or graders)
is a major problem and suggesting that the Guides state that it is
unfair to misuse GIA grading terminology); Thorpe (7) p.2 (stating
that an identification of the grading system used ``is necessary to
make accurate quality comparisons''); Shor (257) p.1 (suggesting
that the Guides state that it is unfair to describe diamonds by
color and clarity grades developed by GIA or other recognized gem
labs ``unless they conform exactly to the standards set forth by
those institutions'').
\79\ Richard T. Liddicoat, Jr. & Lawrence L. Copeland, ``The
Jewelers' Manual'' 29-32 (1967); AGL (230); Rapaport (233) p.1. The
Gemological Institute of America (GIA) and the American Gem Society
(AGS) employ different grading systems, and some diamond graders
have their own ``in-house'' grading systems. The letter ``D''
designates the best color in the GIA grading system. Some in-house
grading systems have grades that start with ``A,'' ``AA,'' or
``AAA'' and consequently ``D'' in their systems stands for a much
poorer color grade.
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The Commission is persuaded that a representation that a stone is a
specific grade could be deceptive if the identity of the grading system
used is not disclosed. Section 23.1 states that it is unfair or
deceptive to misrepresent the grade of an industry product. The
Commission has added a Note to Sec. 23.1 that states that, if any
representation is made regarding the grade assigned to an industry
product, the identity of the grading system used should be disclosed.
The FRN solicited comment on the JVC's proposed subsections 23.1(d)
through (f), which address deception involving gemstone investments.
Section 23.1(d) would require, in the sale of gemstones as investments,
a disclosure that profit or appreciation cannot be assured, that no
organized market exists for the resale of gemstones by private owners,
and that the seller is in compliance with all applicable laws and
regulations governing securities dealers. In general, the comments
favored these disclosures.80
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\80\ JMC (1); Fasnacht (4); Sibbing (5); Thorpe (7); King (11);
Honora (15); Argo (17); AGS (18); Capital (19); G&B (30); Jabel
(47); Schwartz (52); Skalet (61); Lannyte (65); GIA (81); Eisen
(91); Nowlin (109); McGee (112); ArtCarved (155); Bales (156);
Bridge (163); IJA (192); Bedford (210); Matthey (213); Bruce (218);
Shire (221); MJSA (226); Preston (229); Limon (235); ISA (237A);
Leach (257); and AGTA (49) (favoring the proposal for sales to
consumers but opposing the proposal for inter-trade transactions
(e.g., a sale by a dealer to a retailer).
Opposed to this provision: Onyx (162) and Rapaport (233) p.4
(stating that ``there are regular ongoing markets for the resale of
diamonds and colored stones by private owners'' such as auction
houses, jewelry stores, estate jewelry shows, and pawnshops). But
see Shire (221) p.3 (stating that these examples do not constitute a
ready market, since auction houses, for example, only want specific
items and do not take everything for sale). The Commission believes
that most consumers know that they, as individuals, would not have
access to a market comparable to the stock market; hence, a
disclosure would not be necessary to prevent deception in the
absence of an affirmative misrepresentation as to the nature of the
market.
There is no evidence indicating that consumers believe that
sellers of investment gemstones are governed by laws and regulations
covering securities dealers.
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[[Page 27184]]
The comments favoring these disclosures also generally favored the
proposed sections 23.1(e) and (f). Proposed part (e) would prohibit the
seller from implying that a gemstone sold for investment purposes is
more desirable or different than gemstones marketed for use in
jewelry.81 Proposed part (f) states that it is an unfair practice
to limit a purchaser's opportunity for an independent examination of an
industry product by delivering a product in a sealed container with a
warranty that becomes void if the seal is broken.82 This practice
makes it impossible for the consumer to examine the product or retain
an independent expert to examine or appraise the product to determine
whether the seller has fairly represented it. On the other hand, a
consumer can refuse to buy a product sold under these conditions.
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\81\ See comments cited in note 80, and NACAA (90) and LaPrad
(181). These comments are mostly from retail jewelers who would not
usually sell gemstones as investments. Ethical sellers of gemstones
for investment purposes may provide gemstones that are a higher
grade then those commonly sold as jewelry.
\82\ See comments cited in note 80. Rapaport (233) stated, at
p.4, that it would be acceptable to deliver the product in a sealed
container with a warranty that becomes void if the seal is broken,
if the sealing agency allows the re-sealing of the product at a
reasonable cost and discloses this at the time of sale.
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The FRN asked if there would be voluntary compliance with the
proposed guidelines for sellers of investment gemstones. Thirteen
comments stated that voluntary compliance could not be expected.\83\
Six comments stated that compliance could be expected only from
legitimate operators.\84\ Five comments anticipated voluntary
compliance by all concerned.\85\
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\83\ King (11); Argo (17); Jabel (47); Schwartz (52); Skalet
(61); GIA (81); Nowlin (109); McGee (112); ArtCarved (155); IJA
(192); Matthey (213); Shire (221); and Leach (257).
\84\ Fasnacht (4); AGTA (49); Bales (156); LaPrad (181); Bedford
(210); and ISA (237A).
\85\ Sibbing (5); Thorpe (7); Honora (15); Bridge (163); and
MJSA (226).
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An industry guide is not appropriate if there is an indication that
the violations are willful or wanton and will not be voluntarily
abandoned. The experience of the Commission in bringing cases against
sellers of investment gemstones indicates that most of the sellers have
been engaged in fraud. Thus, they are unlikely to comply with practices
that would be likely to put them out of business. The Commission has
concluded that a case-by-case approach is a more appropriate way to
address the problem of gemstone investment claims than inclusion in the
Guides.
The JVC did not propose any substantive changes in the last three
sections in Category I (23.2, 23.3, 23.4), and there were no comments
pertaining to these sections. The Commission has decided to retain
sections 23.2 and 23.4. Section 23.2 states that it would be deceptive
to use depictions that would materially mislead consumers about the
product shown.\86\ Section 23.4 states that it would be deceptive to
use the term ``handmade'' unless the item is entirely handmade or made
by manually controlled methods consistent with consumer expectations.
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\86\ The Postal Service (244) stated that mail order purveyors
of jewelry sometimes use deceptive photographs to sell their wares.
This section notes that such a practice is unfair or deceptive, and
a following Note specifically states diamonds should not be depicted
in greater than actual size without a disclosure that the depiction
is an enlargement. The JVC proposed expanding the Note to include
depictions of gemstones other than diamonds, and the Commission has
made this change. In addition, because television shopping programs
or computer images also may contain misleading images of jewelry,
the Commission has added ``televised or computer image'' to the list
of covered ``visual depictions'' in this section.
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However, the Commission has determined to delete section 23.3. The
admonition in section 23.3(a) against misrepresenting the origin of a
product repeats the general guidance provided in section 23.1 (which
provides a list of characteristics, including origin, which should not
be misrepresented). Section 23.3(b) states that a disclosure of foreign
origin should be made only when it is deceptive not to do so. A Note
following this section explains that it is not necessary to disclose
the foreign origin of small and functional parts, or other items (such
as diamonds) which are primarily obtained from sources outside the
United States. U.S. Customs requires products being imported into the
U.S. to be marked with the country of origin unless they will be
substantially transformed in the United States.\87\ Thus, the
Commission has concluded that this section of the Guides is
unnecessary.
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\87\ See The Tariff Act of 1930, as amended, 19 U.S.C. 1304, and
Customs' implementing regulations, 19 CFR 134.11.
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The Commission also has deleted Sec. 19.4(b) of the Watch Band
Guides, which states that it is unfair to fail to disclose that a
metallic watchband, or a substantial part thereof, is of foreign
origin.\88\ No commenters identified themselves as watchband
manufacturers or marketers, and very few commenters even addressed the
existence of the Watch Band Guides. It is unclear whether the fact that
a watchband is made abroad is material to consumers, or whether
consumers currently expect that any unmarked metallic watchband was
made in the U.S.A. However, as noted, U.S. Customs requires imported
watchbands (and other items of commerce) to be marked with the country
of origin. Therefore, the Commission has concluded that this section is
unnecessary.\89\
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\88\ The Watch Band Guides contain very detailed instructions
as to the labeling of watchbands assembled in the U.S. of foreign
components. 16 CFR 19.4(b), note 2. Several Commission orders, from
the 1960's or earlier, require similar detailed disclosures.
However, the Commission recently issued a ``Sunset Rule'' that
terminates administrative orders automatically after 20 years. 60 FR
58514 (Nov. 28, 1995).
\89\ More specific guidance on when industry products can be
marked ``Made in the U.S.A.'' is likely to be addressed further by
the Commission later this year.
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C. Metals (Category II): Secs. 23.5-23.8
Guides in Category II, in both the current Guides and the JVC
petition, apply to industry products composed in whole or in part of
precious metal. In the JVC petition, this category also includes a
proposed standard for pewter.
1. Inclusion of Metallic Watchbands
As noted previously, the Guides for the Metallic Watchband Industry
have been combined with the Jewelry Guides. The Commission believes
that, in most respects in which the Watch Band Guides differ from the
Jewelry Guides, the Watch Band Guides are unnecessarily restrictive or
no longer represent the Commission's views of how the law should be
applied. For example, unlike the Jewelry Guides, the Watch Band Guides
state that it is unfair to fail to disclose the metallic composition of
a product which has the appearance of gold but is not gold
(Sec. 19.2(A)(2)). There is no evidence that suggests that consumers
today will infer that a gold-colored metal watch band is gold. The
prices for gold-colored
[[Page 27185]]
metallic watch bands compared to what gold watch bands (or other gold
jewelry) would sell for is at least one way consumers are alerted that
a gold-colored band is not gold.\90\ Thus, the Commission has omitted
this provision from the Guides.
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\90\ To the extent that sellers purposely inflate the price of
their gold-colored products to lead consumers to believe they are
purchasing a gold item, they are probably engaging in fraud and are
likely to misrepresent the item as gold when it is not, which would
be a deceptive practice under Sec. 23.5(a).
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Other differences between the Watch Band Guides and the Jewelry
Guides are noted at appropriate portions below.
2. Misrepresentation as to Gold Content: Sec. 23.5
Section 23.5(a) of the current Guides states that it is an unfair
trade practice to sell or offer for sale any industry product by means
of any representation that would deceive purchasers as to the gold
content. Section 23.5(b) identifies specific practices that may be
misleading and section 23.5(c) lists markings and descriptions that are
consistent with the principles described in the section. These latter
provisions are ``safe harbors'' (i.e., examples of ways of avoiding
misrepresentations).
a. General provision as to misrepresentation: Sec. 23.5(a). As
noted, Sec. 23.5(a) of the current Guides contains a general provision
admonishing against misrepresenting the gold content of industry
products. The JVC proposed adding definitions of ``karat,'' ``gold,''
``karat gold,'' ``fine gold,'' ``mark,'' and ``apply or applied'' to
this section.91 No evidence indicating confusion as to the meaning
of the terms was presented. In some cases, the terms are already
defined very succinctly in the current Guides.92 For these
reasons, the Commission has not included the proposed definitions in
the Guides.
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\91\ Only one comment specifically addressed the proposed
definitions. Finlay (253) stated at p.1 that it did not object to
the proposed definitions of ``gold.''
\92\ For example, the JVC proposed defining ``fine gold'' as
``gold of 24 karat quality.'' However, Sec. 23.5(b)(1) of the
current Guides simply refers to ``fine (24 karat) gold.'' Similarly,
although the JVC proposed a new definition for ``quality mark''
specifically for gold, the more general definition in Sec. 23.8 of
the current Guides (defining the term ``mark'' in conjunction with
precious metals generally) is clearer and more accurate. See
discussion regarding quality marks below.
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The JVC also proposed including a statement that no mark other than
the quality mark (e.g., 14 K) shall be applied to an article indicating
that it contains gold or as to the quality, fineness, quantity, weight,
or kind of gold in an article. The Commission found no justification or
need for such a broad statement. Section 23.5(a) already states that
misrepresentations about the gold content of an article are unfair or
deceptive.
b. Specific provisions and ``safe harbors'': Sec. 23.5(b)-(c).
Section 23.5(b) in the current Guides identifies specific practices
that may be misleading. Subsection (1) states that the unqualified use
of the word ``gold'' is limited to 24 karat gold. The JVC proposed
adding that the unqualified use of ``solid gold'' is limited to 24
karat gold. There were two comments on this issue, one favoring the JVC
proposal because ``solid gold should mean that the product is 100%
gold,'' and one against the proposal, since fineness must be disclosed
for all gold other than 24 karat gold.93 The Commission believes
that the term ``solid gold'' is not inherently deceptive or
unfair.94 Accordingly, the Commission has rejected this proposal.
---------------------------------------------------------------------------
\93\ Lee (153); NRF (238) p.1.
\94\ For example, the phrase ``solid 10 karat gold'' is not
likely to lead consumers to believe the item is 24 karat gold. See
Advisory Opinion, ``Solid'' and ``karat'' used together, 71 F.T.C.
1739 (1967).
---------------------------------------------------------------------------
Subsection (2) in the current Guides advise that (except for 24
karat gold), the karat fineness be stated when the word ``gold'' is
used. The JVC did not suggest any changes in this section, and only
suggested minor changes in the corresponding ``safe harbor'' provision
in Sec. 23.5(c)(1).95 However, Finlay argued that the word
``gold'' should be allowed in product advertising without a designation
as to karat fineness.96 Including karat fineness in advertising,
however, helps consumers make basic comparisons among competing
products offered by different retailers. Therefore, the Commission has
not changed this provision.
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\95\ This safe harbor provision simply states that an industry
product composed throughout of an alloy of gold of not less than 10
karat fineness, may be described as ``Gold'' when the word ``Gold''
is immediately preceded by a correct designation of the karat
fineness. The JVC suggested following the words ``an alloy of gold
of not less than 10 karat fineness'' with ``less tolerance set out
in 15 U.S.C. 294, et seq.'' [the National Stamping Act] and
footnoting that statement with a detailed explanation of the
tolerance. The tolerances are set forth in Sec. 23.5(d) of the
current Guides and are more easily understood in the current format.
\96\ Comment 253, p.1 (stating that this ``will not mislead
consumers where all other requirements of the guidelines have been
met and where information as to karat fineness is given at the point
of sale''). See NRF (238) p.1 and discussion infra, regarding the
scope and application of the Guides.
---------------------------------------------------------------------------
A Note following the first ``safe harbor'' provision,
Sec. 23.5(c)(1) in the current Guides, deals with hollow products and
advises that there be a disclosure that these products, whatever their
gold content, have hollow centers, when the failure to make such a
disclosure would be deceptive. It also states that these products
should not be referred to as solid gold. The JVC proposed revising the
note to drop the guidance that there be a disclosure that the product
is hollow. However, the Commission has determined that this disclosure
is useful because, otherwise, consumers would be unaware that the
product is only hollow. Thus, the Commission has not deleted this
provision. The JVC also suggested that the note be changed to state
that products that are filled with cement or some other filler may not
bear a quality mark. However, such products are essentially ``gold
plated'' products, and as long as they conform with the Guides'
provisions about how to mark such products, consumers are not likely to
be deceived. Thus, the Commission has decided not to adopt this
proposal.
Subsections (3)-(5) advise against particular uses of the word
``gold'' (e.g., plated, filled, rolled, overlay) unless they are so
qualified as to be non-deceptive. Subsection (6) advises against
representing that one gold product is superior to another unless the
representation is true.97
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\97\ A Note following this section provides guidance for the use
of the word ``gold'' as applied to certain words (Duragold,
Diragold, Noblegold, Goldine). The JVC proposed adding ``Layered
Gold'' to this list, and the Commission has done so.
---------------------------------------------------------------------------
Subsection (7) advises against the use of the word ``gold'' on any
product of less than 10 karat fineness. Bales proposed in its comment
that the Guides be amended to permit gold alloys containing less than
10 karats of gold (less than .416 percent gold) to be marketed as
containing gold. Bales has a patent on a product in which the gold
content varies from four to six karats and which is alleged to have
good corrosion resistance.98 This issue was addressed
comprehensively by the Commission in 1977.99 Thus, the
[[Page 27186]]
Commission has not changed this provision.
---------------------------------------------------------------------------
\98\ Comment 156, pp.5-8. LaPrad (181) stated at p.2 that ``gold
plated items should include any item that is not at least 10 karat
solid gold in fineness throughout the item.'' This suggests that an
alloy that contained less than 10 karat gold could be described as
``plated.'' However, ``plated'' has been used for many years to
refer to a base metal product with a coating of gold. Extending the
meaning of the term to low-karat alloys would be confusing.
\99\ The 10 karat minimum standard has been used at least since
1933, when it first appeared in Commercial Standard CS 67-38,
promulgated by the then Bureau of Standards of the U.S. Department
of Commerce. It was incorporated into the Trade Practice Rules for
the Jewelry Industry, 16 CFR Part 23, in 1957. In 1977, the
Commission proposed permitting sellers to market gold of less than
10 karat and silver of less than 92.5% if the quality was accurately
disclosed. This proposal was published for public comment. Over 1200
comments were received, many from consumers, and over 98% of the
comments opposed lowering the 10K standard. The Commission found,
based on articles and test reports, that articles of less than 10
karat fineness tend to tarnish and corrode. The Commission
ultimately retained the 10 karat minimum fineness for gold and the
92.5% standard for silver. 42 FR 29916, 29917 (1977).
---------------------------------------------------------------------------
The JVC petition also included an admonition against applying a
quality mark (e.g., 9 karats) to any article of less than 10 karat
fineness regardless of whether the word ``gold'' is used. Because the
word ``karat'' is so clearly associated with gold content (even without
the use of the word ``gold''), the use of the term ``9 karat'' is
likely to represent that the item is 9 karat gold. The Commission has
determined that advising against this use is consistent with and
clarifies the Guides.
On the basis of comments received in response to questions in the
FRN, the Commission has revised current Secs. 23.5(b)(3), (4), and (5).
These changes are explained in detail below, along with the changes to
the corresponding ``safe harbor'' provisions in subsection 23.5(c) of
the current Guides.
i. Mechanically or electrolytically ``plated'' products. There are
two basic kinds of ``plated'' gold. Mechanically plated gold has a
layer of gold alloy bonded to a base metal by heat and pressure. Gold
electroplate has a layer of gold alloy electrolytically deposited on a
base metal. Section 23.5(b)(3) of the current Guides states that a
surface-plated or coated article can only be referred to as ``gold''
when the term is adequately qualified so as to disclose that the
product or part is only surface-plated or coated with an alloy of gold.
However, for mechanically plated articles, it adds that the word
``gold'' should be preceded by a designation of the karat
fineness.100
---------------------------------------------------------------------------
\100\ Canada (209) suggested, at p.4, that gold plated articles
``be prohibited from using the quality mark `karat'* * *'' because
such use confuses the consumer as to the value of the article. In
fact, the current Guides (in Secs. 23.5(b)(5) and (c)(3)) appear to
prohibit a quality mark on gold electroplated items. However, a
designation of karat fineness has been recommended in the Guides for
mechanically plated articles for many years, and Commission staff is
not aware of complaints from consumers who were deceived by this
representation. No other commenters suggested that the Guides advise
against the use of a quality mark on mechanically plated items.
Hence, the revised Guides, in Secs. 23.4(b)(5) and (c)(3), continue
to recommend that items identified as mechanically plated contain
quality marks.
---------------------------------------------------------------------------
Section 23.5(b)(4) states that certain terms (``gold-filled,''
``rolled gold plate,'' ``rolled gold plated,'' ``gold overlay,'' ``gold
plated,'' or ``gold plate'') should only be used for mechanically-
plated items (i.e., not gold electroplate) and that the gold on these
items should be of ``such thickness and extent of coverage that the
terms will not be deceptive.'' It also states that the karat fineness
should be included with these terms. The safe harbor provision in
Sec. 23.5(c)(2) states that these terms are not deceptive when used for
mechanically-plated items if the karat fineness is stated and the gold
is of ``substantial thickness'' and constitutes 5% of the weight of the
item. Section 23.5(c)(2) also creates a safe harbor for all these terms
except ``gold filled'' when the gold weight is less than 5% if they are
preceded by a fraction indicating the gold weight (e.g., \1/40\ 12 Kt.
Rolled Gold Plate). ``Gold filled'' is reserved for items with a gold
weight of 5% or more.101
---------------------------------------------------------------------------
\101\ The Watch Band Guides contain almost identical provisions
for mechanically plated watch bands, but they contain a section
(Sec. 19.2(e)(2)) entitled ``Examples of Proper Markings for
Expansion Bands of Specified Composition and Construction.'' The
main point made by the ``Examples'' is that quality marks on gold-
filled portions of a watchband should not imply that base metal
portions of the band are gold. The Commission believes the section
of the current Jewelry Guides dealing with quality marks (Sec. 23.8)
adequately addresses this issue. See discussion of quality marks,
infra. Therefore, the Commission is not including the ``Examples''
in the revised Guides.
---------------------------------------------------------------------------
The JVC proposed adding a note to Sec. 23.5(c)(2) of the current
Guides, stating ``The actual gold content of gold-filled and rolled
gold plate articles shall not be less than the gold content indicated
by the quality mark by more than ten percent.'' Only three comments
addressed this issue, all opposing the provision.102 Section
23.5(d) of the current Guides provide that ``the requirements of this
section relating to markings and descriptions of industry products and
parts thereof are subject to the tolerances applicable thereto under
the National Stamping Act (15 U.S.C. 294, et seq.) * * *.'' The
National Stamping Act provides that, for articles made of gold, ``the
actual fineness * * * shall not be less by more than three one-
thousandths parts than the fineness indicated by the mark * * *.'' 15
U.S.C. 295 (1993). No reason was offered for the much larger, proposed
tolerance. Accordingly, the Commission has not adopted this
change.103
---------------------------------------------------------------------------
\102\ NACSM (219) p.24; Leach (258) p.9 (stating that the
tolerance is ``by far too liberal''); Korbelak (27) p.4 of attached
letter of April 23, 1982 to Susanne S. Patch (stating that the
proposal is ``unsupportable'' and ``contrary to the spirit of the
recent amendment of the Marking Act which tightened tolerances on
karat goods''). [The National Stamping Act was amended in 1976.]
\103\ A ten percent tolerance is found in Voluntary Product
Standard PS 67-76, ``Marking of Gold Filled and Rolled Gold Plate
Articles Other than Watchcases.'' The tolerance is apparently meant
to apply to weight claims, such as ``10% 14 karat gold''.
This standard is referred to in the current Guides
[Secs. 23.5(d) and 23.5(f) (as ``Commercial Standard CS 47-34'')]
with respect to the exemptions applicable to the tolerance when a
test for metal content is being performed (e.g., excluding ``joints,
catches, screws'' etc.) Other Voluntary Product Standards are also
referred to in the current Guides for the same reason (i.e., a list
of parts of jewelry exempt from assay.) The JVC recommended
including in the Guides the full text of all five Voluntary Product
Standards for precious metals that are referred to in the current
Guides as ``Commercial Standards.'' Commercial Standards were
promulgated by the U.S. Department of Commerce and administered by
the National Bureau of Standards (``NBS''). Later renamed by the NBS
as Voluntary Product Standards (``VPS''), they had the same legal
significance as FTC guides. The Department of Commerce and the NBS,
which is now called the National Institute of Standards and
Technology (``NIST''), withdrew these and all other VPS, as an
economy measure, on January 20, 1984. The JVC proposed preserving
the material in the VPS by incorporating it into the Jewelry Guides.
Only one comment addressed the issue of whether to include the
VPS in the Guides. The Gold Institute (13) agreed that the VPS
should be incorporated, but gave no reasons. The Commission has
included the material pertaining to exemptions from assay (with some
changes, discussed infra) in the Appendix. However, the Commission
has concluded that it is not necessary to include other portions of
the VPS. The VPS state the standards that must be met for each
product, if the product is represented to be in compliance with the
VPS. However, the VPS have been withdrawn so such a representation
is obsolete.
---------------------------------------------------------------------------
Section 23.5(b)(5) states that the terms ``gold electroplate'' or
``gold electroplated'' can only be used when the plating ``is of such
karat fineness, thickness, and extent of surface coverage that the use
of the term will not be deceptive.'' The safe harbor provision in
Sec. 23.5(c)(3) states that these terms are not unfair or deceptive
when used for items with a coating of seven millionths of an inch of
fine (24 karat) gold, or the equivalent. [If the gold coating is, for
example, 12K (half as fine), the coating should be 14 millionths of an
inch thick (twice as thick).] ``Heavy gold electroplate'' may be used
for a coating equivalent to 100 millionths of an inch of fine gold.
This subsection also states that the terms ``gold flashed'' or ``gold
washed'' may be used to describe an electroplated coating that is
thinner than seven millionths of an inch of fine gold or its equivalent
(the minimum thickness for the use of the term ``gold
electroplate'').104
---------------------------------------------------------------------------
\104\ The Postal Service (244) p.2, commented that the use of
``gold flashed'' or ``gold washed'' is misleading to consumers,
particularly where items are ordered by mail and not seen by the
consumer until after purchase. However, the terms ``gold flashed''
and ``gold washed'' have been in common use for many years. The
Commission does not have sufficient evidence at this time to advise
against the use of these terms in all circumstances.
---------------------------------------------------------------------------
The FRN sought comment on how ``gold plate'' should be defined in
the Guides. (As noted, current Sec. 23.5(b)(4) allows ``gold plate'' to
be used to describe only mechanically plated items.) Six comments
opposed allowing
[[Page 27187]]
electroplated items to be described as ``gold plate.'' 105 Most
gave no reason other than stating that there should be a distinction
between products that are mechanically plated and those that are
electroplated.
---------------------------------------------------------------------------
\105\ Gold Institute (13) p.2 (defining ``gold plate'' as an
optional term to describe a mechanically plated article); Handy
(62); Newhouse (76); Mark (207); MJSA (226) p.4 (limiting ``gold
plate'' to mechanically plated articles is ``generally consistent
with terminology used in the trade''); and Knight (256) p.2 (stating
that consumers know electroplate is inferior to mechanically plated
gold).
---------------------------------------------------------------------------
Twelve commenters favored letting electroplated items be designated
as ``plate.'' 106 Sheaffer noted that ``gold electroplate,'' the
designation currently advised by the Guides, is too lengthy for many of
its products and is unknown to consumers in foreign countries, who are
familiar with the term ``plate.'' 107 Sheaffer stated that most
foreign countries permit ``plate'' or ``plated'' to be used to describe
an article coated with gold, regardless of the method of application,
and that a change in U.S. requirements would allow them to stock
inventory of items marked as ``gold plate.'' Further, one commenter
interviewed by Commission staff stated that some manufacturers would
like to market items that are the product of both mechanical plating
and electrolytic plating, that could be labeled ``gold plate.''
108
---------------------------------------------------------------------------
\106\ Fasnacht (4) p.1 (stating that ``gold plate'' has
historically been used in the trade ``for any application of a karat
gold to a base''); Benrus (22); Estate (23); Korbelak (27) p.3
(stating that the trade now uses ``gold plate'' to mean gold applied
electrolytically); G&B (30); ArtCarved (155); LaPrad (181); Matthey
(213); Bruce (218) p.7 (stating that the trade now uses the term
``gold plate'' to mean gold applied electrolytically); Citizen (228)
p.3 (stating that the term should not ``be restricted to any
particular method of applying the gold covering'' and noting that
``the vast majority of gold coverings are applied
electrolytically''); Sheaffer (249); and Leach (257). Four of these
(Fasnacht, G&B, Matthey, and Estate) stated that the method should
be disclosed.
\107\ Comment 249, p.2. Section 23.5(c)(2) states that
``adequate abbreviations'' are not unfair or deceptive for
mechanically plated gold, which is also referred to as ``gold
filled'' and abbreviated as G. F. Section 23.5(c)(3) makes no such
provision for electrolytically plated gold. Moreover, in an advisory
opinion issued in 1971, the Commission stated that ``gold
electroplate'' could not be abbreviated. Advisory Opinion,
Designation of gold content on ball point pens, 79 F.T.C. 1052
(1971). However, the Commission currently has no information that
consumers would understand abbreviations for mechanically plated
gold but not for electrolytically plated gold. Thus, the Commission
has revised the Guides to state that adequate abbreviations are not
unfair or deceptive for electrolytically plated gold (e.g., 12 Kt.
G. E. P.). Therefore, the advisory opinion is withdrawn.
\108\ Matthew Runci from MJSA.
---------------------------------------------------------------------------
Some comments stated that the relevant issue for consumers is
durability, and not the method of plating. Sheaffer stated that ``[t]he
normal consumer is totally unconcerned about the process which a
manufacturer might use to apply gold or silver plate to an article so
long as the precious metal plate meets all appropriate required
standards.'' 109 Canada commented that ``gold plate'' is ``simply
a layer of gold placed over a base substance'' and that the ``important
reference should inform the consumer of the thickness of the plate.''
110
---------------------------------------------------------------------------
\109\ Comment 249, p.3 (noting that ``silverplate'' is allowed
under the current Guides regardless of the method of application and
that this has not misled consumers).
\110\ Comment 209, p.4.
---------------------------------------------------------------------------
Although the comments indicate that there are differences of
opinion in the industry regarding industry custom and usage of the term
``plate,'' under the current Guides the term ``gold plate'' can only be
used for mechanically plated gold. Historically, mechanically plated
gold has contained a thicker coating of gold and has been more durable
than gold electroplate, both because it was thicker and because it was
less porous.
However, the comments indicate that electroplating has been
significantly improved in recent years.111 Other comments indicate
that gold electroplate could now be as desirable, or more desirable,
than mechanically plated gold.112 Commission staff conducted
telephone interviews of seven commenters, who, with one exception,
indicated that gold electroplate can be made as thick and as durable as
mechanically plated gold.113 Furthermore, all of the commenters
whom Commission staff interviewed stated that mechanically plated gold
has usually been marketed as ``filled gold,'' ``rolled gold,'' or
``gold overlay'' (instead of ``gold plate'').
---------------------------------------------------------------------------
\111\ Benrus (22) p.2 (stating that ``The science of gold
plating has improved greatly in the past 15 years and the
requirements in the current Guides . . . are simply not in tune with
today's technology or market practices''); Alan Foster,
``Electrodeposited and Rolled Gold,'' Gold Bulletin 64 (1982),
attached to comment 27 (indicating that the electroplating of gold
was greatly improved about 30 years ago). Korbelak (27) (attached
letter of April 23, 1982 to Susanne S. Patch) states that the
current Guides ``perpetuate an economic advantage to one method of
manufacturing [mechanical] over another.''
\112\ Catholyte (34) p.1 (stating that when corrosion is the
quality criterion, ``mechanically cladded material is not the
present day choice because machining processes which produce the
desired designs will destroy the starting clad stock and yield `raw'
or cut edges which will have little or no clad matter present. (This
procedure necessitates the use of electroplate to `cover' those
edges which are exposed.)''). Other comments indicate that
mechanically plated gold normally has a surface coating of
electroplate. Korbelak (27) (see articles attached to comment); Tru-
Kay (196) p.1 (stating that its major product was mechanically-
plated jewelry, and noting the existence of ``the surface coating of
gold electroplate'' on gold filled items); Mark (207) p.3 (owned and
operated a gold-filled manufacturer and distributor for 25 years and
referred to the ``surface coating of gold electroplate'' on gold
filled (i.e., mechanically-plated) items).
\113\ Matthew Runci, Executive Director, MJSA (226); George
Knight, former president of the Gold Filled Manufacturers
Association (256); Irving Ornstein, Vice President, Leach & Garner
(258); Howard Solomon, Vice President, Donald Bruce & Co. (218);
I.L. Wein, President, Benrus (22); Barry Sullivan, President,
ArtCarved (155); Kenneth Genender, U.S. Watch Council (118). Only
Mr. Knight stated that gold electroplate is inherently inferior to
mechanically plated gold.
---------------------------------------------------------------------------
Based on the comments, the Commission has determined that the
current Guides reflect the now-outdated belief that gold electroplate
is inherently inferior to mechanically plated gold. The Guides may thus
unfairly give mechanical plating a competitive advantage and may make
international trade more difficult. Further, the comments indicate that
the term ``gold plate'' has not been used extensively for mechanically
plated items, and therefore, consumers may not expect an item labeled
as ``gold plate'' to have been mechanically plated. Moreover, the
Commission agrees with the comments that state that consumers are
unlikely to distinguish between products on the basis of the method of
plating used and are more concerned with the durability.114 Thus,
the distinction between mechanically plated and electroplated products
no longer serves a useful purpose. Therefore, the Commission has
concluded that the term ``gold plate'' would not be inherently
deceptive when applied to electroplated items with a sufficient layer
of gold that assures reasonable durability. This will allow products
composed of a combination of types of plating, or newer methods of
plating that are developed, to be called ``gold plate.''
---------------------------------------------------------------------------
\114\ Consumers can determine for themselves whether they like
the appearance of the product, but the consumer has no way of
determining durability.
---------------------------------------------------------------------------
For these reasons, the Commission has created a safe harbor that
would allow ``gold plate'' to be used for gold applied by any process
so long as the coating is sufficiently durable to satisfy consumer
expectations that the plated product would retain its appearance for a
reasonable period of time.115 The Commission believes that a
standard based on thickness, rather than weight of the gold coating, is
more relevant to
[[Page 27188]]
consumer expectations.116 For the reasons discussed below, the
Commission has established a safe harbor for products with a minimum
thickness of one half micron of gold coating.
---------------------------------------------------------------------------
\115\ Although the evidence indicates that the term ``gold
plate'' has not been frequently used, because plating generally has
been in use for many years, consumers reasonably would expect a
certain minimum level of durability from an item so labeled. The
Commission believes it is appropriate to create a safe harbor with a
numerical standard for a specific term such as ``gold plate'' when
consumers would expect certain qualities from products described by
the term and products at or above the standard would have such
qualities.
\116\ Sheaffer (249) p.4 (stating that a standard based on a
weight ratio (e.g., 1/20th) can ``encourage the production of
inferior articles lacking strength and rigidity as the thickness,
and thus, the cost of the plate can readily be reduced by use of a
very thin base material''). But cf. AWA (236) p.2 (in discussing
``gold flashed'' watches, stating that thickness ``is only one
factor in determining the esthetic qualities and durability of the
electroplating process,'' that different technologies produce
varying thicknesses, all of which provide durable coverage, and that
establishing a threshold standard for ``gold flashed'' or other
similar terms creates an arbitrary standard that distorts the
marketplace); and NAW (251). However, because of the other comments
discussed in the text, the Commission believes that identifying a
minimum thickness and fineness is appropriate for a safe harbor for
``gold plate'' claims for jewelry.
---------------------------------------------------------------------------
In developing this safe harbor, the Commission has considered the
standard for gold plated jewelry established by the International
Organization for Standardization (``ISO''): ``ISO International
Standard 10713 Jewellery [sic]--Gold alloy coatings.'' 117 This
standard sets a minimum thickness of half a micron of fine gold (or its
equivalent) for both mechanically plated and electrolytically plated
gold jewelry.
---------------------------------------------------------------------------
\117\ The Trade Agreements Act of 1979 states that federal
agencies must, in developing standards, ``take into consideration
international standards and shall, if appropriate, base the
standards on international standards.'' 19 U.S.C. 2532(2)(A) (1980).
A ``standard'' is defined as ``a document approved by a recognized
body that provides, for common and repeated use, rules, guidelines,
or characteristics for products or related processes and production
methods, with which compliance is not mandatory.'' 19 U.S.C.
2571(13) (1995). An international standard is defined as a standard
promulgated by an organization engaged in international standards-
related activities, the membership of which is open to
representatives, whether public or private, of the United States and
all members of the World Trade Organization (``WTO''). 19 U.S.C.
2571(5), (6), and (8) (1995). A WTO member is ``a state or separate
customs territory (within the meaning of Article XII of the WTO
Agreement), with respect to which the United States applies the WTO
Agreement. 19 U.S.C. 3501(10) (1995).
ISO is, according to the ``foreword'' sections in several ISO
standards attached to the Swiss Federation comment (232), ``a
worldwide federation of national standards bodies. The work of
preparing International Standards is normally carried out through
ISO technical committees.'' ISO is open to representatives from the
United States and to representatives from members of the WTO, and
qualifies as an international standards organization.
However, the Trade Agreements Act also explicitly states several
reasons why basing a standard on an international standard may not
be appropriate, including the prevention of deceptive practices and
fundamental technological problems. 19 U.S.C. 2532(2)(B)(i).
---------------------------------------------------------------------------
The Commission also considered the ISO standard for gold plated
watches, which sets a minimum thickness standard of 5 microns, and
comments submitted as to the current standard in the Watch Guides, to
determine a sufficiently durable coating of gold for plated jewelry.
Watches have historically been assumed to be subjected to more wear
than other articles of jewelry.118 The comments that address gold-
plated watches indicate that a one micron thickness may be durable.
Benrus commented that thicknesses of up to \1/2\ micron ``are
unsubstantial and wear very quickly'' but that there is ``a new
industry `standard' of a minimum of 1 micron of gold plating (40
millionths of an inch) which has substantial durability and reliability
and gives years of satisfactory service.'' 119 The U.S. Watch
Council also noted that the watch industry has adopted 1 micron of
thickness (described as 40 millionths of an inch of 23 karat gold) as a
standard for gold plating.120 Two commenters interviewed by
Commission staff, Benrus and U.S. Watch Council, stated that watches
with a one micron coating of gold, if worn every day, could be expected
to last between two and four years.
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\118\ This is reflected in the current Guides. Watches marked
``gold electroplate'' should be plated with at least three-fourths
one thousandths of an inch of 10 karat gold (or 750 millionths of an
inch) whereas jewelry should be plated with at least 7 millionths of
an inch of 24 karat gold or the equivalent.
The American Watch Association (236) stated at p.1, that
standards for gold plating should be similar for watches and jewelry
because ``consumers can be confused when faced with jewelry and
watch products subject to entirely different definitions and
standards.'' However, watches may be subjected to more wear than
most jewelry (because they are usually worn daily), and, based on
past practice, consumers may expect watches to have a thicker
coating of gold plate than jewelry. Moreover, there are different
ISO standards for plated jewelry and plated watches.
\119\ Other commenters interviewed by Commission staff stated
that \1/2\ micron was not very durable [Irving Ornstein from Leach
(257); Kenneth Genender from U.S.W.C. (118)]. Catholyte, (34) p.1 (a
``quality'' product would contain 5 microns).
\120\ Benrus (22); USWC (118).
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Because most jewelry gets less wear than watches, the Commission
believes that the ISO standard of half a micron of fine (24 karat) gold
plating for jewelry constitutes a ``floor'' of sufficient durability,
so that consumers are unlikely to be misled about the durability of an
item marked ``gold plate.'' However, the Commission recognizes that
some commenters indicated that half a micron is not very durable. Also,
certain items of jewelry receive more wear than others, and some items,
such as rings, might actually receive more wear (and more friction with
skin) than watches.121
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\121\ Telephone interview with I. L. Wein, President, Benrus.
Bruce (218), in discussing vermeil (which is gold plate over
sterling silver), stated that one micron of plating would be
sufficient for some items such as earrings, two microns for other
such as necklaces, but that an item like a ring would require three
microns.
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Therefore, to ensure that consumers are not deceived by the implied
claims of durability arising from the term ``gold plate,'' the ``safe
harbor'' in the revised Guides (Sec. 23.4(c)(2)) reflects the
Commission's view that the term ``gold plate'' is not inherently
deceptive or unfair when used for gold applied to an industry product
(excluding watches) by any process so long as the following two
conditions are met: (1) The product contains a coating of half a
micron, or 20 millionths of an inch, of fine gold or the equivalent;
and (2) The coating is ``of substantial thickness,'' 122 which for
items that are subject to a great amount of wear, such as rings, should
be more than half a micron of fine gold or the equivalent. This second
provision ensures that products that are subject to greater wear should
have a coating of greater thickness than the minimum half micron.
Moreover, it ensures that products that are subject to a great amount
of wear in certain areas would have a more substantial coating in those
areas.
---------------------------------------------------------------------------
\122\ ``Substantial thickness'' is defined in a footnote which
is similar to the present footnote 1 in the current Guides.
---------------------------------------------------------------------------
The Commission has indicated that the thickness of the gold plating
may be marked in microns on the item itself if it is followed in close
proximity by a gold quality mark (e.g., 2 microns 12 K. G. P.). A note
following this section recommends that if a product has a thicker
coating in some areas than others, the area of least thickness should
be marked. This allows manufacturers to inform consumers of the minimum
thickness of the plating, and consumers may therefore shop for items
with more or less plating depending on their needs and budget.
The ISO standard, in section 5.4, prohibits quality marks on gold
plated items. However, the Commission does not believe it is
appropriate to include this portion of the international standard in
the revised Guides. The quality mark in combination with an indication
of the thickness of the gold plate, can communicate important
information to consumers. The ISO standard also sets up a system
whereby gold plated products can be labeled ``A,'' ``B,'' or ``C,''
with A indicating products that have a minimum of 5 microns of 14 karat
gold (or the equivalent), B indicating a minimum of 3 microns of 14
karat gold (or the equivalent), and C indicating a half micron of 24
karat gold (or the equivalent). However, American
[[Page 27189]]
consumers are not familiar with this system, and the Commission does
not believe it is appropriate to include it in the Guides at this
time.123
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\123\ ISO standard 17013 also provides a similar system of
marking mechanically plated gold items (e.g., ``A'' indicates a
thickness of 5 microns), based on the thickness of the gold plate.
However, the Guides allow marking of mechanically plated items
(e.g., gold-filled or rolled gold plate), based on the weight of the
gold in the item. The current system in the Guides has been used for
many years and the ISO system of marking may be confusing to
consumers. Thus, the Commission has not included the ISO system in
the revised Guides. The Commission believes that omitting the ISO
system of marking mechanically plated gold from the Guides will not
pose a barrier to international trade, because manufacturers can
mark the product ``gold plate'' according to the new provisions for
gold plated items, discussed above.
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The safe harbor for ``gold plate'' (Secs. 23.4 (b)(4) and (c)(2))
will be in addition to those already contained in the Guides. Thus,
Secs. 23.4 (b)(5) and (c)(3) of the revised Guides indicate that
mechanically plated gold can be called ``gold filled,'' ``rolled gold
plate,'' or ``gold overlay.'' However, items mechanically plated with
gold also can be referred to as ``gold plate,'' in accordance with the
guidance of Sec. 23.4 (c)(2) of the revised Guides. Electroplated items
can be marked as ``gold electroplate'' or ``GEP,'' in accordance with
the guidance of Secs. 23.4(b)() and (c)(4) of the revised
Guides,124 or as ``gold plate,'' in accordance with
Sec. 23.4(c)(2).
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\124\ The JVC petition suggests revising the sections pertaining
to electroplate by substituting the word ``electroplate'' for the
word ``plate'' and ``electroplating'' for ``plating.'' This revision
clarifies that products coated with gold by a process other than
electroplating should not be sold as ``gold electroplate.''
---------------------------------------------------------------------------
c. New methods of plating. The FRN solicited comment on whether
newer methods of plating should be included in the guides and how they
should be addressed. Nineteen comments addressed this issue, and of
this group, only one commenter stated that he was unaware of new
techniques.125 The most frequently mentioned new method was
``electroforming,'' a process in which gold is deposited over materials
that are removed, leaving a hollow item.126 (If all of the foreign
material is removed, the product is not actually plated.) Citizen Watch
(228) described a process called ``ion plating,'' and Sheaffer (249)
described ``vapor deposition,'' ``sputtering,'' and ``electroless
immersion.'' However, Sheaffer stated that these processes could be
handled in the same basic manner as mechanical plating and
electroplating and noted that the terms ``plate'' or ``plated'' should
be available to describe products coated by any of these
methods.127 As discussed supra, the Commission has revised the
Guides to indicate that it is not misleading to describe an item as
gold plate, whatever method is used to apply the gold, so long as it
meets the suggested minimum thickness and fineness standards. The
Commission does not have enough information at this time to provide
more detailed guidance regarding the newer methods of plating.
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\125\ Gold Institute (13); Estate (23); Korbelak (27); G&B (30);
Handy (62); Newhouse (76); Eisen (91); ArtCarved (155); Bales (156);
LaPrad (181); Mark (207); Canada (209); Matthey (213); Bruce (218);
WGC (223); MJSA (226); Citizen (228); Sheaffer (249); and Leach
(257). Leon Newhouse (76), a former executive in the watch industry
who stated that he has been retired since 1971, said he was not
aware of any new techniques. Handy, Mark, Matthey and MJSA stated
the techniques can be adequately dealt with by the existing
provisions in the Guides.
\126\ Bruce (218) (stating that it produces this type of
jewelry); Bales (156) p.8 (stating that such jewelry is often sold
by weight and that ``[m]any times, the manufacturer leaves a
measurable amount of residue inside the shell and weighs it, and
actually sells [it] as gold or silver''); Canada (209) (stating that
the problem of foreign substances left inside plated articles
deserves review). Section 23.5(a) of the Guides makes clear that
overstatement of the quantity of gold in a product is unfair and
deceptive.
\127\ Comment 249, p.3; ArtCarved (155) (stating that ``gold
plate'' should be allowed for all methods). Two comments, Estate
(23) and G&B (30), stated that the method of application should be
revealed, but gave no reasons.
---------------------------------------------------------------------------
d. Nickel in gold-filled jewelry. The FRN solicited comment on
whether the Guides should advise against the use of the term ``gold-
filled'' to describe a product in which nickel is inserted between the
gold-filled item and a surface coating of gold electroplate. The FRN
also asked if it would be acceptable to permit the insertion of nickel
so long as the lessened durability of such an item is disclosed, and
asked what type of disclosure should be made.128
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\128\ The JVC proposed this provision to prevent ``the
occasional expediency, in the manufacturing of finished products, to
`hot nickel' or use some other non-precious electroplating over the
mechanical precious metal surface and then merely to apply a flash
of precious metal electroplating.'' Petition Section 23.5 C(2),
Footnote 2. ArtCarved (155) suggested, at p.3, that ``on some
surfaces nickel serves as a leveling agent.'' Korbelak (27) stated,
at p.4, that ``nickel is apparently used to prevent corrosion of the
unavoidably exposed copper alloy base of the mechanically coated
stock.''
---------------------------------------------------------------------------
Most of those who commented believed that jewelry made in this way
should not be called ``gold-filled.'' 129 Tru-Kay (which stated
that gold-filled jewelry is its major product line) noted that the
insertion of nickel would adversely affect durability and
quality.130 Three comments contended that nickel should not lessen
durability.131
---------------------------------------------------------------------------
\129\ Fasnacht (4); Gold Institute (13); Estate (23); Korbelak
(27); Newhouse (76); Tru-Kay (196); Phillips (204); Mark (207);
Matthey (213); Bruce (218); WGC (223); MJSA (226); and Leach (257).
Two commenters, G&B (30) and Jabel (47), favored allowing the
insertion of nickel with a disclosure, but G&B noted that there may
be a need to ``have a new term.''
\130\ Tru-Kay (196) p.1.
\131\ Handy (62); ArtCarved (155); and Sheaffer (249).
---------------------------------------------------------------------------
Mark stated that if a layer of nickel ``has covered the basic
material, it will show up as soon as any gold surface coloration has
worn through* * *.'' 132 This is particularly important since the
metal color would change from yellow to white. Mark also stated that
``[t]o cover the mechanically bonded layer of gold [with nickel] which
is the essence of the gold-filled product defeats the purpose of the
gold-filled standard to the consumer.'' 133
---------------------------------------------------------------------------
\132\ Mark (207) p.4.
\133\ Id.
---------------------------------------------------------------------------
The Commission agrees with the argument of the majority of the
commenters that a thin wash of gold could wear away and reveal the
nickel. Thus, the use of the term ``gold-filled'' to describe such a
product does not comport with Sec. 23.4(b)(5) of the revised Guides,
which states that the product should contain ``a surface-plating of
gold alloy applied by a mechanical process which is of such thickness
and extent of surface coverage that reasonable durability is assured.''
The Commission has concluded that the use of ``gold-filled'' or other
terms to describe mechanically plated gold covered with nickel that is
washed with gold involves a misleading use of the word ``gold'' because
it does not disclose that this product has only a thin wash of gold
over a surface layer of nickel.134 To clarify this point in the
revised Guides, the Commission has added a provision, Sec. 23.4(b)(6),
that states that such a product should not be described as ``gold
plate'' or ``gold-filled'' unless it contains a disclosure that the
primary gold coating is covered with a base metal, which is gold
washed. Such a product comports with the guidance in the current and
revised Guides for ``gold washed'' or ``gold flashed'' and, if the
seller wished to do so, the seller could so describe it.135
---------------------------------------------------------------------------
\134\ The Commission rendered an advisory opinion on this issue
in 1966, stating that ``a purchaser of such an article would not get
the type of performance expected from gold filled articles because
points of wear would expose the coating of white nickel at a very
early stage and the ornamental value would be seriously reduced.''
Advisory Opinion, Improper Use of terms such as ``gold filled'' or
``rolled gold plate'', 69 F.T.C. 1234 (1966).
\135\ The Gold Institute stated, that ``Nickel is a recognized
skin irritant,'' and urged that the use of nickel in gold jewelry be
prohibited. Comment 13, p.2. Several other commenters took this
position. However, the fact that nickel is a skin irritant would
require the disclosure of its presence in all jewelry, not just
rolled gold jewelry. This was not proposed in the FRN and there is
not an adequate basis at this time for adding such a provision.
---------------------------------------------------------------------------
[[Page 27190]]
e. Provisions relating to vermeil. Vermeil, a product made of
sterling silver with a coating of gold, is a special form of gold
plate.136 The JVC proposed including provisions for vermeil in the
Guides and the FRN solicited comment on whether a recommended minimum
plating of 120 millionths of an inch of fine gold, or its equivalent,
over sterling, was appropriate.
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\136\ ``Tiffany's Sterling: History and Status,'' National
Jeweler (undated) (attached to Korbelak (22)) (stating that vermeil
is a unique product with a ``silver-gold'' glow, which has been on
the market for a long time). However, no provisions pertaining to
vermeil have ever been included in the Jewelry Guides.
---------------------------------------------------------------------------
Eighteen comments addressed this issue.137 Two comments stated
the proposed standard was not appropriate; one offered no reason and
the other stated that the standard should be up to the
manufacturers.138 Three comments stated that the proposed standard
was thicker than necessary.139 Other commenters offered various
opinions on the proposed standard.140 Most of the other comments
simply said the proposed standard was appropriate but offered no
reasons.
---------------------------------------------------------------------------
\137\ Fasnacht (4); Gold Institute (13); Korbelak (27); G&B
(30); Jabel (47); Handy (62); Newhouse (76); ArtCarved (155); IJA
(192); Tru-Kay (196); Mark (207); Canada (209); Bruce (218); Impex
(219); MJSA (226); Sheaffer (249); Knight (256) and Leach (257).
\138\ Newhouse (76) and Impex (219).
\139\ Korbelak (27) p.4 (stating that ``a floor of 100
millionths of an inch was established by the trade many years
ago''); Tru-Kay (196) p.2 (stating that the proposed standard was
``quite excessive'' and not necessary ``in order to give the
consumer a quality product''); Bruce (218) p.8 (stating that the
proposed standard was ``very heavy'' and noted that ``the nature of
the product and the wear it is subjected to would be a more
appropriate guide for plating thickness''). Bruce (218) suggested
that the proposed standard was appropriate for items such as rings
(which receive a lot of wear) but suggested 40 millionths of an inch
for earrings and pendants and 80 millionths of an inch for bracelets
and neck chains.
\140\ MJSA (226) pp.4-5 (stating that the JVC recommended 120
millionths of an inch simply because it is higher than the 100
millionths of an inch required for heavy gold electroplate); G&B
(30) p.8 (indicating that the point was simply to set some
standard); ArtCarved (155) p.4 (stating that ``if vermeil is the
standard word used for 120 millionths of an inch, this would be
okay''); Canada (209) p.4 (noting that it has a quality mark for
vermeil but has yet to establish a minimum standard for plating).
---------------------------------------------------------------------------
MJSA supported the proposed standard stating that it ``assures an
extremely high level of durability and low porosity.'' However, MJSA
stated that ``it is possible to establish a highly durable coating of
gold over silver at substantially lesser thicknesses,'' and noted that
many manufacturers currently produce such a product.141 In the
Jeweler's Dictionary, modern usage of ``vermeil'' is defined as ``Heavy
gold electroplate over sterling silver * * * or a substantial layer of
karat gold mechanically applied over sterling silver.'' 142 The
current Guides identify the minimum thickness for heavy gold
electroplate as the equivalent to 100/1,000,000ths of an inch of fine
gold.
---------------------------------------------------------------------------
\141\ Comment 226, pp.4-5.
\142\ ``Jewelers' Dictionary'' 253 (3d ed. 1976).
---------------------------------------------------------------------------
The JVC petition indicates that vermeil is susceptible to
discoloration, presumably because the silver might tarnish.143
Because gold itself deters tarnishing, the thicker the coating of gold,
the less likely the underlying silver will tarnish. However, Korbelak
(27) p.4, stated that ``gold coatings are permeated by sulfides in the
average atmosphere up to thicknesses of 10 microns (0.0004 inch).''
Thus, even a gold coating of 120 millionths of an inch (or 0.00012
inch), or about 3 microns would not completely solve this problem.
---------------------------------------------------------------------------
\143\ The JVC recommended the addition of a note that states
that a diffusion barrier (typically of nickel) may be
electrolytically applied, in a thickness of no more than 50/
1,000,000ths of an inch, under the layer of gold.
---------------------------------------------------------------------------
The Commission believes it is appropriate to reference a numerical
thickness in the Guides when consumers have come to expect certain
qualities from products described by the term and products below the
standard would not have such qualities. The comments indicate that
there are items sold as ``vermeil'' that have the qualities consumers
associate with ``vermeil,'' and that have a gold coating of less than
120 millionths of an inch. Furthermore, the definition of vermeil in
the Jeweler's Dictionary is consistent with Korbelak's comment (27)
that many years ago, the trade established a floor of 100 millionths of
an inch for vermeil. Therefore, the Commission has concluded that a
thickness of 100 millionths of an inch, or 2.5 microns, of fine gold is
an appropriate thickness ``floor'' for vermeil.
Because there may be items currently sold as ``vermeil'' that do
not comport with the generally accepted meaning (i.e., gold over
silver), the Commission has added a general provision stating that it
would be unfair or deceptive to describe an article as ``vermeil'' if
it misrepresents the product's true composition. The Commission has
also added a section, 23.5(b), which provides guidance on when a
product may be described as ``vermeil.'' This section states that a
product may be described as ``vermeil,'' ``if it consists of a base of
sterling silver,144 coated or plated on all significant surfaces,
with gold or gold alloy of not less than 10 karat fineness, which is of
substantial thickness and a minimum thickness throughout which is
equivalent to two and one half (2\1/2\) microns (or approximately 100/
1,000,000ths of an inch) of fine gold.'' As with other gold-plated
items (covered in Sec. 23.4 of the revised Guides), ``substantial
thickness'' is defined in a footnote which is similar to the present
footnote 1 in the current Guides.
---------------------------------------------------------------------------
\144\ The comments indicate that the sterling silver base is
part of the common understanding of the term ``vermeil.''
---------------------------------------------------------------------------
With respect to the problem of the tarnishing of the silver base,
the JVC recommended the addition of a note allowing a nickel barrier.
However, the nickel is placed over the silver base, and it is the
silver that distinguishes vermeil from other gold plated items.
Moreover, vermeil is by definition composed completely of precious
metal alloys.145 Although the note indicates that the purpose of
the ``diffusion barrier'' is to prevent premature discoloration, there
was no discussion of the effect a ``diffusion barrier'' over the silver
would have on the unique coloration of vermeil. Moreover, no
explanation was offered for limiting the thickness of the barrier to
50/1,000,000ths of an inch.146 Although there may be a need for
such a barrier, in the absence of adequate information on this issue
(including whether it changes the appearance of the product in a manner
that would be objectionable to consumers), the Commission has
determined not to add this note to the Guides. Instead, the Commission
has added a Note which states that such a product should not be
described as vermeil unless there is a disclosure that the sterling
silver is covered with a base metal, which is gold-plated.
---------------------------------------------------------------------------
\145\ See also Advisory Opinion, Impropriety of description
``14K'' for item not entirely gold, 69 F.T.C. 1212 (1966) (stating
that an earring post with a 14K gold base, electroplated with
copper, nickel and then karat gold, could not be described as 14
karat gold, because it would ``contains substantial electroplatings
of base metals'').
\146\ Franklin Mint (250) p.4 (objecting to the proposal and
stating that their own tarnish testing indicates the need for a
barrier of 150/1,000,000ths of an inch).
---------------------------------------------------------------------------
The JVC petition suggested several other qualifications of the use
of ``vermeil'' that the Commission has not included in the revised
Guides. The petition suggested that the application of the gold must be
either by mechanical bonding or electroplating. However, comments have
indicated that some new methods of application have been developed, and
no reasons were offered
[[Page 27191]]
for excluding those methods. (See infra for a discussion of these
comments.) The JVC also proposed that a vermeil industry product only
be represented by the word `Vermeil' standing alone,147 and
proposed prohibiting use of the words ``gold'' or ``silver'' to modify
``vermeil.'' However, no reasons were offered as to why the terms
``gold vermeil'' or ``silver vermeil'' would be deceptive. The use of
the terms ``gold'' and ``silver'' are covered by other sections of the
revised Guides, and the Commission believes these sections are adequate
to prevent the deceptive use of these terms in connection with vermeil.
---------------------------------------------------------------------------
\147\ Franklin (250), at p.4, objected to the exclusion of
``alternative descriptions and markings . . . such as `sterling
silver electroplated with 24 kt. gold'' and noted that ``no evidence
has been produced that such designations would mislead the public.''
The Commission believes that alternative truthful descriptions of a
vermeil product (e.g., sterling silver electroplated with 24 kt.
gold) are acceptable.
---------------------------------------------------------------------------
Finally, the JVC suggested including a requirement that when
``vermeil'' is used as a quality mark, it must be accompanied by the
name or trademark of the manufacturer or importer according to the
provisions of the National Stamping Act. The National Stamping Act
creates such a requirement for any quality mark indicating the presence
of gold or silver. Thus, the requirements of the Act may apply to a
``vermeil'' quality mark. However, there is currently a Note in the
Guides, following the section dealing with quality marks, referring to
the requirements of the National Stamping Act. Instead of creating a
second note, the Commission has added ``vermeil'' to the list of
quality marks in that Note (and in Sec. 23.9 of the revised Guides).
3. Misrepresentation as to Silver Content: Sec. 23.6
Section 23.6(a) of the current Guides cautions against
misrepresenting the silver content in any industry product. The JVC
proposed adding the abbreviation ``Ster.'' to Sec. 23.6(b) of the
Guides, which states that the use of the terms ``silver,'' ``solid
silver,'' ``Sterling,'' or ``Sterling Silver'' is deceptive unless the
product is 925/1000ths pure silver. Because consumers are likely to
believe this term stands for ``Sterling,'' the Commission has added the
abbreviation ``Ster.'' to this section.
The JVC proposed stating that abbreviating the term ``Sterling''
was not allowed when used to describe hollowware or flatware. No reason
was offered for prohibiting this practice, and the Commission has no
reason to conclude that this practice is inherently unfair or
deceptive.148 The JVC also proposed stating that ``Sterling'' or
``Ster.'' was not allowed to be applied to a silverplated article. This
proposed addition to Sec. 23.6(b) essentially restates Sec. 23.6(d) of
the current Guides, which states that it is unfair to apply the terms
``Sterling'' or ``Coin'' to any silver-plated article or the plating
thereon. In fact, the National Stamping Act states that silverplated
articles shall not ``be stamped, branded, engraved or imprinted with
the word `sterling' or the word `coin,' either alone or in conjunction
with other words or marks.'' 15 U.S.C. 297(a). However, the Commission
has determined that Sec. 23.6(d) of the current Guides may
unnecessarily inhibit the use in advertising of phrases such as
``sterling silver plated'' or ``coin silver plated.'' Thus, the
Commission has deleted Sec. 23.6(d) and has added a Note referring to
the requirements of the National Stamping Act.
---------------------------------------------------------------------------
\148\ Franklin (250) commented at p.5, that the presumption
implicit in allowing sterling to be abbreviated on other products
``is that buyers of the other products named therein for which
`ster.' is an acceptable usage understand its meaning; it defies
logic to assume that the term `ster.' is not recognized and
understood by the hollowware and flatware buying public.''
---------------------------------------------------------------------------
Section 23.6(c) states that the use of ``coin'' is deceptive unless
the product is at least 900/1000ths pure silver. The JVC proposed
adding a prohibition against abbreviating the term ``coin.'' There is
no evidence that ``coin'' is being abbreviated or, if it were, that it
would be misleading to consumers. Accordingly, the Commission has not
adopted this proposal.
a. Silverplate. Section 23.6(e) of the current Guides state that it
is an unfair trade practice to represent an industry product as plated
with silver unless all significant surfaces are coated with silver
``which is of substantial thickness.'' 149 The JVC proposed
continuing the use of the ``substantial thickness'' standard but adding
a footnote stating this means thickness sufficient to assure durable
coverage of the base metal. (The current Guides contain such a footnote
in Sec. 23.5(c)(2) with respect to gold-filled items.) The FRN
solicited comment on whether this addition should be made or whether
the thickness should be defined numerically.
---------------------------------------------------------------------------
\149\ The Watch Band Guides differ from the Jewelry Guides in
that they state that when an industry product is marked as ``silver
plate'' all significant surfaces ``shall have a plating or coating
of silver of a high degree of fineness and such plating or coating
shall be of substantial thickness.'' 16 CFR 19.2(b) (emphasis
added). The Jewelry Guides simply state that such a product should
contain a ``plating or coating of silver which is of substantial
thickness.'' The Jewelry Guides state that ``silver'' means sterling
silver (i.e., unless qualified by the word ``coin''). Thus, the
Jewelry Guides appear to limit the use of ``silver plate'' to
sterling silver plate, whereas the Watch Band Guides appear to allow
coin silver to be used on an item marked ``silver plate.'' Because
no one objected to the current provision in the Jewelry Guides, the
Commission has retained the provision as it appears in the Jewelry
Guides for both jewelry and detachable watch bands.
---------------------------------------------------------------------------
All but one of the 16 pertinent comments indicated that giving a
numerical value to ``substantial thickness'' would be
desirable.150 However, four of these suggested that additional
data were needed.151 Moreover, only a few made specific
recommendations. Sheaffer noted that it was ``not aware of any problems
resulting from the current definition of `substantial thickness''' but
nevertheless proposed a coating five microns (200 millionths of an
inch) thick. Mr. Korbelak suggested 500 millionths of an inch where it
is functionally necessary.152
---------------------------------------------------------------------------
\150\ Gold Institute (13); Korbelak (27); G&B (30); Handy (62);
Newhouse (76); ArtCarved (155); Bales (156); Phillips (204); Canada
(209); Bruce (218); MJSA (226); Sheaffer (249); and Leach (257). The
one dissenter was the JCWA (216), which stated at p.3 that ``there
is insufficient data to determine an `acceptable' thickness of
silver plating, and because related ISO standards have not been
established, it is difficult to determine the durability of specific
levels of silver plating. Therefore, it is not practical to define
`durability' in numerical terms. The existing definition is
appropriate.''
\151\ G&B (30); Handy (62); Canada (209); and MJSA (226).
\152\ Sheaffer (249) p.4; Korbelak (27) p.4.
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The Gold Institute made detailed recommendations, but only for
silver plated flatware and hollowware.153 However, without more
evidence of the need for, and desirability of, these particular
standards, the Commission does not believe it is appropriate to adopt
specific standards for flatware and hollowware. Moreover, the amount of
wear received by jewelry is different from the amount of wear received
by flatware and hollowware. Therefore, the proposed standards for
flatware may not be appropriate for jewelry. Indeed, the amount of wear
received by different kinds of jewelry varies greatly (e.g., earrings
as compared to bracelets) and manufacturers may need flexibility in any
silver plate standard for jewelry.
---------------------------------------------------------------------------
\153\ Comment 13, pp.2-3.
---------------------------------------------------------------------------
Based on the comments, the Commission does not believe that there
is currently a consensus in the industry as to what would constitute an
appropriate minimum numerical thickness for the purpose of identifying
a safe harbor for the term silverplate.154 However, the Commission
has added a note to Sec. 23.6(e) to provide some guidance to the
industry regarding ``substantial thickness'' in connection
[[Page 27192]]
with the use of the term silverplate. This note is similar to footnote
1 in the current Guides, which annotates the use of the phrase
``substantial thickness'' in connection with ``gold plate.''
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\154\ There is no ISO standard for silverplate.
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Finally, the JVC recommended adding a section to the Guides that
would allow items with an inner core of base metal to be referred to as
sterling or coin (instead of silverplate) as long as the item as a
whole contained 925 or 900 parts silver per thousand. A literal reading
of the sections of the current Guides pertaining to sterling and coin
[Secs. 23.6 (b) and (c)] indicates that this practice is not currently
perceived as misleading. However, the actual practice in most of the
industry is only to label an item sterling if it is a uniform mixture
throughout of 92.5% silver and a base metal (or, for coin, 90% silver
and the rest base metal). Without more information as to consumer
beliefs, the Commission is not adopting this specific provision at this
time.
b. Diffusion barrier on sterling silver. The JVC recommended adding
a note to the Guides that states that a diffusion barrier (typically of
nickel) may be electrolytically applied, in a thickness of no more than
50/1,000,000ths of an inch, under a layer of rhodium, to deter
premature tarnishing on sterling silver products.\155\
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\155\ Rhodium, a member of the platinum group metals, is very
hard.
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Although this note refers to ``sterling silver products,'' it
follows the section on silver plate, and it is unclear whether this
note is meant to apply to sterling silver products or silver plated
products or both. In either event, the described product would have no
silver on the surface, and thus, strictly speaking, it would not fall
within the definitions in the Guides of either sterling silver or
silver plate. John Lutley, Executive Director of the Silver Institute
and President of the Gold Institute, stated, ``[s]ome jewelry
manufacturers plate pure silver over a nickel flash on sterling silver
to achieve a mirror finish and reduce the rate of tarnishing.'' \156\
This may be the practice the note was designed to address. However, in
the absence of adequate information on this issue (e.g., how such
products are described to consumers), the Commission has not included
this Note in the revised Guides.
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\156\ Comment 13, p.2.
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c. Quality marks. The JVC proposed adding three subsections dealing
with quality marks. Two subsections [23.6 Section I(g) and I(h) in the
JVC petition] reiterate the general provisions concerning the use of
the terms ``Sterling,'' ``Ster,'' ``Sterling Silver,'' ``Silver,'' or
``Solid Silver'' and ``Coin'' or ``Coin Silver,'' set out in
subsections (a), (b), and (c) of the silver section. Therefore, the
Commission is not restating these provisions in another section.
The third proposed section dealing with quality marks [section 23.6
Section I (i) of the JVC petition] states that no quality marks shall
be used ``other than those herein specified.'' The Franklin Mint
commented that this ``inexplicably prohibits use of such universally
recognized numerical terms as `.925' in conjunction with other
applicable quality marks such as `ster.' or `sterling.' '' \157\ The
Commission does not believe that a marking such as ``.925 ster.'' is
inherently deceptive, and is not including this proposal in the Guides.
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\157\ Comment 250, p.5.
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d. Tolerances and exemptions for testing purposes. Footnote 2 of
the current Guides notes that the tolerances of the National Stamping
Act are applicable to claims made with respect to silver content. The
JVC suggested reorganizing this information, and the Commission
believes that this change will be helpful to industry members who are
using the Guides. Footnote 2 of the current Guides also refers to the
exemptions recognized in an assay for quality (to determine the amount
of fine silver in the item which is assayed), which are taken from
Commercial Standard CS 118-44 [Marking of Jewelry and Novelties of
Silver] and Commercial Standard CS 51-35 [Marking Articles Made of
Silver in Combination with Gold]. The JVC suggested identifying these
exemptions in an additional subsection. Because the exemptions apply to
both silver and gold, and because the lists of exemptions distract from
the main points of the text of the Guides, the Commission has included
this information as an appendix to the Guides. A Note following the
silver section refers to the Appendix.
4. Marking of Articles Made of Silver in Combination With Gold
The current Guides do not contain a separate section addressing how
products which are a combination of silver and gold can be
nondeceptively described. The JVC proposed including in the Guides most
of the text of Voluntary Product Standard PS 68-76, ``Marking of
Articles Made of Silver in Combination with Gold.'' \158\ The proposed
section defines the covered products as sterling silver in combination
with gold.\159\
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\158\ Footnote 2 in the current Guides references former
Commercial Standard CS 51-35 (``Marking of Articles Made of Silver
in Combination with Gold'') but only to note that it sets out
exemptions from an assay in quality. See discussion, infra,
regarding Commercial Standards generally.
\159\ The VPS provides that articles where the gold and silver
are visually indistinguishable (e.g., where the gold covers the
entire article, or where white gold is combined with silver) may be
marked, e.g., ``Sterling and \1/5\ 10 K,'' where the fraction
represents the proportion of the weight of the alloyed gold to the
weight of the entire metal in the article. It also provides that the
karat mark can only be used if the gold alloy is \1/20\ of the
weight of the entire metal in the article. For articles where the
gold and silver are visually distinguishable, the karat mark must
always follow the Sterling mark, e.g., ``Sterling and 10 K,'' and
there is no requirement that the proportion of the weight of the
alloyed gold to the weight of the entire metal in the article be
disclosed. The JVC also proposed that articles so marked must not
contain any metal other than Sterling silver and 10 karat or better
gold.
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The JVC's proposals, at least in the case of products with
distinguishable components, result in markings that the Commission has
already identified as deceptive.\160\ However, claims as to silver
content are covered by the silver section and claims as to gold content
are covered by the gold section. Furthermore, the marking of articles
which are a combination of silver and gold is adequately addressed by
Sec. 23.8(a) of the current Guides. That section provides that it is
unfair to place a quality mark on a product when the mark would deceive
purchasers as to the metallic composition of the product or any part
thereof. Moreover, subsection (a)(2) notes that, when a quality mark
applies to one part of a product but not another part of a similar
appearance, it should be accompanied by an identification of the part
to which it applies. The JVC offered no evidence regarding why
additional guidance on these issues was needed or that any combination
gold and silver products
[[Page 27193]]
were being marketed in a manner that deceived consumers as to their
metallic content.\161\
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\160\ In an advisory opinion, Marking of jewelry produced from a
14 karat gold sheet laminated upon sterling, 89 F.T.C. 651 (1977),
the Commission stated that the mark ``Sterling and 14K'' was
deceptive as applied to an article in which a 14K gold sheet was
laminated on sterling, and the gold constituted at least 5% of the
weight of the article. The Commission noted that the different
metals were visually distinguishable ``but casual inspection cannot
determine the relative thickness of the gold layer and the silver.''
Id. at 651. The Commission stated that the suggested markings
``could suggest to consumers that the amount of gold and silver. . .
are approximately equal or, at least, would suggest more than five
percent 14K gold.'' Id.
In an advisory opinion involving two visually indistinguishable
metals, Marking of 18 karat white gold ring with platinum baguette
prongs, 74 F.T.C. 1686 (1968), the Commission stated that a white
gold ring with platinum baguettes could not be marked ``18K--10%
Plat.'' The Commission reasoned that ``the consumer might conclude
that all of the prongs, including those for the center stone, are of
platinum composition. Under these circumstances, it is not enough to
merely say that the ring contains 10% platinum and 90% gold without
disclosing the true composition of the various parts of the ring.''
Id. The Commission suggested that the ring could be marked ``18K-
baguette prongs Plat.''
\161\ The Franklin Mint (250) stated at p.4, that there is no
evidence that a gold karat mark is misleading on a gold and silver
item when the gold constitutes less than \1/20\ of the total metal
weight. Moreover, it also noted that the JVC did not propose any
such prohibition for vermeil products, ``which are but another form
of gold and silver item. . . .''
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Finally, the JVC's proposal to permit quality marks only for
sterling and gold items is unduly restrictive. For example, an article
made of coin silver combined with gold could not contain a quality mark
under the JVC proposal, nor could an article which contains any metal
other than sterling silver or gold. For all these reasons, the
Commission has not included in the Guides, the proposed provisions
relating to articles made of silver in combination with gold.
5. Platinum: Sec. 23.7
Section 23.7 of the current Guides states that it is an unfair
trade practice to use the words ``platinum,'' ``iridium,''
``palladium,'' ``ruthenium,'' ``rhodium,'' or ``osmium,'' or any
abbreviations thereof, in a way likely to deceive purchasers as to the
true composition of the product. The JVC and a number of commenters
proposed changes to this section. However, the Commission recently
received a request for an advisory opinion from the JVC and Platinum
Guild International for markings of platinum products. This request
indicated that members of the platinum industry are interested in
simplifying current Commission guidance regarding platinum descriptions
and bringing this guidance into closer accord with international
standards. The comments submitted in response to the FRN do not address
some of these issues. Therefore, the Commission has decided that it
would be beneficial to solicit additional comment from the entire
industry on markings and descriptions of platinum products before
making any changes in this section. A request for comment on these
issues will be published in a separate Federal Register notice.
6. Pewter
The current Guides do not pertain to products made from pewter. The
JVC recommended including a section on pewter and the FRN solicited
comment on whether the guides should include a provision, and whether
the standard of any alloy consisting of at least 900 parts per thousand
Grade A Tin is appropriate.
Thirty comments addressed this issue, and most thought pewter
should be included in the Guides and that the proposed standard was
appropriate. Four opposed the change, stating that the Guides should
only address precious metals.162 One comment stated that there was
no apparent need for regulation of pewter but another stated that there
are ``many companies that are abusing the representation of pewter
products.'' 163
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\162\ Nowlin (109); LaPrad (181); Sheaffer (249); and Leach
(258).
\163\ NACSM (219) p.7; Bales (156) p.9.
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It appears that pewter has been increasingly utilized in costume or
fashion jewelry. Nellie Fischer of the American Pewter Guild advised
staff in a telephone interview that over the past five years her
company's sales of pewter jewelry to the trade have increased by 40
percent.164 Pewter jewelry and other pewter products are sold by
at least some of the same entities that sell other products covered by
the current Guides. The Commission has concluded that inclusion of a
provision for pewter may prevent misrepresentations.
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\164\ Christopher R. Mellott, counsel for the Pewter Guild,
compiles voluntary statistical reports from samplings of pewter
manufacturers and, over the period from 1983 to 1990, found a six-
fold increase in the value at wholesale of pewter jewelry sales.
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With respect to the proposed standard, Salisbury Pewter stated that
``a 90% tin requirement is justified by the metallurgical restraints
for strength and hardness.'' 165 The American Pewter Guild, a
trade association, attached a list of historical references to pewter
which indicate that pewter has virtually always had a tin content of at
least 90%.166 Ten pewter producers also supported the proposed
standard.167
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\165\ Comment 86, p.1.
\166\ Comment 89 (also stating that pewter has been defined as
containing 90% tin in the Guild's By-Laws since their adoption in
1976).
\167\ Stieff (25); Empire (44); Woodbury (64); Lance (84); Web
(85); Salisbury (86); Fischer (87); Seagull (111 and 120); Universal
(178); and Heritage (215). Other comments favoring the proposed
standard for pewter are: Fasnacht (4); Estate (23); G&B (30); Jabel
(47); Bales (156); Canada (209); Bruce (218); MJSA (226); and
Preston (229).
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Because pewter has historically contained at least 90% tin,
consumers presumably expect pewter to have the qualities that are
associated with an alloy containing at least 90% tin. Thus, the
Commission has included a section on pewter in the Guides. Section
23.8(a) states that it is unfair and deceptive to describe a product as
``pewter'' if the description misrepresents the product's true
composition. Section 23.8(b) states that a product may be described as
``pewter'' if it contains at least 90% tin, with the remainder composed
of metals appropriate for use in pewter.
7. Additional Guidance Relating to Quality Marks: Sec. 23.8
The JVC proposed several changes in Sec. 23.8 of the current
Guides. The introductory paragraph of this section defines ``quality
mark'' and gives specific examples of words (e.g., ``gold,'' ``karat,''
``silver,'' etc.) that are considered to be quality marks. (As noted
previously, the Commission has added the word ``vermeil'' to this list
of words that constitute quality marks.) 168
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\168\ The Watch Band Guides differ from the Jewelry Guides with
respect to quality marks in that they list the words duragold,
diragold, noblegold, and goldine as quality marks in Sec. 19.2(g).
However, the Jewelry Guides, in a Note following Sec. 23.8 on
quality marks, reach the same practices by stating that quality
marks ``include those in which the words or terms `gold,' `karat,'
`silver,' `platinum,' (or platinum related metals), or their
abbreviations, are included, either separately or as suffixes,
prefixes, or syllables.'' The Commission has added this sentence of
this Note to the introductory paragraph of this section in the
revised Guides (Sec. 23.9). The Commission does not believe it is
necessary to add the words duragold, diragold, noblegold, and
goldine to the examples of quality marks listed in current
Sec. 23.8.
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Part (a) of this section addresses the use of quality marks on
articles that are made from more than one metal. The JVC suggested that
the title be changed from ``Deception as to applicability of marks'' to
``Deception as to application of marks'' and that a definition of
application be added. The definition of application suggested by the
JVC includes bills, invoices, orders, statements, letters, and
advertisements. However, this definition is inappropriate in the
context of part (a) of this section, which is limited to deception in
the use of quality marks, which do not encompass bills, invoices, etc.
The term ``quality mark'' is defined as a mark ``which has been
stamped, embossed, inscribed, or otherwise placed, on any industry
product and which indicates or suggests that such product is composed
throughout of any precious metal or any alloy thereof or has a surface
or surfaces on which there has been plated or deposited any precious
metal or any alloy thereof.'' 169 Section 23.8 contains specific
guidance for marks on the products themselves
[[Page 27194]]
(or attached thereto). Other sections of the Guides apply to claims
made in bills, invoices, orders, statements, letters, and
advertisements. Thus, the Commission has not included the proposed
definition of application in the Guides.
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\169\ This is consistent with the references to such marks in
the National Stamping Act, which applies to articles ``having
stamped, branded, engraved, or printed thereon, or upon any tag,
card, or label attached thereto, or upon any box, package, cover, or
wrapper in which said article is incased or inclosed, any mark or
word indicating or designed or intended to indicate'' the degree of
fineness of the gold or silver in the article. 15 U.S.C. 294. A
quality mark does not have to be placed on a product, but, if it is,
it must be accurate within the tolerances prescribed by the National
Stamping Act. 15 U.S.C. 294-296. The National Stamping Act goes
beyond embossing quality marks on products to things surrounding the
product (e.g., labels, wrappers), but not as far as bills,
advertisements, etc., as the JVC proposes for the Guides.
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Part (b) of this section addresses deception by reason of the
difference in the size of letters or words in quality marks (e.g., GOLD
electroplate). A Note following this section, entitled ``Legibility of
markings,'' recommends that quality marks be of sufficient size to be
legible and be so placed as to be likely to be observed. The JVC has
not suggested any changes to this section, or to the Note following it.
The Commission agrees that the portion of the Note pertaining to
legibility should remain unchanged.170 However, the second
sentence of the Note implies that quality marks should normally be
engraved on products and that tag or labels can only be used when
``such marking cannot be achieved without injury to the appearance of
the product.'' The National Stamping Act indicates that quality marks
can be applied by means of tags or labels, regardless of whether
engraving would damage the product. The Commission has therefore
modified this Note to clarify the fact that if a quality mark is used,
it may be either engraved on the product or placed on a tag or label.
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\170\ There is no requirement that there be a quality mark;
however, it may be deceptive to place an illegible mark on a
product, because consumers might interpret such a mark to mean the
product is of higher quality than it actually is.
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The second Note following this section currently states that it is
the consensus of the members of the industry that quality marks on such
items should be accompanied by identification of the manufacturer,
processor, or distributor. The Commission has changed this Note to
reference the requirements for identification contained in the National
Stamping Act.171
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\171\ The Watch Band Guides differ from the Jewelry Guides in
their treatment of quality marks in two respects (in addition to
that discussed in note , supra). Section 19.2(g)(3) of the Watch
Band Guides, dealing with the marking of watch bands composed of two
metals of similar appearance, is adequately addressed by
Sec. 23.8(a) of the current Jewelry Guides, discussed above. Section
19.2(g)(1) of the Watch Band Guides provides that if a quality mark
is concealed by packaging, it should appear on the outside of the
packaging if the failure to so display it would deceive consumers.
The Jewelry Guides do not require that products contain quality
marks and, thus, do not require that a quality mark be visible in
spite of packaging. The Commission believes it is neither unfair nor
deceptive to fail to include a quality mark; hence, it is neither
unfair nor deceptive to allow packaging to conceal a quality mark.
Thus, the Commission has not included this provision in the revised
Guides.
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8. Exemptions From Assay
Some functional parts of gold alloy, gold-filled, silver and
platinum items may need to be made of other sturdier metals to function
properly, and thus, are exempt from any assay for quality. (An assay is
a test made to determine the quantity of precious metal in a product
compared to the weight of the whole product.) The current Guides
include the exemptions for these parts that are set out in the various
Voluntary Product Standards. Since trade practice for many years has
been to make such parts of base metals, it is unlikely that consumers
would expect them to be made of precious metal; hence, a claim that an
item was silver would not be deceptive because the screws and rivets
were made of base metal.
The current Guides list the exemptions for gold and gold-filled
items in section 23.5(e) and (f) and for silver and for silver in
combination with gold, in footnote 2.172 However, the Commission
believes that detailed listings of the exemptions need not appear in
the body of the Guides and has included the list of exemptions for all
covered metal products in an Appendix.173
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\172\ The Guides contain no exemptions for products which are
never assayed. This includes products made of gold or silver
electroplate. (Such articles are not sold with the representation
that they contain a specific percent by weight of precious metal.)
\173\ The current Guides use the Appendix to list and classify
the Guides. The JVC proposed placing this material first as a Table
of Contents. The Commission believes that the existing list of
section numbers and titles in the table of contents is sufficient
and has omitted this classification from the revised Guides.
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The list includes all exemptions from the current Guides and, based
on the comments, includes some additions.174 Tru-Kay stated that
there is a significant inconsistency in the Guides between the
exemptions recognized in the manufacture of gold-filled jewelry and
those which are exempted in the manufacture of silver jewelry. Tru-Kay
stated that ``industry trade practice over many years has been to apply
the exemptions as listed for gold-filled to both gold-filled and
sterling silver,'' because the same reasons that certain parts are
exempt in gold-filled jewelry are also applicable in silver
jewelry.175 Tru-Kay explained that when the exemptions were first
written, ``many articles that were being produced in gold-filled, were
not at that time being produced in sterling silver.'' 176 Since
this is no longer the case, Tru-Kay urged that ``these exemptions be
standardized in a consistent manner.'' 177 The Commission agrees
with this proposal and has expanded the list of exemptions for silver
items to include all exemptions listed for gold-filled items.178
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\174\ In addition, because the revised Guides cover items other
than jewelry, the exemptions are stated as applying to industry
products, not to jewelry industry products.
The JVC proposed exemptio
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