JVC: Be careful about the grading reports you use

The JVC notes that, “Obviously, the rule is completely and thoroughly undercut if a lab discloses a particular grading system, but uses the grades in a manner that is out of line with industry norms for the grading system.”

--It is unfair and deceptive to misrepresent the grade of a diamond. The subjective element to grading means that there is tolerance in the industry for a diamond to be off by one letter grade; one lab, for example, might say that a diamond is an E color while another would evaluate the same stone and give it an F. The JVC said if a diamond grading case goes to court, the court likely would rely on these industry norms. 

Labs that routinely produce reports that over-grade diamonds, “are likely engaging in a pattern and practice of deception,” the JVC said. This exposes them--and the sellers who use their reports--to potential government enforcement, class-action lawsuits brought by consumers (though they are not class actions, consumers already have brought grading report lawsuits in Tennessee) or Lanham Act (Trademark Act) lawsuits brought by competitors. 

And, “It exposes the entire buying public to a crisis in confidence,” the JVC said.  

Preventing deception
The JVC notes that there are circumstances surrounding diamond grades in which “clear and conspicuous” disclosure will prevent deception. “If a lab report uses a grading method that deviates in some respect from the industry norm, and if the method often results in different grades, this should be disclosed on the report so that the reasonable buyer is able to make an informed purchase.” 

The example the JVC cites is the face-down (table-down) method of color grading. This is how the Gemological Institute of America grades its diamonds, and the JVC said it is accepted as the industry norm. 

If a lab grades face up (table up), and this frequently results in different color grades than the industry norm, this must be “clearly, understandably and conspicuously disclosed,” the JVC said. “The disclosure should include a description of the practice used (e.g., face-up analysis) as well as the fact that the practice frequently results in different color grades than standard methods.”

The EGL labs outside the United States color grade their diamonds face up. In an interview following the announcement that the EGL International brand would be no more, EGL’s new global manager Menahem Sevdermish acknowledged as much. “Yes, it’s not GIA, it’s different,” he said. 

Yet Sevdermish said the network of labs, which used the 0,1,2,3 system of color grading at one point, would continue color grading diamonds using the GIA’s D, E, F terminology, an action with which some disagree. 

Martin Rapaport, who quit listing all diamonds with EGL grading reports on his diamond trading network in October in protest of over-grading, told National Jeweler Thursday that he won’t reverse his decision on not listing EGL-graded diamonds as long as EGL continues to color grade its diamonds face up.

He said any labs using GIA terminology need to use the GIA grading system; those not using the same system shouldn’t use the GIA’s terms for color and clarity, a point made in an earlier article by National Jeweler columnist and retailer Jim Alperin. 

“It’s the confusion that’s so problematic here and confusion is the kissing cousin of misrepresentation,” Rapaport said. 

Editor's note: This article was corrected to reflect the fact that there haven't been any class-action lawsuits regarding diamond grading reports filed in Tennessee. All the suits there have been filed by individuals.