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Dear Pricescope Community,
Last September diamonds with EGL reports were banned from the Rapnet trading network. Yesterday Martin Rapaport released a video called Honest Diamonds, discussing this topic. I created the synopsis below for the jewelers with whom I do educational training.
In the spirit of education and dialogue about over-grading and abuse-potential I'm posting it here as well.
Please note: The notes are often paraphrased. For proper context go to the indicated video time-index.
John
Honest Diamonds Video From Martin Rapaport
https://www.youtube.com/watch?v=xwPv8HjQ4DY
Introduction and Overview [ 00:00 ]
> Diamonds are complicated.
> Consumers need to trust the people selling them diamonds.
> In 1950 the GIA gave us language and standards to use.
> This level playing field is global and empowers buying confidence.
Same Language but Different Standards [ 01:49 ]
> Some laboratories use GIA grading terminology but apply a lower standard.
> The EGL International lab might claim F color, but submitted to GIA it would be 4-5 grades lower.
> Consumers see the report with “F” on it, thinks it’s a deal, but the color has been misrepresented.
> Factually those diamonds are out there and consumers think they’re better than they are.
> This poses a significant threat to the diamond industry.
Communicate Honestly and Fairly [ 3:20 ]
> A written document citing diamond quality must be accurate and not misleading.
> How can consumers buy diamonds if they can’t trust jewelers?
> Honest grading isn’t optional. Honest grading is the essence of our business.
The Rapaport Group’s Position
1. GIA Terminology = GIA Standards [ 04:18 ]
> Anyone using GIA terminology to describe a diamond must also use the GIA standards.
> If not, they are over-grading and misrepresenting the quality of the diamond.
2. Suppliers are Responsible [ 04:39 ]
> If a supplier provides a diamond that’s treated (and says it’s not) he must take it back
> Therefore, why would we allow suppliers to provide diamonds with misrepresented color and clarity?
> Like undisclosed treatments or MMDs, a diamond with over-graded color and clarity should also be taken back.
Addressing Excuses
...“If I Can’t Beat Them, I’ll Confuse Them” [ 05:13 ]
> Sellers who can’t beat others on the price use over-graded reports to confuse the consumer about quality.
> They push color or clarity on the over-graded report in a way that makes their price seem attractive.
> This is unacceptable.
...“There Are No Diamond Grading Standards” [ 06:03 ]
> EGL International claims there is no such thing as a standard.
> GIA standards have been around since the 1950s.
> Don’t tell me there’s no diamond grading standard. It’s a lie.
...“Diamond grading Is subjective” [ 06:30 ]
> Yes, but within a certain tolerance range.
> An F color may go back to GIA and get a G. But there is no way a GIA F will come back K.
> You can line up 100 gemologists and show them K colors and no one will say they are F.
> Abusing this idea of subjectivity is an attempt to confuse consumers so they can overcharge on price by giving lower qualities.
...“It wasn’t me, it was EGL” [07:28 ]
> If you’re a retailer and blame EGL for over-grading you may think you’re protected. But you are not.
> As a retailer you’re responsible to the consumer for the quality you told them it was.
> In court you may be held accountable for triple damages on the quality difference of the stone.
...“I can always give it back to my supplier” [ 08:22 ]
> Not true. The law in the USA says if you’re a jeweler you’re an expert.
> As an expert you are expected to know if the quality is not GIA quality.
...“If I charge a low price it is fair” [ 08:34 ]
> No, because the consumer was incentivized to buy that diamond because you represented it as a good deal.
> Regardless of the deal, he thought he was buying F, or something like F, and you sold him a K.
Those who cannot remember the past are doomed to repeat it. [ 09:12 ]
> Rick Chotin sold Yehuda fracture-filled diamonds, giving a good price but not disclosing the treatment.
> Upon discovery, lines of consumers started returning their diamonds.
> Rick Chotin refunded them with his personal life savings until he went broke, then committed suicide.
> The takeaway is that you must not lie about the quality of a diamond, even if you give a good price.
Looking Deeper
An Un-level Playing Field [ 11:35 ]
> Let’s say you’re selling a GIA F color for $10,000. Across the street is an EGL F color for $5,000.
> The consumer doesn’t understand the nuances of color grading or different lab standards.
> But the consumer DOES understand “$10,000 here $5,000 there” so he buys across the street.
Consequences [ 12:35 ]
> What is the honest guy to do? He sees clients going to his competitor day after day.
> Some retailers may try to educate, but that will take a lot of time and effort.
> Some will go out of business being ethical.
> Others will say “I can’t compete! I too must sell EGL International and over-graded reports.”
Unintended Consequences [ 12:47 ]
> Bad situations are hurting good people in the industry.
> How is an ethical jeweler to compete against a neighbor who sells over-graded diamonds?
> In some instances it’s convincing them that they must become sellers of over-graded diamonds.
> It’s a growing cancer and that causes the un-level playing field to grow.
Ethical Responsibility
Timing Of This Video [ 14:35 ]
> Some people don’t want this video coming out.
> Raising this story near Christmas may cause people to buy less diamonds.
> We have a responsibility to let consumers know not to buy over-graded diamonds, specifically before Christmas.
> The trade is at risk. We may get into a situation where consumers say “Show me the money.”
> If the trade can’t show them the money it will become a bigger and bigger crisis.
Confusion Is Not Acceptable [ 15:13 ]
> Why were all EGL labs banned from Rapnet?
> Because there are 12 EGLs with different standards between them.
> Confusing consumers on color and clarity is bad enough.
> They cannot possibly differentiate between all these EGLs with different standards.
Final Thoughts
Why does Rapaport use SI3 on their price list, as it’s not GIA terminology? [ 16:13 ]
> Because people in the trade do use SI3 as an intermediate grade between SI2 and I1.
> We specify it so that people can have an idea about that intermediate grade.
> Rapnet wants to get to the point where people can buy diamonds without seeing them.
> In that sense adding supplemental information to a GIA report is acceptable (black pique, white feather etc.)
Rapaport Supports Competition [ 17:40 ]
> Some people say Rapaport is only for the GIA.
> We thank the GIA for creating the language and the standard but we support competition.
> Every laboratory in the world that wants to compete should compete.
> Charge lower prices, give better delivery time, whatever. Just don’t miscommunicate or misrepresent or confuse.
> And if a lab chooses to use GIA terminology they must use the GIA standard.
Related Links
JCK Online (September 9, 2014): RapNet Bans EGL Reports From Trading Network
http://www.jckonline.com/2014/09/09/rapnet-bans-egl-reports-from-trading-network?
Pricescope Topic (September 9, 2014): RapNet Bans EGL Reports From Trading Network
https://www.pricescope.com/community/threads/rapnet-bans-egl-reports-from-trading-network.205934/
Diamonds.net (November 10, 2014): Honest Grading announcement and video
http://www.diamonds.net/HonestDiamonds/
Diamonds.net (November 10, 2014): Honest Grading Special Report PDF by Martin Rapaport
http://www.diamonds.net/HonestDiamonds/Resources/Special_Report_Honest_Grading_1.pdf
Pricescope Topic: (November 10, 2014): Rapaport Honest Grading calls to end (EGL Int) overgrading
https://www.pricescope.com/communit...ding-calls-to-end-egl-int-overgrading.207812/
Last September diamonds with EGL reports were banned from the Rapnet trading network. Yesterday Martin Rapaport released a video called Honest Diamonds, discussing this topic. I created the synopsis below for the jewelers with whom I do educational training.
In the spirit of education and dialogue about over-grading and abuse-potential I'm posting it here as well.
Please note: The notes are often paraphrased. For proper context go to the indicated video time-index.
John
Honest Diamonds Video From Martin Rapaport
https://www.youtube.com/watch?v=xwPv8HjQ4DY
Introduction and Overview [ 00:00 ]
> Diamonds are complicated.
> Consumers need to trust the people selling them diamonds.
> In 1950 the GIA gave us language and standards to use.
> This level playing field is global and empowers buying confidence.
Same Language but Different Standards [ 01:49 ]
> Some laboratories use GIA grading terminology but apply a lower standard.
> The EGL International lab might claim F color, but submitted to GIA it would be 4-5 grades lower.
> Consumers see the report with “F” on it, thinks it’s a deal, but the color has been misrepresented.
> Factually those diamonds are out there and consumers think they’re better than they are.
> This poses a significant threat to the diamond industry.
Communicate Honestly and Fairly [ 3:20 ]
> A written document citing diamond quality must be accurate and not misleading.
> How can consumers buy diamonds if they can’t trust jewelers?
> Honest grading isn’t optional. Honest grading is the essence of our business.
The Rapaport Group’s Position
1. GIA Terminology = GIA Standards [ 04:18 ]
> Anyone using GIA terminology to describe a diamond must also use the GIA standards.
> If not, they are over-grading and misrepresenting the quality of the diamond.
2. Suppliers are Responsible [ 04:39 ]
> If a supplier provides a diamond that’s treated (and says it’s not) he must take it back
> Therefore, why would we allow suppliers to provide diamonds with misrepresented color and clarity?
> Like undisclosed treatments or MMDs, a diamond with over-graded color and clarity should also be taken back.
Addressing Excuses
...“If I Can’t Beat Them, I’ll Confuse Them” [ 05:13 ]
> Sellers who can’t beat others on the price use over-graded reports to confuse the consumer about quality.
> They push color or clarity on the over-graded report in a way that makes their price seem attractive.
> This is unacceptable.
...“There Are No Diamond Grading Standards” [ 06:03 ]
> EGL International claims there is no such thing as a standard.
> GIA standards have been around since the 1950s.
> Don’t tell me there’s no diamond grading standard. It’s a lie.
...“Diamond grading Is subjective” [ 06:30 ]
> Yes, but within a certain tolerance range.
> An F color may go back to GIA and get a G. But there is no way a GIA F will come back K.
> You can line up 100 gemologists and show them K colors and no one will say they are F.
> Abusing this idea of subjectivity is an attempt to confuse consumers so they can overcharge on price by giving lower qualities.
...“It wasn’t me, it was EGL” [07:28 ]
> If you’re a retailer and blame EGL for over-grading you may think you’re protected. But you are not.
> As a retailer you’re responsible to the consumer for the quality you told them it was.
> In court you may be held accountable for triple damages on the quality difference of the stone.
...“I can always give it back to my supplier” [ 08:22 ]
> Not true. The law in the USA says if you’re a jeweler you’re an expert.
> As an expert you are expected to know if the quality is not GIA quality.
...“If I charge a low price it is fair” [ 08:34 ]
> No, because the consumer was incentivized to buy that diamond because you represented it as a good deal.
> Regardless of the deal, he thought he was buying F, or something like F, and you sold him a K.
Those who cannot remember the past are doomed to repeat it. [ 09:12 ]
> Rick Chotin sold Yehuda fracture-filled diamonds, giving a good price but not disclosing the treatment.
> Upon discovery, lines of consumers started returning their diamonds.
> Rick Chotin refunded them with his personal life savings until he went broke, then committed suicide.
> The takeaway is that you must not lie about the quality of a diamond, even if you give a good price.
Looking Deeper
An Un-level Playing Field [ 11:35 ]
> Let’s say you’re selling a GIA F color for $10,000. Across the street is an EGL F color for $5,000.
> The consumer doesn’t understand the nuances of color grading or different lab standards.
> But the consumer DOES understand “$10,000 here $5,000 there” so he buys across the street.
Consequences [ 12:35 ]
> What is the honest guy to do? He sees clients going to his competitor day after day.
> Some retailers may try to educate, but that will take a lot of time and effort.
> Some will go out of business being ethical.
> Others will say “I can’t compete! I too must sell EGL International and over-graded reports.”
Unintended Consequences [ 12:47 ]
> Bad situations are hurting good people in the industry.
> How is an ethical jeweler to compete against a neighbor who sells over-graded diamonds?
> In some instances it’s convincing them that they must become sellers of over-graded diamonds.
> It’s a growing cancer and that causes the un-level playing field to grow.
Ethical Responsibility
Timing Of This Video [ 14:35 ]
> Some people don’t want this video coming out.
> Raising this story near Christmas may cause people to buy less diamonds.
> We have a responsibility to let consumers know not to buy over-graded diamonds, specifically before Christmas.
> The trade is at risk. We may get into a situation where consumers say “Show me the money.”
> If the trade can’t show them the money it will become a bigger and bigger crisis.
Confusion Is Not Acceptable [ 15:13 ]
> Why were all EGL labs banned from Rapnet?
> Because there are 12 EGLs with different standards between them.
> Confusing consumers on color and clarity is bad enough.
> They cannot possibly differentiate between all these EGLs with different standards.
Final Thoughts
Why does Rapaport use SI3 on their price list, as it’s not GIA terminology? [ 16:13 ]
> Because people in the trade do use SI3 as an intermediate grade between SI2 and I1.
> We specify it so that people can have an idea about that intermediate grade.
> Rapnet wants to get to the point where people can buy diamonds without seeing them.
> In that sense adding supplemental information to a GIA report is acceptable (black pique, white feather etc.)
Rapaport Supports Competition [ 17:40 ]
> Some people say Rapaport is only for the GIA.
> We thank the GIA for creating the language and the standard but we support competition.
> Every laboratory in the world that wants to compete should compete.
> Charge lower prices, give better delivery time, whatever. Just don’t miscommunicate or misrepresent or confuse.
> And if a lab chooses to use GIA terminology they must use the GIA standard.
Related Links
JCK Online (September 9, 2014): RapNet Bans EGL Reports From Trading Network
http://www.jckonline.com/2014/09/09/rapnet-bans-egl-reports-from-trading-network?
Pricescope Topic (September 9, 2014): RapNet Bans EGL Reports From Trading Network
https://www.pricescope.com/community/threads/rapnet-bans-egl-reports-from-trading-network.205934/
Diamonds.net (November 10, 2014): Honest Grading announcement and video
http://www.diamonds.net/HonestDiamonds/
Diamonds.net (November 10, 2014): Honest Grading Special Report PDF by Martin Rapaport
http://www.diamonds.net/HonestDiamonds/Resources/Special_Report_Honest_Grading_1.pdf
Pricescope Topic: (November 10, 2014): Rapaport Honest Grading calls to end (EGL Int) overgrading
https://www.pricescope.com/communit...ding-calls-to-end-egl-int-overgrading.207812/
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