If you sell jewelry on the Internet, watch out: The Federal Trade Commission may be after you.
In December 1998, the commission went undercover, surfing the World Wide Web in search of jewelry auctions and retailers on the Internet. The target of their search: false or misleading advertising. Specifically, the commission was examining the ads for pearl jewelry products, diamond weights, and gemstone treatments.
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Of the 90 retailers they examined on the Web, they found a high percentage of companies that failed to adhere to advertising guidelines the commission has set for the industry.
The com-mission’s jewelry guides can be viewed online at www-.ftc.gov. Officials refused to disclose which companies it inspected.
For example, the Jewelry Guides require that ads for pearl jewelry make it clear whether a pearl is cultured or an imitation, as opposed to natural pearls which are rare. Cultured pearls are produced by injecting mollusks with an irritant that makes the pearl grow; imitation pearls are man-made.
Of the 56 retailer sites that contained ads for pearls, only 29 percent advertised them correctly.
The commission – which has adapted the law against false and deceptive advertising to the jewelry industry – also requires that when decimals are used to measure diamond weights, the weights should be accurate to the last decimal place using normal rounding rules.
Since it is impossible to tell if the companies were rounding the weights properly, the commission assumed they were done correctly.
However, if the company used fractions to show the diamond’s weight, the inspectors checked to see if the proper disclosures had been made. Sixty-two of the 90 retailer sites had ads for diamonds, of which 58 percent “appeared to be advertising the weights correctly,” according to a statement issued by the commission.
Many of the problems companies run into had to do with disclosure, said Robin Spector, a lawyer for the commission’s Bureau of Consumer Protection. For example, the commission’s jewelry advertising guidelines require companies to disclose when gemstones have treatments that are not permanent or when a treatment means that the gemstone will require special care.
This was a particular problem, as only 5 percent of the 64 retailers selling gemstones disclosed their treatments properly.
The problem, Spector said, is that many of the retailers did not make sure that the buyer would have to see these disclosures before he or she makes a purchase. Many of the companies included the disclosures on their site, but did not make them obvious to someone who is looking to buy.
The commission sent e-mails to all of the companies that did not comply, informing them of the regulations. The e-mails were educational rather than threatening, Spector said. If the commission were to charge a company with advertising its products deceptively, the case would go before an administrative law judge, if it is not settled beforehand.
If a company violates a court order to cease and desist from its illegal practices, however, it could be found in contempt and be fined $11,000 per violation. But that has never happened in a jewelry case, Spector said.
This is the first time the commission has conducted a random search of jewelry sellers over the Internet, said Michele Muth, a press officer for the commission. The FTC uses these informal searches to assess compliance with advertising for a number of other industries, however. She urged consumers to be careful when shopping online.
”Do your homework and try to assess it (the product) as much as you can,” Muth said. “A little more caution is called for.”
Larry R. Robins, a lawyer with the Providence firm of Hinckley, Allen & Snyder, said the commission has made it clear that as long as a company is operating in interstate commerce, it is subject to its rules. If it is selling products online, that normally would be considered Interstate commerce.
