The Federal Trade Commission announced today that it sent letters to eight jewelry marketers, warning them that some of their online diamond advertising may be deceptive. The FTC did not disclose the names of the companies that were contacted.
Following up on the revisions to the FTC's Jewelry Guides published last year, the FTC expressed concerns that the companies' online and social media advertising may mislead consumers into thinking that the advertised diamonds came from a mine, when they were actually simulated or lab-created. The FTC warned the marketers not to use the name of any precious stone, including diamonds, to describe a simulated or lab-created stone, unless the name is immediately preceded by a clear and conspicuous disclosure that the product is not a mined stone.
The FTC's warning letters also provide important guidance to marketers about some other issues as well.
In several of its warning letters, the FTC cautioned marketers against using general environmental benefit claims such as "eco-friendly," "eco-conscious," and "sustainable." The FTC said that it is "highly unlikely" that the companies can substantiate all reasonable interpretations of these claims. The FTC wrote, "marketers must have a reasonable basis for any environmental benefit claims they make for their products, and qualify any such claims adequately to avoid deception."
The FTC also expressed concerns that hashtag disclosures used by the companies weren't effective. In one letter, for example, the FTC said that the hashtag "#labgrowndiamonds" didn't sufficiently communicate to consumers that the company's diamonds were grown in a lab.
There are a lot of important take-aways here.
First, in many product categories, we're seeing companies create a new formulation of a familiar product, while still wanting to use the original name -- such as "meat" products that aren't made from animals. The FTC's message here is that if you're going to call your product by a familiar name, but it may confuse consumers about what the product really is, you'd better modify the product name to make communication clear. Here, the FTC told jewelry marketers that it wasn't enough to include a disclosure; the FTC said that the name of the product itself should be modified.
Second, the FTC hasn't taken a lot of action against marketers making unqualified general environmental benefit claims. The fact that the FTC is calling the companies out for claims such as "eco-friendly" and "sustaintable" suggests that the FTC is looking more closely at these issues and more cases may be on the horizon.
Finally, today's action suggests that the FTC may have concerns about the effectiveness of hashtag disclosures. With hashtag disclosures being so widely used by marketers to communicate important information in social media, it's important to take a close look at what you're using to make sure that the overall communication is not misleading.
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