The Federal Trade Commission (FTC) has recently made some major changes to the FTC Jewelry Guides, lowering its standards about what may be sold as “gold jewelry”. Federal law generally prevents marketers from making unfair and deceptive claims about their products. The FTC guides provide instructions to the jewelry industry about what will and will not be considered “unfair and deceptive” in marketing its products.
We have all heard about the blockbuster change in the most recent version of the guides, which permit synthetic diamonds to be marketed without any disclosure that they are manmade. In the excitement over that shift, industry largely overlooked significant changes to the treatment of precious metals that may prove to be even more important.
Crucially, going forward, marketers will be able to label a piece as “gold jewelry”, even if it contains only a miniscule amount of the precious metal.
A Little History
The Hallmark Act of 1973 requires a manufacturer to inscribe a marking on gold jewelry stating the karat fineness. That’s why if you look at an American-made gold bracelet you should see an inscription reading 10K, 14K, or the like. 24K indicates pure gold, which is rarely used in jewelry due to the softness of unalloyed gold.
Prior version of the FTC guides required that items labeled “gold jewelry” be 10K or 41.66% gold at a minimum, fostering a widespread understanding that gold jewelry is high quality merchandise that maintains its luster even with long-term use. The guides also had complex rules for jewelry to be marketed as “gold-filled”, “gold plated”, or for other designations indicating lesser gold content.
The New Rules and Their Rationale
The most recent FTC jewelry guide provides that the word “gold”, or any abbreviation, can be used to describe jewelry containing any amount of the precious metal, if the piece also contains “an equally conspicuous, accurate karat fineness disclosure”. Thus, jewelry can be marketed as gold if it is under 10K, so long as the lower purity, such as 2K or 6k is noted. The FTC largely kept the complex rules surrounding gold plated or gold-filled designations.
The FTC justified its changes by citing a 2016 Harris Study done by the Jeweler’s Vigilance Committee. The JVC study revealed that most consumers understand that the purity of gold alloy impacts its color, likelihood of tarnishing and corroding, overall durability, and resale value. However, nothing in the FTC’s explanation indicated that consumers are aware of how the karat system works, or what minimum amount of gold is necessary to avoid the tarnishing or corrosion associated with excessive base metals content.
Gold Forever Tarnished?
Does this reverse decades of consumer understanding of the properties of gold jewelry? Pease and Curren predicts that this change will lead to consumers being confused and disappointed as their gold jewelry discolors their skin and fails to hold up in the long term. The lower quality products that will now flood the market could make gold jewelry into yet another disposable fast fashion accessory, as opposed to a treasured heirloom to be passed down from generation to generation.
Even before the changes, Pease and Curren has documented rampant under-karating and outright false hallmarks in our Buyer Beware newsletter, indicating that industry standards need to be strengthened, not relaxed. Now more than ever, those who buy jewelry from the public will need to be cautious about their purchases. As the market fills with dubious material, purchasers of scrap jewelry should demand that their refiner use a true fire assay to ensure a fair return.