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Winners and Losers in the Lead Ruby Controversy

| Apr 23, 2014 | Macy's Fake Gem Lawsuit

A ruby is a hard and durable stone second only to diamonds in hardness.  When the Burmese source of rubies became unavailable in the early 2000s, many vendors turned to low-grade rubies from Africa, loaded them with lead filled glass to enhance color and make them look like the real thing, and these “rubies” found their way to fine jewelry departments in Macy’s and other stores. Initially, the news was kept quiet but slowly spread as problems mounted.  In December 2007, Jewelry Insurance published an article entitled:

How do you like your rubies — leaded or unleaded?

The Jewelry Insurance newsletter provides monthly insight to specialists in the field including jewelry insurance agents, underwriters, and claims adjusters, the people who have to deal with fraud daily.

These “rubies” were found in Africa primarily and were low-grade but plentiful.  By adding the lead glass, the vendors took a very cheap but plentiful source of low-grade otherwise unusable ruby, made them look like the real thing, got real ruby prices, and purchasers were none the wiser.  Although the cost was negligible, the end result was they passed as real rubies and created windfall profits for the sellers, from vendors to on-line sellers or traditional stores like Macy’s.

As stories spread about the problems with the composite rubies, some people began to question the sources and the process, and found the “rubies” needed special care, were not as durable, and often broke down in simple household tasks, like in lemon juice or dishwater.  According to the article, “Researchers have found that when a filled stone is heated to high temperature, the filler begins “sweating” and after a few moments flows out of the stone.  When a highly filled ruby losses its filler, it can fall to pieces if the filler is destroyed.  Fracture-filling merely masks a low-quality, unattractive and weakened stone.”

Although the Federal Trade Commission section Section 23.22 (Disclosure of Treatments to Gemstones) provides:

It is unfair or deceptive to fail to disclose that a gemstone has been treated if:

(a) The treatment is not permanent.  The seller should disclose that the gemstone has been treated and that the treatment is or may not be permanent;

(b) The treatment creates special care requirements for the gemstone.  The seller should disclose that the gemstone has been treated and has special care requirements.  It is also recommended that the seller disclose the special care requirements to the purchaser;

(c) The treatment has a significant effect on the stone’s value.  The seller should disclose that the gemstone has been treated.

Note to § 23.22:

The disclosures outlined in this section are applicable to sellers at every level of trade, as defined in § 23.0(b) of these Guides, and they may be made at the point of sale prior to sale; except that where a jewelry product can be purchased without personally viewing the product, (e.g., direct mail catalogs, online services, televised shopping programs) disclosure should be made in the solicitation for or description of the product.

§ 23.23 Misuse of the words “ruby,” “sapphire,” “emerald,” “topaz,” “stone,” “birthstone,” “gemstone,” etc.

(a) It is unfair or deceptive to use the unqualified words “ruby,” “sapphire,” “emerald,” “topaz,” or the name of any other precious or semi-precious stone to describe any product that is not in fact a natural stone of the type described.

(b) It is unfair or deceptive to use the word “ruby,” “sapphire,” “emerald,” “topaz,” or the name of any other precious or semi-precious stone, or the word “stone,” “birthstone,” “gemstone,” or similar term to describe a laboratory-grown, laboratory-created, [manufacturer name]-created, synthetic, imitation, or simulated stone, unless such word or name is immediately preceded with equal conspicuousness by the word “laboratory-grown,” “laboratory-created,” “[manufacturer name]-created,” “synthetic,” or by the word “imitation” or “simulated,” so as to disclose clearly the nature of the product and the fact it is not a natural gemstone.

Note to paragraph (b): The use of the word “faux” to describe a laboratory-created or imitation stone is not an adequate disclosure that the stone is not natural.

(c) It is unfair or deceptive to use the word “laboratory-grown,” “laboratory-created,” “[manufacturer name]-created,” or “synthetic” with the name of any natural stone to describe any industry product unless such industry product has essentially the same optical, physical, and chemical properties as the stone named.

§ 23.24 Misuse of the words “real,” “genuine,” “natural,” “precious,” etc.

It is unfair or deceptive to use the word “real,” “genuine,” “natural,” “precious,” “semi-precious,” or similar terms to describe any industry product that is manufactured or produced artificially.

Sellers Ignore FTC Requirements

So many sellers ignored the requirements of the law and sold these lead glass filed rubies as “natural” or “real rubies” when in fact they were low-grade unusable rubies on steroids now known as “composites”. An example is the expose of Macy’s from two television news sources.  Good Morning America did an undercover purchase of rubies at Macy’s and found sales people touting composite stones as real, and getting real ruby prices for them.  KPIX Channel 5 in San Francisco purchased rubies at Macy’s and found the same thing, false rubies sold as real with no disclaimers.

So who wins and loses in this scheme?

Winners: Sellers

For the supplier, fracture filling is a moneymaker because:

They pay far less for a low-grade ruby and after the treatment sell the product for real ruby prices.  Also they expand the supply base by using formerly unusable low-grade rubies resulting in windfall profits for suppliers and ultimate vendors, whether they are established stores like Macy’s or online vendors, or small jewelry shops..

Losers: Consumers

The loser is the consumer who pays real ruby prices for an inferior product that will require special treatment ad is worth far less than they paid for it.  Simply stated it is not a ruby, so if the consumer thought they were buying a ruby it won’t be appraised or insured as a real ruby, is not as durable, and requires special treatment.

AGL, a lab that specializes in reports on colored gems, identifies the stone as “composite ruby.”  This term immediately distinguishes such a highly adulterated stone from ruby that is not fracture-filled.

The Jewelry Insurance newsletter recommends that appraisers, adjusters, and insurance representatives.  Ask the policyholder whether the jewelry has recently been cleaned or the gem reset, or whether it had been exposed to such common household solvents as bleach, ammonia or lemon juice.  Fracture-fill materials often discolor or break down under the stress of heat or chemicals, causing the stone to appear damaged.  In such cases, it’s really the filling that’s been damaged and the insurer is not liable.

Proposed Class Action vs. Macy’s

The Brandi Law Firm is representing people who bought ruby jewelry at Macy’s in California in a proposed class action pending in San Francisco Superior Court before the Hon. John Munter. (San Francisco Superior Court No. CGC 10-495868).