Dealers Target Thaigem's Tactics
By Marlene A. Prost
CHANTHABURI, THAILAND -- A group of U.S.-based gem dealers have
accused gem e-commerce Thaigem.com of misleading the public and
violating Federal Trade Commission (FTC) regulations.
Taking their concerns to the press and, in some cases, the FTC,
the small but vocal group claims Thaigem has been wrongly
identifying valuable gems, using the term =93flawless=94 to describe
colored stones where it's not appropriate, enhancing the
brightness of photographic images, and failing to disclose
treatments for individual gems.
Thaigem, which is owned by Thaigem Global Marketing Ltd. in
Chanthaburi, Thailand, has admitted to two identification
errors, which it blames on the huge volume of business. It also
announced in July that it would eliminate the term =93flawless=94
from its gem descriptions. But Thaigem also dismisses its
critics as small-volume dealers threatened by the competition.
The complaints came to a head last year when Thaigem posted a
batch of what it termed =93flawless=94 Paraiba tourmaline at
surprisingly low prices -- for instance, $50 for just under a
The posting stunned David Sherman, owner of Treasures of the
Earth in Los Gatos, California, because his mine is one of the
major producers of this rare, brightly-colored tourmaline. He
bought $72,000 worth of the gems, only to discover after
attempting to heat them that they were not from the original
=93It was an honest mistake,=94 Thaigem CEO Don Kogen told Colored
Stone. =93We lost a lot of money on [the Paraiba]. We didn't care,
we just cleaned up that mess.=94
Thaigem gave Sherman a refund, and changed its product
descriptions to read =93Paraiba color=94 tourmaline.
In a second, unrelated case, Thaigem also conceded that they
mixed up a batch of green tourmaline and chrome tourmaline. Mark
Herschede of Turmali & Herschede Inc. in Sanibel, Florida,
discovered the mixup when he paid $59 for a 4.85 carat green
tourmaline advertised as a chrome tourmaline, which would be
much more valuable. The appraised value of the stone on the
accompanying certificate by the Chanthaburi Gemological Research
Institute was inflated to $825.86, he said.
When Hershede confronted Thaigem, again, they conceded the
error, offered to refund the money, and changed the product
descriptions to =93chrome-color=94 tourmaline.
Herschede, too, isn't satisfied. =93What concerns me is what
they're doing is just not right. You don't go around defrauding,
or at least misleading, the public. When you issue a
certificate, you have to be right. I don't buy that defense.=94
But the major complaint critics had was that Thaigem routinely
described colored stones as =93flawless=94 in its online catalog.
=93Colored stones aren't supposed to be flawless. . . . The FTC
says you can't call colored stones flawless [unless the gem
actually is flawless],=94 said Paul Dixon of PGR-Gem.com in
Harrisonburg, Virginia. He cites a recent case where he bought a
small lot of 20 rubies totaling 3.5 carats that were described
as flawless on the site, and turned out to have visible
Dixon, Herschede, Sherman, and others believe that these were
not simply isolated cases. They see a pattern of
misrepresentation which, intentionally or not, results in
misleading the members of the public who form about 60 percent
of Thaigem's customer base.
Frustrated by the barrage of criticism, Thaigem executives on
July 7 and 16 issued a lengthy press release addressing the most
persistent complaints. One major change is that the company will
no longer use the word =93flawless.=94 Although Thaigem points out
that =93flawless=94 is a common trade term, and is even used by
competing sites, =93we decided to take the high ground,=94 said
Thaigem has developed an alternate system for describing clarity
where the highest rating is =93clean=94 -- defined as free from
inclusions -- and the lowest is =93translucent,=94 meaning that the
light is scattered as it passes through the gem.
Regarding treatments, Thaigem said it has always told customers
in its =93terms and conditions=94 to assume that any
internationally-traded gem has been treated. For on
particular treatments, customers are directed to either e-mail
the company or to access the =93Gemstone Discovery=94 section of the
Web site, which reviews treatments in the general description of
each gemstone. However, as of press time, customers were
required to click through several layers of links to view this
and there was no indication of how to access it
from the lists of gems for sale.
Thaigem insists that it is not obligated to disclose treatments
on individual stones in part because a =93treatment's effect on a
stone's value is subjective=94 -- referring to an FTC clause which
states that enhancements need not be disclosed if they have no
significant effect on a gem's value.
Finally, Thaigem fired back at its most vocal individual
critics. =93Competitors including Mr. Mark Sarosi
(Africagems.com), Mr. Mike Dixon (PGR-Gem.com), and Mr. Mark
Herschede (Gemmark.com) claim their motivation in attacking
Thaigem.com is to protect uneducated buyers,=94 stated the July 7
press release. =93Such claims . . . are not only a direct slur on
our professionalism but are also potentially insulting to the 40
percent of our customers who are undoubtedly well-informed trade
members. . . . In reality, the only conceivable motivation these
sellers have in attacking our company is their own inability to
compete on a global scale.=94
In the relatively new field of online trading, the ongoing
dispute has forced the industry to ask: Who is in charge of
trading in cyberspace? Who sets standards for Internet
promotion? And can dealers rely on the FTC and trade
associations to enforce standards for international companies
selling on the World Wide Web?
To answer these questions, some 30 gem dealers, including
Thaigem, have joined a task force launched by Richard Orbach of
CherryPicked.com in New York to agree on guidelines for online
=93The goal here is to create an association or agency whose
purpose is implementation of online standards for colored stones
by establishing an enforceable standard,=94 said Orbach. If
successful, it will represent a huge step forward in a medium
that is still new -- and very much open to controversy.