Dealers Target Thaigem’s Tactics

By Marlene A. Prost

Thaigem's Gem Center in Chanthaburi, Thailand. Photo by Mick Elmore.

CHANTHABURI, THAILAND -- A group of U.S.-based gem dealers have accused gem e-commerce giant 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 “flawless” 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 “flawless” 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 “flawless” Paraiba tourmaline at surprisingly low prices -- for instance, $50 for just under a carat.

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 Paraiba mine.

“It was an honest mistake,” Thaigem CEO Don Kogen told Colored Stone. “We lost a lot of money on [the Paraiba]. We didn't care, we just cleaned up that mess.” Thaigem gave Sherman a refund, and changed its product descriptions to read "Paraiba color" tourmaline.

Related Links

Sites Mentioned • Thaigem.com • Federal Trade Commission • PGR-Gem.com • Africagems.com • Gemmark.com • CherryPicked.com

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 "chrome-color" tourmaline.

Herschede, too, isn’t satisfied. “What 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.”

But the major complaint critics had was that Thaigem routinely described colored stones as “flawless” in its online catalog.

“Colored stones aren’t supposed to be flawless. . . . The FTC says you can’t call colored stones flawless [unless the gem actually is flawless],” 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 inclusions.

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 “flawless.” Although Thaigem points out that "flawless" is a common trade term, and is even used by competing sites, "we decided to take the high ground," said Thaigem Chief Operations Officer Gavin Linsell.

Thaigem has developed an alternate system for describing clarity where the highest rating is “clean” -- defined as free from inclusions -- and the lowest is “translucent,” meaning that the light is scattered as it passes through the gem.

Regarding treatments, Thaigem said it has always told customers in its “terms and conditions” to assume that any internationally-traded gem has been treated. For information on particular treatments, customers are directed to either e-mail the company or to access the “Gemstone Discovery” 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 information, 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 “treatment’s effect on a stone’s value is subjective” -- 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. “Competitors 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,” stated the July 7 press release. “Such 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.”

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 trading.

“The goal here is to create an association or agency whose purpose is implementation of online standards for colored stones by establishing an enforceable standard,” said Orbach. If successful, it will represent a huge step forward in a medium that is still new -- and very much open to controversy.

For more extensive coverage on this story, see the September/October 2001 issue of Colored Stone.