Questions also raised about ethics in diamond supply chains

While shopping undercover at some of Canada’s top jewellers, Marketplace journalists came across sales pitches filled with false claims and inconsistent diamond grading reports, all of which could lead consumers to question whether they got what they paid for.

Last year, Canadians who purchased a diamond ring spent on average just over $4,300, according to Edahn Golan Diamond Research & Data Ltd. Marketplace journalists posed as secret shoppers to capture the sales pitch on hidden camera at three of Canada’s most popular value retail jewelry chains: Peoples Jewellers, Ben Moss Jewellers, and Michael Hill, visiting three locations for each retailer in Ontario and Alberta.

Each store sold diamond rings backed by grading reports with specifications for each of the so-called four Cs — cut, colour, clarity and carat. Employees often touted these documents as ironclad, with very rare discrepancies.

“Maybe one in maybe 100 cases … a colour might be off slightly,” said a sales representative at a Michael Hill location.

However, industry experts say that’s not the case, and inconsistencies can be found between reports provided by different grading labs, which can have significant impacts on a diamond’s independent appraisal value.

“Any one of the features can make anywhere from 20 to 30 to 40 per cent difference,” said Steve Knight, a Hamilton, Ont., appraiser who’s been valuating gems for over 20 years.

Marketplace purchased a ring from each of the retailers, each with a grading report indicating the diamond’s quality. The rings were then sent to a different lab, the Gemological Institute of America (GIA), to see how their grades compared to the report provided in store. GIA designed the original grading system for diamonds in the 1950s that other labs model their methodologies on.

According to the reports they were sold with, the diamonds Marketplace purchased were each under a carat and “SI2” or “slightly included” in clarity, meaning they should have no visible internal flaws or “inclusions” without magnification.

After they were re-graded by GIA, the rings were taken to Knight to consider the value difference between the two reports.

Knight did two appraisals for each ring, first considering the grades on the reports sold with the rings and then with the re-grades from GIA. Even though the specs were relatively close, key inconsistencies led to some significant value differences.

Michael Hill’s grades went slightly up in colour and down in cut, but the clarity was consistent so the ring was ultimately appraised with little difference in value — $130 more.

But variations between the grading reports for the Peoples ring meant it dropped $915 in value, or 23 per cent. The Ben Moss ring also dropped by $860, or 19 per cent.

The biggest factor in the drop in value was the difference in clarity grades for both rings. Those rings went from having minor inclusions to having ones that could be visible, which may affect the diamond’s transparency and brilliance.

“When we start to get into the I1 [included] grading area, the price drops substantially…. You might be able to see the inclusions,” said Knight.

The cut grade was not included on the grading report sold with the Ben Moss ring, which also factored into its value drop. In the grade’s absence, Knight appraised the ring as an average or “good” cut, but when the ring was re-graded at GIA, the grade was deemed “fair” — just a step above poor on the five-level scale.

“Cut can make a big difference in price from the very best cut to the very worst cut,” said Knight.

Peoples, Michael Hill and Ben Moss all told Marketplace they stand by their reports, graded by Gemological Science International (GSI) in Peoples’ case, and the International Gemological Institute (IGI) in Michael Hill and Ben Moss’s cases. The labs also stand by their assessments.

Michael Hill says the lab it uses is “recognized” and “used internationally.” Peoples says that expert gemologists are expected to have differing opinions to this small degree.

The vice-president of merchandising for Charm Diamond Centres, which owns Ben Moss, told Marketplace in an interview that reports can be subjective.

“We’re talking about shades of grey, not black and white,” said Tom Hart. “[It’s] very common between different gemologists to have different opinions on the same diamond.”

Marketplace bought all the diamonds at a discount offered by the retailers, and although Knight said the journalists didn’t necessarily overpay for the rings they got based on the new reports, he says the salespeople went too far when they told shoppers the reports are certain.

‘Estimated replacement value’ used as sales tactic, expert says

The four Cs weren’t the only measure of value employees pointed to. Some associates said a diamond ring is a good “investment” that always appreciates over time, but multiple appraisers told Marketplace a “used” diamond ring can resell for half of its retail price.

Many associates showed the secret shoppers a replacement value on the diamonds’ grading reports that was much higher than the sticker price, and offered it as proof that they were getting a great deal.

Knight suspects that’s just a sales tactic, since some of the values are unreasonably high.

“When you’re looking at it and the value looks like it’s too good to be true, it probably is,” said Knight.

The Peoples and Michael Hill rings were sold with documents showing a replacement value for over $1,000 more than journalists paid for them, but within range of the independent appraiser’s valuation. Peoples says its diamond is a specialty cut and therefore harder and more expensive to replace, so the replacement value is higher.

However, the Ben Moss ring’s replacement value was close to $3,000 more — nearly double the cost of the ring.

“We’ve got a good supplier in Canada, so we sell at a very good, [competitive] price,” said a sales rep about another Ben Moss ring. “But it’s worth more — actually it’s worth more.”

When asked why there was such a discrepancy between what rings are being sold for and what they are supposedly worth, salespeople often said this value was “for insurance.” But Anne Marie Thomas of the Insurance Bureau of Canada isn’t buying it.

She said consumers may not end up getting that amount if the ring is lost, and in the meantime, they could be paying extra on their insurance premiums.

“They want you to walk away feeling good, like you got a great deal,” she said. “From an insurance perspective, you want to make sure that you are insuring your item for what it’s worth.”

She suggests getting an independent valuation from an appraiser not linked to the company to be sure the ring is worth what you were sold on.

‘It’s duping consumers,’ says advocate about ethical diamond process

Associates at all three retailers also told Marketplace secret shoppers that they were confident their supply chains were void of ethical concerns.

One Ben Moss employee said there are “definitely no labour issues” or environmental concerns associated with their diamonds, because of the Kimberley Process Certification Scheme, but its narrow definition of “conflict-free” only refers to rough diamonds that fund armed attacks on legitimate governments by rebel groups.

All of the retailers subscribe to the Kimberley Process Certification Scheme, a system set up in 2000 to prevent so-called “blood diamonds” from entering the global market by certifying them as “conflict-free.”

Joanne Lebert of IMPACT, a natural resources NGO, says these days, the “conflict-free” definition only really covers diamonds from the Central African Republic.

“All other human rights violations — sexual violence, child labour, environmental violence and injustice, corruption, fraud, smuggling, money laundering — it doesn’t fall within the definition,” said Lebert.

IMPACT was a founding member of the Kimberley Process Certification Scheme. Lebert says the organization advocated to expand the definition of “conflict-free” for years, but eventually withdrew from the Kimberley Process in 2017.

“It’s duping consumers,” she said. “We didn’t want to lend our name to that white washing anymore.”

Lebert says retailers can’t be sure that their diamonds are ethical if they don’t know where they are sourced. None of the retailers Marketplace spoke with were able to say where their diamonds were from, apart from some small, specialty collections and ones mined in Canada.

“It’s very clear that they don’t have any information,” said Lebert. “No evidence of where those diamonds originate from, much less the conditions under which they were mined.”

Peoples and Michael Hill both told Marketplace that they are part of other organizations that go beyond the Kimberley Process, including the Responsible Jewellery Council (RJC), which sends third-party auditors to inspect members’ supply chains.

But Lebert says while the RJC’s standards are strong, she’s critical of the fact that the full audit reports are not made public. Its website also shows members don’t have to be in compliance with all the standards to maintain their certification.

The RJC told Marketplace in a statement that it supports “continuous improvement” on its members’ supply chains “as opposed to complete compliance.” It also noted that this is consistent with the Organisation for Economic Co-operation and Development (OECD) guidance on supply chain due diligence.

Tom Hart says Ben Moss hasn’t considered joining an organization like RJC, but says the company’s “key suppliers” are members.

“We always tell our associates, ‘If you have a customer who cares about anything to do with labour or environment or anything, direct them to Canadian diamonds,'” said Hart. “I reviewed our training, and then I realized we don’t focus on [limitations of] the Kimberley Process.”

“We did misinform you, and so I apologize if in the past other customers have been misinformed,” he went on. “That certainly would not have been our intent.”

Russia the world’s biggest diamond producer

Russian diamonds are also a concern for Lebert. The Russian Federation is the biggest producer of diamonds by volume in the world, and Alrosa, a company largely owned by the Russian government, mines most of them.

“There’s a likelihood that those diamonds are making their way into our supply chain,” said Lebert.

“We don’t know for sure whether or not the proceeds from those diamonds are essentially financing the war and the conflict in Ukraine. One can surmise,” she said, echoing concerns of several other diamond experts Marketplace spoke with.

Although all three companies said they don’t import diamonds directly from Russia, Lebert fears they could enter their supply chains untraced.

She says India — where an estimated 80 to 95 per cent of the world’s rough diamonds are polished and cut — does not have sanctions against Russian diamonds, so they could get mixed in with diamonds from other areas before they make it to the global market.

Peoples’ parent company Signet told Marketplace in an email that it informed its suppliers not to source raw diamonds from Russia after its army invaded Ukraine last year, and that the company is confident that its vendor agreements are being followed.

Neither of the other retailers shared any specific policies against Russian-sourced diamonds, but said it’s difficult for retailers industry-wide to know where their diamonds originate.

Lebert wants to see the retail diamond industry better align itself with international guidelines for supply chain due diligence, and said Canada should write those guidelines into law as other countries have. Global Affairs Canada told Marketplace there are “currently no plans to write into law” the OECD guidelines.

Until then, consumers may want to ask for documentation about the origin, and have the ring independently appraised. It may also be worth having the ring re-graded if you suspect the specifications are significantly off. Many retailers have a refund policy so if the ring is not what you thought it was, you can take it back.