Notice of Consultation - Diamonds and "Made in Canada" Representations

The Competition Bureau has become aware that there is some confusion in the Canadian marketplace as to when diamonds may be represented as "Canadian" or "of Canada". The purpose of this Notice of Consultation is to solicit public comments on the Bureau's enforcement approach under the Competition Act (the "Act) when reviewing "Made in Canada" representations used in the promotion and advertising of diamonds.

The Competition Act and the Bureau's enforcement approach

The purpose of the misleading representations and deceptive marketing practices provisions of the Act is to promote fair competition in the marketplace by discouraging deceptive business practices, and by encouraging provision of sufficient information to enable informed buyer choice.

Sections 52 and 74.01 of the Act provide that representations made to the public, by any means whatever (including print or broadcast media, Internet advertising, and oral representations) must not be false or misleading in a material respect. A representation is material if it would influence the purchasing decision of a prospective buyer. In evaluating whether a representation is false or misleading, the Bureau considers how the average purchaser would interpret the representation.

Further, the Act states that the general impression conveyed by a representation, as well as its literal meaning, must be taken into account. Thus, when examining a particular advertisement, the Bureau would consider the general impression conveyed through a combination of words, visual elements, illustrations and overall layout which may alter the plain meaning of a representation.

If the Bureau believes that a representation is materially false or misleading, it will then look to its Conformity Continuum in choosing the appropriate enforcement approach for achieving conformity with the legislation. In prioritizing enforcement activity, the Commissioner of Competition reviews matters in relation to criteria such as economic impact and the Bureau's enforcement policies and priorities.

Guide to "Made in Canada" Labelling and Advertising

The Guide to "Made in Canada" Labelling and Advertising (the "Made in Canada Guide") was adopted in the 1980's to evaluate label declarations and advertising claims which refer to Canada as the country of origin of a product for the purpose of the administration of the Competition Act, the Consumer Packaging and Labelling Act and the Textile Labelling Act. The Made in Canada Guide is not tailored specifically to the jewellery industry and is applied by the Bureau on a case-by-case basis. The guide is used in determining whether a representation, either implicit or explicit, that a product is "Made in Canada" is false or misleading to prospective purchasers of the product.

Implicit declarations of domestic origin of products such as "Shop Canadian", "Proudly Canadian", "Think Canadian", the Canadian flag symbol, the maple leaf symbol, which appear on labels or in advertisements are interpreted by the Bureau as giving the same general impression to the public as explicit statements such as "Made in Canada" and "Product of Canada".

There are currently two requirements to the Bureau's analysis of a "Made in Canada" representation. First, the Bureau determines whether the product "came into being" in Canada. Secondly, the Bureau assesses the amount of Canadian direct labour and/or material that went into the various components of the final product.

For the product to have "come into being" in Canada, the last substantial production operation must have been performed in Canada and result in a new and identifiable final product. In other words, the important and significant stage of manufacturing that transformed the product into its final form has to have occurred in Canada. For the second requirement, it is expected that the product came into being in Canada with a Canadian direct labour and /or material content of at least 51% of the total production cost of the product.

When it is clear that a declaration other than a "Made in Canada" claim would more accurately reflect a product's evolution, then such a statement is recommended, for example, "Assembled in Canada", "Distilled in Canada", "Printed in Canada", "Processed in Canada", and "Sewn in Canada".

Guidelines with Respect to the Sale and Marketing of Diamonds, Coloured Gemstones and Pearls

In 1994, a special committee of Jewellers Vigilance Canada Inc., in cooperation with the Canadian Jewellers Association, the Canadian Gemmological Association, l'Association des gemmologistes professionnels du Québec (now l'Association québécoise de gemmologie), the Canadian Advertising Foundation (now Advertising Standards Canada) and the federal government represented by Industry Canada, developed Guidelines with Respect to the Sale and Marketing of Diamonds, Coloured Gemstones and Pearls (the "Diamond Guidelines"). Those guidelines define a "diamond" at section D1.2 as "A naturally occurring monocrystalline pure carbon mineral in the isometric crystal system which has been polished and fashioned for personal adornment or display and which possesses beauty, rarity, durability and value."

Consultation

At the time the Diamond Guidelines were developed, there were no diamond mines operating in Canada. There are now differing views as to the point at which the diamond becomes a diamond. Contrary to the definition given to a "diamond" under section D1.2 of the Diamond Guidelines some industry representatives believe that a diamond is a diamond from the point it is mined. Accordingly, if it is extracted from a Canadian mine, it comes into being as a diamond, in Canada. It has also been suggested that it is industry practice to refer to the country of origin of a coloured gemstone as the place where it was mined no matter where it is cut. Burmese ruby, Ceylon sapphire, Brazilian emerald, Australian opals and even B.C. jade have been cited as examples of a standard terminology in the jewellery industry.

As it appears that there are inconsistencies between industry practices and the content of the Diamond Guidelines, the Bureau is soliciting public comments related to when a diamond may be represented as "Canadian" or "of Canada". Comments could include consideration of the following questions:

1. When should a diamond be deemed to "come into being"? Why?

2. What do consumers and trade buyers perceive the terms "Canadian diamond" and "Diamond of Canada" or equivalent Canadian typical symbols or words to mean?

3. What are purchasers' expectations when they seek out a "Canadian diamond"? Are they looking for a diamond that is: (i) mined in Canada; (ii) mined, cut and polished in Canada; or (iii) cut and polished in Canada?

4. Is it industry practice to refer to the origin of the diamond, gem or other stone as the place where it was mined? Provide details.

The consultation period will run for 45 days beginning August 9, 2000 and closing September 23, 2000. It should be noted that submissions received from industry stakeholders, consumers and other interested parties will be treated as public information and posted on the Bureau's Web site, except where confidentiality is specifically requested.

The Bureau's enforcement approach pending the results of the consultation process

Pending the results of the consultation process, the Bureau is encouraging suppliers to disclose as much information as possible when promoting, selling or advertising diamonds. Where any representation is made claiming a diamond to be "Canadian" or "of Canada", suppliers should clearly identify which stage(s) of the overall manufacturing process has taken place in Canada.

The Bureau will not consider the representations listed below as false or misleading under the misleading representations and deceptive marketing practices provisions of the Act and will not take enforcement action if they are truthful and can be substantiated.

1. If the diamond is mined, cut and polished in Canada, the diamond may be represented as a "Canadian diamond or a "Diamond of Canada". However, a supplier may wish to provide a more explicit representation, for example, "Canadian-mined, cut and polished diamond" or "Diamond mined, cut and polished in Canada".

2. If the diamond is mined in Canada, initially cut and polished outside Canada, and finally cut and polished in Canada, the diamond may be represented as a "Canadian diamond" or a "Diamond of Canada" providing that the final cutting and polishing process constitutes a "substantial production operation" resulting in a "new and identifiable final product" within the meaning of the Made in Canada Guide. However, a supplier may wish to provide a more explicit representation, for example, "Diamond mined in Canada, partially cut and polished in both (name of country) and Canada".

3. If the diamond is mined in Canada, initially cut and polished in Canada, and finally cut and polished outside Canada, the diamond may be represented as a "Canadian diamond" or a "Diamond of Canada" providing that the initial cutting and polishing process constitutes a "substantial production operation" resulting in a "new and identifiable final product" within the meaning of the Made in Canada Guide. However, a supplier may wish to provide a more explicit representation, for example, "Diamond mined in Canada, partially cut and polished in both Canada and (name of country)".

4. If the diamond is mined in Canada but cut and polished outside Canada, the diamond may be represented as a "Canadian-mined diamond"or a "Diamond mined in Canada", regardless of where it was purchased. However, a supplier may wish to provide a more explicit representation, for example, "Diamond mined in Canada, cut and polished in (name of country)".

5. If the diamond is mined outside Canada but is cut and polished in Canada, the diamond may be represented as a "Diamond mined in (name of country), cut and polished in Canada".

6. If the diamond is mined outside Canada, initially cut and polished outside Canada, and finally cut and polished in Canada, the diamond may be represented as a "Diamond mined in (name of country), partially cut and polished in both (name of country) and Canada".

7. If the diamond is mined outside Canada, initially cut and polished in Canada, and finally cut and polished outside Canada, the diamond may be represented as a "Diamond mined in (name of country), partially cut and polished in both Canada and (name of country)".

The Bureau is also reminding interested parties that proposed marketing plans and/or practices can be submitted for a written opinion under its Program of Advisory Opinions. The current fee for an opinion under the misleading representations and deceptive marketing practices provisions of the Act is $500 plus applicable taxes.

How to contact the Competition Bureau?

Comments may be submitted by regular mail, facsimile or e-mail. To obtain additional information, please call the Competition Bureau's Information Centre or visit our web site.

Information Centre Industry Canada Competition Bureau 50 Victoria Street Hull, Quebec K1A 0C9

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Phone: 819-997-4282 Toll free: 1-800-348-5358 TDD (hearing impaired): 1-800-642-3844 Facsimile: 819-997-0324

E-mail: compbureau@cb-bc.gc.ca