The diamond industry has been going through many and various changes in the last 40-50 years but more so in the last 10 years. Nothing has changed more than the desire of the market for increased transparency. Depending where we stand in the value chain; mining, polishing, trading, retailing, the transparency level would be different. The most obscure one is in the wholesale market and service providers. I wanted to review three main areas where transparency is still lacking a few things that can be easily improved. These improvements will increase consumer confidence in our industry. These areas cover auction houses such as Sotheby’s and Christie’s among others, Gemological labs such as the prominent GIA and information providers such as Rapaport. Most of them have very close relationship with various large dealers, which then creates an obvious conflict of interest. There has to be an Independent, 3rd party, supervisory position to ensure the boundaries are not broken.
This three part series will cover each of the main Service providers in the industry. We will start with the Auction Houses, Followed by The GIA and will end with Rapaport.
Auction Houses and Transparency
As of the end of 2019, all of the major auction houses have ceased to exist as public entities. Even when they were, we would have expected form them to be even more transparent with the broader market, and they pushed the limit. Now that they are all in private hands, they have even more freedom to behave and be as transparent or as opaque as they wish. What am I talking about?
I have covered many, if not all Jewelry auction of the top 4 auction houses in recent years, and from time to time, it seems that many unsold items, of great importance, just “disappear” from the auction house website, as if it did not exist. When an auction takes place, there is always the risk that an item may not sell, it happens. But what happens next? what happens when the owner of the item wants to see the item in the private market? people do research, and may end up finding out that the item that they are about to buy, has not sold at auction. They see what the estimate was and rightfully assume that the item did not reach the minimum value given by the auction house. They create a value in their heads. Sometimes it is justified but sometimes it does not. It all depends how long has past since the official auction take place, and markets change quite often. Potential buyers have an illusion.
If the seller has an intimate relationship with the auction house, the seller would ask the auction house to remove the item from their website, and so no digital trace is left that the item was ever offered for sale. Only the printed catalogue remains. The only indication that the item was removed would be by exploring the specific auction area on the website and realise that a specific item number is no longer there. If item 399 is a famous piece or an important piece that went unsold, you will see item 398 on the site with its sold price and then you will see item 400 with its sold price (or not), thus item 399 is no longer published.
This does not mean that all items that end up not selling are removed from the site, it just means that a few and selective ones have been removed by the auction house. I think it is completely wrong to do, and should be banned.
A potential seller is made aware ahead of time that the item may end up not selling and is taking that “risk”. Should the item not sell, then it should remain published on the site with the clear words unsold published and all details of the valuation remaining there. Consumers are trusting auction houses to do the right thing.
Another area which is clear to the seller is that the auction house is not guaranteeing the payment, so should a buyer ends up not paying the item, it is clear in the catalogue that the item, not paid, within 30 days, will be returned or put up for sale at a subsequent auction event. In that event, the auction house may also remove the item from their site. I think it should be mandatory that auction houses keep all items, sold or unsold, fully published on their website and in fact, they should also add the last highest bid given before it went unsold.
The moment an auction house publishes to the open public an item, it should remain published; sold or not.
Another area that needs a better position by the auction house would be to publish any previous auction an item was offered at. Most auction houses do this, but I find that at times, especially in jewelry they ignore it and do not mention it, especially if it was previously offered at another auction house. It should be made universally accepted that if an item was previously sold by another auction house year back, that it should be mentioned. It is part of provenance. Provenance should not be limited to the same auction house. In the same manner that auction houses mention previous auctions or ownership for pieces of art, it should be the same for jewelry. otherwise, should it be falling under “unethically sourced”?
Next Article will cover the GIA. Feel free to comment or send in questions.
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