The Gemstone Forecaster has been bullish on unheated Mogok Burma ruby and sapphire for years. We monitor this market closely because we find these stones to be the number one colored stone collectible. These rare gems are considered the creme de la creme in the collector, high end jewelry, and auction markets.
The amount of goods entering the US market has declined rapidly in the last few months. The Burmese government has halted the flow of smuggled goods between Burma and Thailand by positioning the Army along the border. This is drying up goods in Bangkok and driving prices upwards. The Burmese government has also closed the Mogok area to all foreigners.
We are not sure what this means, but many suspect it is a matter of time before Mogok is shut down entirely. At least the Burmese miners, cutters and dealers fear this might happen. The worst thing for business is uncertainty. It is difficult to analyze the actions of a Third World government more known for radically altering their policies than possessing a strong foundation in basic economic theory. How are the Burmese miners, cutters and dealers reacting to this new situation? They are hoarding their goods right now. Think about it. If you had lived under the repressive rule of the Burmese government all your life and you saw activity that told you there may be future problems, would you rather have your assets tied up in the Burmese kyat or would you want your money in Burma ruby and sapphire?
Prices are extremely high in Burma. We know of a New York dealer that traveled to Rangoon to buy sapphire. Of course, it is logical to believe you can buy cheaper closer to the source. What happened? He came home empty-handed. The goods he was bidding on were sold at a higher price to another Burmese dealer.
Another factor may be the return of the Far East market. The US and European markets have been consuming and collecting the lion's share of unheated Burma ruby and sapphire material without competing with the Asians for the past few years. With the Asian stock markets up over 40% in 1999, they may be re-emerging as prime buyers of these goods. The old economic theory holds true here; if the supply is down and the demand increases, prices must increase. According to Gemkey, high end Burma rubies of 2 carats and above are in hot demand, very scarce, and prices are up by 20 to 25 percent. According to The Guide, the best selling stone on the market today is natural, untreated, blue sapphire. Extra fine, one carat Burma sapphires are selling for $3300 per carat wholesale and are projected to sell for $3600 per carat in 2000.
What should a collector do? If you have a stash of unheated Mogok Burma sapphire or ruby, it appears the market is coming your way. Our buy and hold recommendation remains in force.
There is news that there may be some new material coming from Mong Hsu, Burma. (Yes, the source with the goods that are heated and fracture-filled.) These new goods come in all colors and qualities and are not heated. If Mogok is closed down, this may offer an alternative at prices about 1/2 of the Mogok material. Stay tuned.
Christie's Hong Kong
Christie's Hong Kong sold almost US$50 million in three days, or about 80 percent of the lots. This is the the world's largest auction this year. Last year, Christie's sale in Hong Kong grossed US$22 million. The 1997 sale in Hong Kong sold US$18 million. Auction sales of jewelry had fallen off 15 to 20 percent since the peak of 1995-1996. The recent percentage increase from year to year indicates the Far Eastern market is back. Until recently, Far East collectors had been sellers of their gemstones, keeping downward pressure on the gemstone markets. This year, about 90% of the most expensive goods were bought by private Asian collectors, or 75 % of the entire sale. They outbid private collectors and dealers from Europe and America.
Some records were also broken at the November sale. A jade bangle sold for about US$2.5 million, a record for the size and quality of jade. A 77.1 carat jade cabochon ring was sold for US$2.4 million. Far Eastern collectors specialize in jade, rubies, sapphires, emeralds, and colored diamonds. Even though small colored diamonds were weak, top quality jade, natural pearls and estate pieces were strong. The region's wealthiest collectors are in a significantly improved financial condition than years past.
Christie's New York
Christie's sold $24 million, or 74% of the lots in the October auction. This is an increase from $16.9 million in April. The Rockefeller Dodge diamond, a pear, 26.61, E-VS2 sold for $1,102,500 to an American private. It originally belonged to art patron Ethel Geraldine Rockefeller Dodge, and was set in a platinum mounting. A pear, 25.86, D-IF diamond set in a Harry Winston mounting sold to a Japanese private for $1,432,500. A pear, 5.12, fancy deep yellowish green, SI diamond was sold to a European dealer for over $1 million. A square, 6.20, vivid yellow, VVS2 went for about $43,000 per carat and a cushion, 3.44, vivid yellow, IF sold for $23,000 per carat. A cushion, 4.60 Kashmir sold for $20,870 per carat and a cushion, 19.07, pinkish Burma ruby for $22,050 per carat.
Christie's Marilyn Monroe Auction
A platinum "eternity band" ring with 34 baguette-cut diamonds, given to Marilyn Monroe by ex-husband Joe DiMaggio after their 1954 wedding, sold for $772,500.
Christie's sold $40.7 million in Geneva, or 30% more than its sale in 1998. A pear, 7.96, fancy vivid blue, VS1 diamond pendant sold for $3.2 million, or over $400,000 per carat to a U.S. dealer. The blue diamond was part of a private collection. An intense yellow diamond ring weighing 87.20 went for $1.8 million to the U.S. trade. A pear, 5.80, intense blue, IF diamond sold for $194,616 per carat and a round, 4.77, deep blue, VS2 sold for $259,226 per carat. A 2.01, rectangular, green diamond sold for $225,090 per carat. A round, 8.62, vivid yellow, VS1 diamond sold for $84,491 per carat. A .49, pear, brownish red, SI2 diamond sold for $58,861 per carat. A brooch with a total of 83.84 carats of Burma sapphire sold for $1.45 million, or over $17,000 per carat to a European private. An oval, 4.96, Burma ruby sold for $19,494 per carat. An 8.64, cabachon, Kashmir sold for $12,872 per carat. A strand of 41 rare and natural graduated pearls, owned by Woolworth heiress Barbara Hutton, sold for $1,476,345 to a private European buyer.
Sotheby's New York
Sotheby's sold $16.9 million, or less than 60% of the total lots. In April, Sotheby's sold $12.8 million. The Star of Sierra Leone, an emerald cut diamond weighing 30.15, D-VVS1, sold for $1,872,500 to an American private. This diamond was taken from the 968 carat rough found in that West African nation 27 years ago. The rough was auctioned by De Beers on behalf of the Sierra Leone government and Harry Winston purchased it. The yield was a disappointing 238.48 carats among 17 gems, ranging from 53.96 carats to 1.85 carats. This was because of Winston's desire to only cut flawless stones. This diamond is the third largest to come from that rough. In 1988, Sotheby's sold the larger 32.52 Star of Sierra Leone #2 for $3.52 million. Sotheby's also sold a round, .90, VS2 clarity, vivid green of natural color for $663,000 to an American private. The per carat price was over $730,000. This per carat price is second to the .95 Hancock red that sold for $926,315 per carat on April 28, 1987. As most Gemstone Forecaster subscribers are aware, green diamonds graded natural green are extremely rare in the market. The GIA has an extremely difficult time determining whether the color, caused by irradiation, was caused by nature or a man-made process. An emerald cut, 13.75, vivid yellow, VVS1 sold for almost $71,000 per carat and a round, 14.87, intense yellow, VVS2 for around $21,000 per carat. A 7.00, emerald cut, Colombian emerald fetched $19,000 per carat and a cushion, 12.54, Burma sapphire over $11,000 per carat.
Sotheby's sold $22.4 million, or 60% of the total lots. A 55.11, emerald-cut, D-flawless diamond sold to an American gem collector from Northern California for $4 million. This was the third largest emerald cut, "D" color diamond ever sold at auction. Sotheby's also sold an oval, 15.07, fancy purplish-pink, IF diamond for $2.97 million to a European gem dealer. The stone is the fourth largest pink diamond in the world. A diamond necklace (pear, 20.02, D-Flawless) sold for $923,590, and a 7.97, cushion, Burma sapphire sold for $20,413 per carat.
By analyzing the recent international auction markets, it is obvious collectors from all the major regions of the world were strong buyers. This includes the Middle East and Far East, collectors who recently had been absent. The Far Eastern collectors are back in a big way in the gemstone and jewelry markets because their economies have turned around. Rising oil prices are benefiting the wealthy collectors in the Middle East. The prime lots in Geneva and New York were sold primarily to Americans. This is the result of a booming US economy and the stock market. Also, American collectors will search the world to add to their portfolios. Europeans continue to be major players.
Colored diamond prices are still soft because the Asian market is still not aggressively buying small colored diamonds. Asian buyers were one of the main collectors of colored diamonds in recent years and we expect them back into this market soon. Top colored stone buyers were very selective. Most emeralds failed to sell unless they were part of significant estate jewelry pieces. However, Kashmir sapphires did extremely well as did Burma rubies and sapphires with "no heat" certs.
ABC's World NewsTonight, August, 1999
"While diamonds are perceived as more special than other gems, they are no more rare or precious. In fact, one carat rubies, sapphires, and emeralds are more rare than one carat diamonds."
Betsy Stark, correspondent
Reuters, November, 1999
"Asia's super-rich are scooping up precious gems again, showing renewed consumer confidence in what was an economically shattered region just two years ago."
Francois Curiel, Christie's International
Triumph International (Japan)
A German lingerie maker unveiled a 24-carat, diamond-studded "Millennium Bra" in Tokyo. The bra is made from gold thread, hand woven into 15th-century-style "bobbin lace", and decorated with a 15 carat diamond in the center. It weighs 15 ounces, or about eight times as heavy as a regular bra. The one-of-a-kind undergarment is $1.9 million.
Augustus was a collector of gemstones, jewelry, paintings, and art. He constructed the Green Vaults at the Historical Museum to display his treasures. During World War II, the Dresden Green, along with the rest of the collection of the Green Vaults, was moved to safety out of Dresden. However, this did not deter the Russians, who took possession of the collection during the war, then returned it in 1958. The Dresden Green was publicly redisplayed at a major exhibition in 1959.
The GIA examined the stone in 1988. The Dresden Green diamond was proved to be not only of extraordinary quality, but also a rare type IIa. The clarity grade determined by GIA was VS1 and the gem has the potential of being internally flawless. Unbelievably, the GIA graded the symmetry good and the polish very good. This is amazing for a diamond cut prior to 1741. Also, the Dresden Green has a natural green body color. This is extremely rare. Diamonds with green skins or scattered green patches are more common. You can still visit fancy green diamond at the Green Vaults in Germany.
1999 Winner Gemkey Website Awards
Colored Stones Information
Robert Genis' site is one of the top-ranking information resources for colored stones. The site features set reference sections and provides quarterly mining and marketing reports in the online "Gemstone Forecaster Newsletter".
Highlight: A unique feature is the "Digital Photography Email Service" - submit a request for the gem image you'd like and a JPEG will be sent to your email account.
Professional Jeweler Site of the Week
November 1, 1999
Colored gemstone collectors, retailers and dealers can benefit from the information and services offered on this site, which is updated occasionally with exceptional gemstones for sale and news about gem finds and trends.
Robert Genis, president of National Gemstone, writes a quarterly Web newsletter called The Gemstone Forecaster, which includes market updates on producing countries, information on new finds, news for collectors and reports from gem shows. Current and back issues of the illustrated newsletter can be found at the Web site, along with an invitation to join the e-mail list to be notified when a new issue of the newsletter appears.
The site includes recent and historical price charts for diamonds, Burma rubies and sapphires, and Colombian emeralds, with the disclaimer that they're to be used as general indicators only. The section "How to Collect Gems for Fun and Profit" provides guidelines for discovering collection-worthy stones - top prices paid, optimum colors, supply sources and lore.
National Gemstone specializes in top-quality colored gemstones and offers some for sale on-line. The site pictures several special stones with detailed descriptions of their cuts and the way they reflect light; the company will also send digital images of gemstones by request to interested buyers.
by Stacey King
A West Palm Beach, Florida jeweler will face trial on fraud and money laundering charges. Jack Hasson is accused of bilking more than $80 million from a prominent Florida businessman, plus golfers Jack Nicklaus and Greg Norman. Hasson's lawyer recently pled guilty to charges of helping Hasson launder the millions of dollars.
In 1998, Aben Johnson, the retired founder of a Detroit TV station, filed suit against Hasson in a Florida circuit court claiming the jeweler had cheated him out of more than $80 million. Johnson claimed Hasson sold him purportedly famous-named diamonds that were actually cubic zirconia, blue topaz, citrine or other inexpensive gems.
Johnson began buying jewelry from Hasson in 1988. Some pieces cost as much as $300,000. In 1997, Johnson sold his TV station for $175 million and began buying jewels and gemstones with a vengeance. He spent $40 million in six months. Then, in May, 1997, Johnson spent $17 million for a collection of colored diamonds - reds, greens, blues and yellows - which had supposedly belonged to "Wal-Mart Heiress, Sylvia Walton". It turned out the blue diamonds were low grade sapphires or blue topazes; the red diamonds were synthetic rubies; the green diamonds were tourmalines and the yellow diamonds were citrines or colored CZ. Wal Mart founder Sam Walton has no daughter named Sylvia.
Here are more highlights:
The FBI arrested Hasson in April, 1999 and he pleaded not guilty.
Asian Gangs in Canada
The Canadian Broadcasting Corporation (CBC) said Asian gangs are using Edmonton, Alberta to infiltrate the mining work force and become drug suppliers to addicted workers. The gangs plan to get addicted workers to pay for their drug supplies by stealing diamonds from the mines. Canada is expected to produce about 20 percent of the world's diamonds by the year 2002. Police estimate that diamond mine workers in other countries steal about 5% of the gems from mines in which they are employed. The Royal Canadian Mounted Police set up a small unit in Yellowknife, the capital of the Northwest Territories, to specialize in investigating diamond thefts and keep track of the moves of the Asian gangs in the area. Organized crime gangs based in Asia have long-established bases in Vancouver, British Columbia for drug trafficking in Canada.
China may become one of the world's jewelry centers. The sales of jewelry have increased from 24 billion yuan (US$2.94 billion) in 1991 to 76.2 billion yuan in 1998, with an annual growth rate of 25%. Annual consumption of jewelry may reach 150 billion yuan before 2010, or US$6.5 billion. This would give China 10% of the world market. The number of registered jewelry enterprises increased from over 100 in 1991 to 2,380 in 1998.
Russian police seized over $1 million in stolen diamonds, emeralds, sapphires and other gems from a criminal group. Investigators first caught members of the group trying to sell three diamonds worth $300,000. The rest of the gems were later uncovered when police searched the group's offices in Moscow and the nearby city of Kolomna. The goods included 33 diamonds, 214 emeralds, sapphires, topazes and other gems.
A Thai jeweler paid about US $26,000, or less than 75 cents per carat, for a blue sapphire that weighs 15.69 pounds, or about 35,000 carats. It is the size of a coconut or football. It was discovered in Kanchanaburi province, 73 miles west of Bangkok. This area is known for its low quality sapphires. From the images we have seen, this sapphire is also of low quality. It is probably only an interesting specimen without any real value.
New Emerald Mines
A new Canadian emerald deposit has been discovered in the Yukon. It was accidentally found by a copper and zinc company. Further exploration will continue in the spring when the weather improves. Also, Seahawk Minerals Ltd. has recently announced a new emerald discovery in Minas Gerais, Brazil. Development is underway and they estimate they will mine 3.8 million carats.
Australian Pink Diamonds
This year's annual Argle Australian pink diamonds totaled 51 stones; 47 pinks, 2 fancy violets, and 2 fancy reds weighing 52.61. Sealed bids were opened in Geneva, Switzerland. The prize stones were a .73, emerald cut, fancy red diamond, a .59, fancy purplish red, and a 1.73, fancy deep purplish pink graded by the GIA. Five stones were over 2 carats, the largest is a 2.76 oval. The total prices for the goods are not known, but it was over $100,000 per carat.
New Heated Yellow Diamonds
NovaDiamond Corporation recently introduced a high temperature, high pressure process that changes brown colored diamonds into vivid, yellow green and green colors. Radiation used to be the sole way to enhance colored diamonds artificially and disclosure was relatively easy. The new process requires temperatures of about 2000 degrees Celsius and 50 to 60 kilobars of pressure for the treatment to work. NovaDiamonds will be inscribed with a logo and a unique serial number, in addition to coming with a certificate. These stones should hit the market in February, 2000. The colored diamonds will be sold at a 25 to 50% premium to white diamonds.
The 20,000 millennium "branded" DeBeers diamonds are being sold for 40-50% above Rapaport on the Internet.
This revolves around the the case of Rodger Lindh and Janis Surman. Rodger Lindh, a 62-year-old businessman from Pennsylvania, spent $17,400 on a ring for Janis in August, 1993. The ring is a three carat, emerald-cut diamond with matching one-carat, triangle-cut diamonds on each side, set in a gold band. When Roger Lindh changed his mind about marrying Janis Surman only two months later in October, 1993, Janis returned the ring. A few months later, Rodger reproposed with the same ring. But when he telephoned her in March, 1994 to say he was breaking off the engagement again and then asked her to mail him the ring, she refused. So began a four-year legal battle which ended up in the Pennsylvania Supreme Court. The majority opinion in Pennsylvania ruled the giving of an engagement ring is a conditional gift, irrespective of who breaks off the engagement.
Large, high-quality emeralds usually come only from Colombia, Brazil and the African country of Zambia. They're rare in North America and are found almost exclusively in the small Alexander County community of Hiddenite, about 50 miles northwest of Charlotte. In 1970, a Lincolnton man found a 59-carat emerald crystal that Tiffany's later cut down to the 13-carat "Carolina" emerald worth $200,000. Hill also unearthed a 300-pound quartz crystal in 1990 that's on display at his family's inn.
Deep in debt, Hill started digging last November at a former public mine he owns in Hiddenite. He hit the jackpot a month later by tapping into a vein that generated 3,000 carats -- including the prized 88-carat whopper. Hill's life changed forever after word spread of his find. "Oprah" and "Inside Edition" came calling. "People" magazine featured him. Single women he didn't know were dialing his number. "It's been a really wild ride," Hill, 35, said Wednesday. He decided to sell the 88-carat emerald crystal last summer to help pay $200,000 in debts. Gregory and his group, CQ Marketing Syndicate, hired gem cutter Allan Koo of New York to pare the emerald chunk to reveal only the finest parts of the gem.
The Final Days of Marty Frankel
This story is a continuation of the fascinating case of Marty Frankel. For more information, See GFN, Vol. 17, #3. ED
November 8, 1999
On the Lam with Marty
The Lady who hit the road with the lonely Frankel
Cindy Allison, one of embezzler Martin Frankel's gal pals, tells of his not-so-secret life in Europe
By Karl Taro Greenfeld
They wandered Europe and were finally arrested in Germany. Fugitive Martin Frankel, 44, a.k.a. Michael King, a.k.a. David Rosse, a.k.a. Eric Stevens, the financier who is accused of embezzling more than $200 million from a slew of insurance companies, and his traveling companion, Cindy Allison, 35, a.k.a. Susan Kelley, lounged in their Hotel Prem suite. They were watching the movie Patch Adams. For the fifth time.
It was just another Saturday night on the lam for Frankel and Allison, who for nearly two months had been shacked up here on the banks of Lake Alster in Hamburg, Germany. They had just pushed aside the remains of room-service dinners, the halibut lingering on trays in the suite's living room. On the floor next to Frankel's bed was a black suitcase that contained nearly $2 million in diamonds and about $250,000 in U.S. currency. The case never left his side.
"Then there was this noise, a little jiggle at the door," Allison told TIME in an exclusive interview, "and Marty turned to me and said, 'Do you think they're coming to get me?' and I said, 'No, don't be ridiculous.'"
She was wrong. Two German detectives burst into the room with guns drawn. From behind the protection of a bullet-proof Plexiglas shield, they announced in halting English that they were seeking two Americans. For some reason, they began to aggressively question Allison instead of Frankel, accusing her of using a false passport. Then Frankel looked up at a tall, blond detective and said, "I'm the one you're looking for."
Throughout the summer and into the fall, law-enforcement authorities in more than 115 countries had been looking for Frankel. The 6-ft., 135-lb., mousy-haired, bespectacled, bumbling, barred-for-life stockbroker had been transformed by the tabloid press into a sort of postmodern James Bond villain--one part Goldfinger, one part Woody Allen. He had eluded authorities for four months while traveling with a retinue of women, as rumors spread of his living large while lying low. Law-enforcement officials at first suspected that he was in Israel, then Brazil, and finally admitted they had no idea where he was.
Yet according to Allison, Frankel lived quite openly throughout much of his winding journey. He had gone from his Greenwich, Conn., mansion, where police found smoldering file cabinets and incriminating documents (item No. 1 on his to-do list: launder money), to a White Plains, N.Y., airfield, where a private jet flew him and two women, Mona Kim and Jackie Ju, to Rome, along with 25 suitcases and that stash of diamonds. Then he jaunted through Italy and Germany in chauffeured limousines, steadfastly maintaining to whoever would listen that his case was a misunderstanding that would blow over.
"I thought it was tax evasion or something like that", says Allison, back in the New York City area. "I didn't know what he had done. I used to ask him how much was missing, and he would say he didn't know."
How Allison, a stout redhead from Gibson City, Ill. (pop. 3,600), came to be involved with Frankel is revealing of his bizarre proclivities. She had answered his tele-personal ad and flown from Mission Viejo, Calif., to meet Frankel in Greenwich. What she found when she walked into the $3 million mansion was a halfway house of sorts, a community of women gathered from personal ads and Internet chat rooms, all in the employ of this monied recluse who spent his days hunched over trading terminals in the mansion's digitally locked bedroom-cum-offices.
"Some of the girls were his girlfriends, some of them he had sex with, and some were his ex-girlfriends. But a lot were just friends, like me," says Allison. "It was a fun life, but the women fought all the time. I used to tell him all these people were with him for the money. But then, maybe that's why I was there." Whenever Allison needed money, she filled out a requisition form, usually for about $4,000. "You always got what you asked for," she recalls.
Allison flew off to join Frankel in Rome on June 18. She felt sorry for him, she claims. He had sounded desperate when he called her from his Rome hideout, terrified of being alone, eager to engage in idle chat and already growing nostalgic for the life he had left behind. He had grown wistful, coming to realize that there was no returning to his Greenwich mansion and the financial Xanadu he had created.
Frankel's traveling companions eventually began to fall away, disillusioned with life on the lam, leaving Allison and him at the sparsely furnished Via Asmara apartments. "Marty used to ask me where we should go," Allison says. "He began to realize how small the world really is when everyone is looking for you."
During all this time, Frankel was losing a race to access his ill-gotten fortune before the law could seize his assets. He set up checking accounts in Rome under Allison's name, hoping to transfer funds from another of his Italian accounts. But that $500,000 stash was frozen by the Italian government. A Justice Department warrant mentioned his loot, and that made selling the diamonds too risky.
"He began to get really quiet, kind of introverted," Allison says. "And he would keep asking, 'Do you think they're going to catch me?'" Finally, after an evening meeting with an Italian business partner who Allison says had been aiding him, Frankel came back and announced they were leaving Rome.
At dawn the next morning, June 29, their luggage was loaded into a blue Mercedes, and they headed north, driving 14 hrs. through Tuscany, Milan and the Austrian Alps to Munich. Frankel had hoped an associate there would help him get at his money. After two days, though, Frankel began to sense a trap, and at midnight they checked out of the Astron Hotel.
"We asked the chauffeur, 'Should we go to Amsterdam?'" Allison says. He told them Amsterdam was dangerous. "We told him to drive north. Marty was real quiet most of the way". As the speeding Mercedes passed through the Bavarian night, Frankel asked Cindy if she still believed in God.
Cindy, raised a Roman Catholic, told him she did. Frankel shook his head. "How can you believe?" asked the man who had once established a phony Catholic charitable organization, the St. Francis of Assisi Foundation, in the hope of legitimizing his fraudulent operations.
The pair ended up in Hamburg almost by accident. Frankel planned to stay just a few days until he could concoct a new plan. They dined at La Mer, the hotel's seafood restaurant, and occasionally went out for the evening to Hamburg's red-light district. Allison set out on daily fact-finding missions to discover what had been written about Frankel's case.
"He didn't know where to go, what to do," says Allison. If as a young broker he had been too nervous to even make trades on behalf of his clients, as a fugitive he was proving incapable of even making a decision about where to run.
Those days at the Hamburg hotel, those nights watching television with Frankel hunched over an astrological chart or reading the Mirror or the Sun--he loved the British tabloids--began to blur, Allison says. They slept a lot and speculated about when Frankel would be caught. He was not apologetic. He had only wanted to have some fun, he told Allison, to live the American Dream. And up until that final night, somehow, he never imagined the American Dream would end in a German prison.
Under fire is a widespread practice that uses special software to track Web surfers visits and then places ads on their favorite Web sites and sends them e-mail messages based upon their preferences.
In a hypothetical example, if an advertiser discerns from the tracking information that a consumer's favorite color is pink, it could place pink ads on the Web Sites to catch the consumers attention, an online marketing expert says. That amounts to subliminal messaging, privacy experts say.
The argument is the latest by privacy experts searching for ways to prod regulators into greater scrutiny of such online marketing tactics. But the advertising industry says there is nothing subliminal about marketing based online profiling. While consumers are targeted using information collected secretly, there aren't any secret messages in the appeals themselves. "Every time you make an 800 call or fill out a warranty card, you are becoming part of a marketer's database," says Hal Shoup, executive vice president of the Association of American Advertising Agencies.
The comparison with subliminal messages surfaced last month at a federal workshop on privacy issues. Jason Catlett, president of Junkbusters Inc., which fights the marketing industry, told the gathering that "advertisers are using empirical behavioral science for individual mass-customized manipulation," comparing it with subliminal or hidden advertising that first came to light in the 1950s.
Vance Packard's 1957 book "The Hidden Persuaders" exposed the practice and for years sparked waves of uneasiness in consumers and government officials as well as attempts to stop secret advertising. Among other things, movie theaters were accused of using subliminal messages-appearing for a split second to encourage popcorn and soda consumption; a distiller's print ad allegedly included the word "sex" on an ice cube in a highball; and a toy company flashed "Get It" in a TV commercial.
This week, privacy advocates took the latest fight to the Federal Trade Commission. Robert Ellis Smith, who runs a privacy newsletter urged the commission to label profiling as an "inherently deceptive" trade practice.
The FTC, he said, should "search its own precedents and discover that it has preciously advised against advertising that is effectively identical to the kind of online profiling now at issue."
But the FTC officials said their files on subliminal advertising actually are very thin. Although there aren't any existing U.S. laws against subliminal advertising, there is material to suggest that subliminal advertising may present a legal foothold for Messrs. Smith and Catlett in their campaign for regulation of profiling. Even though it hasn't issued any regulations, the FTC has taken the position that a subliminal ad "that causes consumers to unconsciously select certain goods or services, or to alter their normal behavior, might constitute a deceptive or unfair practice."
The FTC acted against the "Get It" ad in 1974, ruling that "broadcasts employing such techniques are contrary to the public interest. Whether effective or not, such broadcasts are clearly intended to be deceptive."
For comments, questions or price quotes E-mail NGC, Attn: R. Genis
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