GCI March 2016 Validate or Else by TBC on April 27, 2016

Consumer product claims testing has become an imperative part of forward-thinking brands’ pre-product launch or claims validation process. In addition to predicting in-market success and providing valuable efficacy insights, claims testing is increasingly being used as a valuable risk mitigation tool.

Consumers and Governments are Watching

Brands that use consumer experiences to validate product benefits and outcomes reap the benefit of irrefutable proof— from the consumer’s perception—that the product works. It’s not just the consumer who cares if your product delivers what it promises; federal and state governments have their antennae up for everything beauty brands try to convey.

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As a beauty brand, understanding and complying with regulatory requirements is essential. From demonstrating proof of a claim to correct labeling, there are critical questions every brand should be asking.

Previously: Beyond the Launch: Three Ways that Beauty Product Testing Breathes New Life into Mature SKUs

So I asked leading cosmetic regulatory specialist and attorney Ronie Schmelz of Tucker Ellis, LLP, for answers to some important claims questions.

Schmelz, who is licensed to practice in California, New York and Washington, DC, has a broad-based practice representing cosmetic and consumer product companies in commercial litigation, with a particular emphasis on defending companies in consumer fraud, unfair competition, and false advertising class actions, consulting on litigation-avoidance strategies and ensuring compliance with local and federal laws, and advertising, labeling, and claim substant­iation.

Further reading: 7 Reasons to Add Focus Groups to Your Marketing Mix

She also represents companies in inquiries and investig­ations brought by local, state, and federal governmental agencies.

Brands Beware

DH: Which laws and regulations should cosmetics companies be aware of?

RS: More than we can list in one article! There are numerous federal and state laws that affect cosmetics companies. They govern everything from ingredients and product labeling requirements to how cosmetics are marketed and sold to consumers. But there are a few regulations about which every company should be aware.

The main federal laws governing the cosmetics industry are the Federal Food, Drug, and Cosmetics Act (FD&C), the Fair Packaging and Labeling Act (FP&L), and the Federal Trade Commission Act (FTC Act).

There are other laws that apply to the cosmetics industry, like workplace safety, environmental regulations, and trademark and patent laws, but these are the main three federal regulations.

DH: What do these laws mandate?

RS: The FD&C was passed to protect consumers from unsafe or deceptively labeled or packaged products, and it’is enforced by the Food and Drug Administ­ration (FDA).

Even though the FD&C Act does not require companies to obtain pre-market approval before selling their cosmetic products, manufacturers are responsible for ensuring that their products and ingredients are safe.

That means companies must make sure their products are manufactured in sanitary conditions, tested for stability, and safe when used as labeled or intended.

It’s really not enough for a company to rely on its ingredient supplier for safety information, especially since most suppliers don’t formulate products and have limited, if any, knowledge of how their ingredients are used in a company’s final product.

Of course, chemical suppliers should be held accountable for the safety of their ingredients, but cosmetic and personal care manufacturers and distributors are ultimately responsible for ensuring the safety of their products and, as a best practice, should run safety tests on finished products before they enter the market.

Know Your Claims

DH: One of the questions we’re asked regularly relates to labeling and how to appropriately make efficacy claims through marketing language on product packaging. Can you shed some light on the laws that pertain to labeling and advertising?

RS: Sure. Companies should make sure their products comply with labeling requirements of the FD&C and FP&L Acts. These regulations were enacted to protect consumers from deceptively labeled products and to facilitate consumer value comparisons among products.

The FDA website has a comprehensive Cosmetics Labeling Guide, which includes detailed information on everything from mandatory labeling content to font sizes.

Finally, on the federal front, we have the FTC Act, which prohibits false advertising and, more broadly, any unfair or deceptive act or practice.

This law is enforced by the Federal Trade Commission (FTC), which reviews claims to determine whether advertising is false or misleading to reasonable consumers.

It’s important for companies to understand that, in addition to evaluating express claims made about a product, the FTC considers implied claims, whether they are made on the product label, in traditional advertising, or on the Internet.

DH: How do U.S. state laws impact this equation?

RS: Almost every state has its own laws which prohibit deceptive practices and false advertising when marketing to consumers. Some states also have additional regulations that govern cosmetics and other personal care product companies.

Perhaps no state is more active on this front than my home state of California, where companies must comply with labeling requirements of Proposition 65, reporting requirements of the California Air Resources Board, and, by 2020, phase out microbeads—even those that are biodegradable—from their products.

The California Attorney General is also focused on consumer privacy issues and actively monitors ways in which companies market to and interact with consumers.

Any company that sells products to California consumers, whether directly or through third-party resellers like Dermstore and Amazon, must comply with these laws, even if they don’t have operations in the state or sell products in bricks-and-mortar stores located in California.

Stay on Regulators’ Good Side

DH: What can companies due to avoid unwanted attention from regulators?

RS: Although regulated, cosmetic companies historically have not received as much attention from the FDA as drug companies, but that is definitely changing.

As the cosmetics and personal care product markets grow, so too has government scrutiny and activity. We have seen this mostly with companies that market cosmetics in a way that crosses the line between drugs and cosmetics. The difference between a cosmetic and a drug is a critical distinction.

A product that is intended to cleanse, beautify or alter the appearance of the human body is properly marketed as a cosmetic. By contrast, a product that is intended to treat or mitigate a disease or affect the body’s structure or function, is considered a drug.

The FDA analyzes whether a product is a drug or cosmetic largely based on the intended use as conveyed to the consumer by the product marketing and labeling.

Today, we see more and more companies aggressively describing their products’ stated benefits. For example, the proliferation of anti-aging products has led to the significant increase in the number of products designed to “repair damaged skin,” “eliminate wrinkles,” “promote cell regenera­tion,” “rebuild collagen,” or “boost the activity of genes.”.

The FDA has issued Warning Letters to companies that made these drug-type claims about their cosmetic products. In addition to anti-aging products, the FDA has focused on weight loss and anti-cellulite claims, both of which raise red flags and are sure to invite regulatory scrutiny. (See Sample FDA Warning Letter.).

Sample FDA Warning Letter

Lancôme Génifique Youth Activating Concentrate, Génifique Eye Youth Activating Eye Concentrate, and Génifique Cream Serum Youth Activating Cream Serum

  • “Boosts the activity of genes and stimulates the production of youth proteins” -Génifique Youth Activating Night Cream
  • “Boosts the activity of genes” -Absolue Precious Cells Advanced Regenerating and Reconstr­ucting Cream SPF 15 Sunscreen
  • “See significant deep wrinkle reduction in UV damaged skin, clinically proven”

–Subject of 2014 FTC Enforcement Action

DH: Is it correct to say that it’s not just the FDA that enforces these regulations?

RS: Yes, that is correct. While the FDA focuses its enforcement activities on advertising claims made on packaging and other labeling materials, the FTC focuses on advertising and promotional materials used to market cosmetics and personal care products.

The FTC, like the FDA, has also focused its regulatory efforts on anti-aging, weight loss and anti-cellulite claims, and has brought numerous enforcement actions against companies that tout their product’s ability to, among other things, “attack cellulite,” “increase skin circulation,” help consumers “slim down, and produce “visibly younger skin”.

These enforcement actions often end with Court ordered Consent Judgments in which companies are subject to FTC oversight, sometimes for as long as 20 twenty years.

The best way to avoid the attention of regulators is to ensure that products are properly labeled and packaged, steer clear of claims that could be construed as treating a disease or the structure or function of the body, and be especially careful when making any anti-aging, weight-loss and anti-cellulite claims.

And always be prepared to substantiate product claims, ideally through consumer perception studies or clinical tests, or both.

Regulatory Action is Increasing

DH: Lawsuits against cosmetic companies seem to be on the rise. What are you seeing in this regard and how would you advise companies to protect themselves against these lawsuits?

RS: Unfortun­ately, you’re right. Consumer lawyers closely monitor the activities of the FDA and FTC, and you can be sure that if a Warning Letter is issued or an FTC Enforcement Action filed (see Sample FTC Enforcement Action), a consumer class action won’t be too far behind.

Even in the absence of governmental action, however, consumer class action lawyers are increasingly targeting cosmetic and skin care companies and challenging product claims ranging from those promoting their effectiv­eness, to labeling claims such as “All Natural” and “Organic,” to packaging slack-fill violations, and, most recently, violations of state automatic renewal laws.

Given this increased attention by consumer class action lawyers, it is critical that companies proactively take steps to ensure compliance with federal and state laws before launching their products.

Best practices call for product testing, such as consumer perception surveys that are carefully structured to address the desired claims.

Working with credible companies that adhere to generally accepted testing protocols is key, as is carefully designing a study to test the claims a company wants to make about its products. For example, if a company wants to advertise a face cream as helping reduce the appearance of fine lines (an accepted cosmetic claim), a clinical study should employ proven and recognized methods for measuring fine lines.

A consumer perception study should ask the consumer whether, in her opinion, the product helped reduce the appearance of her fine lines, not just whether her skin felt smoother or softer. The best defense to a consumer challenge is to take proactive steps before a product launch to make sure you comply with the law and can substantiate your claims.

Sample FTC Enforcement Action

In the Matter of L’Oréal USA Lancôme Génifique and L’Oréal Paris Youth Code Anti-Aging skin care products:

  • “…boost genes’ activity and stimulate the
  • production of youth proteins.”
  • “visibly younger skin in just 7 days”
  • “Clinically proven” results
  • “new era of skin care: gene science”
  • “crack the code to younger acting skin”

Consent Judgment with broad injunctive relief; 20 year oversight

Know Your Product

DH: What advice would you give a company that wants to market a new cosmetic product?

RS: First, know your product, including its constituent ingredients. Are the ingredients individually and collectively safe and will they produce the desired results you intend to promote?

Second, decide how and to whom you want to market your product. What types of claims do you want to make? Can you substantiate those claims? And finally, make sure to involve legal counsel early on in the development process.

I know it’s a lot more fun to focus on product formulation, packaging ideas and distribution channels, but glazing over the legal requirements can really prove costly. I have represented countless companies who skipped the legal review only to find themselves on the receiving end of a governmental inquiry or consumer class action.

The cost of consulting a lawyer to ensure that products are manufactured and sold legally pales in comparison to the fees a company will likely incur if it has to defend itself against claims brought by the government or private plaintiffs.

So, while I know most people would rather not hear from their lawyers, it really is better to develop a relationship with an attorney who can help you avoid legal pitfalls and will work with you to reduce the risks associated with selling consumer products in our highly litigious society.

– See more at: http://www.gcimagazine.com/business/marketing/QA-Validate-or-Else-369262491.html#sthash.elAycspu.dpuf

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