Locke Lord QuickStudy: Update on Recent FTC Enforcement Actions Against Cosmetic Companies

Locke Lord LLP
May 3, 2016
On April 12th, the FTC announced proposed settlements and orders with four companies: Trans-India Products, Erickson Marketing Group, ABS Consumer Products and Beyond Coastal.  The FTC issued an administrative complaint against a fifth company, Sausalito-based California Naturel.  The FTC charged each of the companies involved with falsely advertising their products as all or 100% natural.  In fact, all of the products involved contained synthetic ingredients which were clearly listed in the products’ ingredient declarations.

What is noteworthy about the FTC’s action is that the agency has again reaffirmed its interest in policing deceptive claims in the cosmetic and personal care industry. For years prior to its action against L’Oréal in 2014 for its false and deceptive scientific claims, the FTC limited its enforcement activity in the cosmetics industry to cellulite and slimming claims, which the agency viewed  as deceptive fat and weight-loss claims.  The other noteworthy point is that the FTC chose  only to pursue “all or 100% natural” claims, and not the claim of natural alone, which has been the subject of numerous class actions. 

Currently, in a regulatory proceeding instituted over a year ago, the FDA is wrestling with the meaning of natural, in the context of food products, to determine what consumers believe natural means, and to enable the FDA to reach a uniform standard for the meaning of natural for foods.  Historically, the FDA’s policy, in the context of food, has been that “natural” means nothing artificial or synthetic is in or has been added to the food that would not normally be expected to be in the food.  The FTC also has historically declined to adopt a uniform definition of “natural,” recognizing that the meaning of the term depends on the context in which it is used. 

Based upon the exhibits appended to the complaints, the FTC actions resulted from the Agency’s ongoing internet surfing activities.  The exhibits, taken from a website, each showed product packages which featured directly on the packaging that the product was “all or 100% natural”.  In addition to the product shots, the exhibits all showed copies of the product ingredient declarations that also appeared on the visited sites, which clearly showed that the product contained ingredients that were not natural.  

While historically there has been a turf delineation between the FDA and the FTC, with the FDA having exclusive jurisdiction over package copy and the FTC having jurisdiction over adverting, once again, the internet proves that this clear delineation of turf is essentially nonexistent, and that marketers, in their risk assessments, can no longer rely on the fact that the FDA, which typically sends a warning letter to address the issues, will be the only enforcement agency for their package copy claims.  By including product package shots on web sites, the package copy becomes an ad and the risk of enforcement is from the FTC, which has far more consequential enforcement authority in these matters.  Instead of a warning letter, the FTC issues a 20-year FTC order, which requires, among other things, a more rigorous standard of claim substantiation from the offending marketer, including claims that go beyond those that were made in the offending advertisement. 

The proposed orders issued in the four cases that the FTC is settling do not require the payment of money under the FTC’s consumer redress authority.  What the orders all contain is the requirement of a heightened level of substantiation for all natural claims:  claims regarding the composition of a product; the extent to which the product contains any synthetic ingredients; and claims regarding any environmental or health benefits made on the basis that the product or any of its components is all natural.  The level of substantiation required by the orders is competent and reliable scientific evidence that is sufficient in quality and quantity and based upon standards generally accepted in the relevant scientific field to substantiate that the representations made are true.  

The last point of interest is that the FTC clearly was not swayed by product ratings issued by the Environmental Working Group’s Skin Deep product review program.