Beauty Store Business

JUN 2018

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beautystorebusiness.com | June 2018 55 A NATURAL PROGRESSION Gay Timmons, president of cosmetics maker Oh, Oh Organic in Richmond, California, works with natural and organic brands in the hope of defining best practices for the use of these oft-murky terms in cosmetic and personal care products. "Lawsuits previously focused on the word 'organic.' Those started in 2008, but died down a couple of years ago," Timmons explains. "But there are now multiple lawsuits around the word 'natural.' Today, it's easier to sue over the claim of 'natural,' because there is no definition." Sahota agrees that lawsuits have become a major issue in the North Ameri- can natural personal care industry. He notes that greenwashing–that is, brands making false natural or organic claims– is a worldwide phenomenon. Yet almost all lawsuits are happening in the U.S. for specific reasons. "We believe there are two reasons: First, these consumers are more inter- ested in natural and organic personal care products, looking for these products in retailers," Sahota says. "Second, which is unique to the States, is lax regulations; apart from California, the terms 'natu- ral' and 'organic' are not protected by regulations." California has the California Organic Products Act, which is designed for organic farming and food products but also covers personal care products. Curt Valva, president of Sunstate Natural Products Consultants in Tampa, Florida, retired two years ago as a high- level executive at one of the nation's first certified organic skincare lines, Aubrey Organics. As a result, he has experience wading through the quagmire of claim challenges from a manufacturer's perspec- tive. He explains that lawsuits surrounding the use of terms like "natural" are mostly cropping up in California, New York and New Jersey, where enforcement agencies are more active and consumer-oriented. He estimates that the number of such lawsuits is growing by over 25 percent year over year. In addition, Timmons explains that the U.S. Food and Drug Administration regulates drugs and cosmetics, while the Federal Trade Commission monitors the promises that manufacturers make to consumers. For example, the FDA commonly handles function claims. "A lot of compa- nies are treading in the middle of [over the counter] drugs and cosmetics," Valva says. "If you say a moisturizer reduces wrinkles, that's changing the structure of skin–and that's a drug claim." But when it comes to recent class action lawsuits, Valva stresses, it's not the FDA or the FTC bringing about these claims; in fact, under the current administration, their funds have been cut. Instead, lawyers looking to make a quick buck are taking a closer look at labels and, if something seems awry, threaten- ing class action lawsuits. A company then may choose to fight the accusations in court. However, this requires hiring legal counsel, preparing documentation and examining the company's sales history, which can cost tens of thousands of dollars and numerous hours–often not an option for a smaller business. Or the company can settle for a set amount, such as $10,000, and the lawsuit gets dropped. "Nine out of 10 companies will settle, looking at it as a cost of doing business. Many smaller companies find it easier to settle, while larger companies may have their own legal team or access to legal counsel, even though it costs more than settling," Valva says. "Or the company can ignore it and hope it goes away, which it usually doesn't. But if these lawyers get 20 companies to settle at $10,000 each, that's a lot of money." In a nutshell, the growing consumer demand for natural and organic products, ill-defined but common terminology in the U.S. and predatory types looking to cash in all create the perfect storm for lawsuits. "A label is a promise, and a consumer can say, 'You deceived me,'" Timmons explains. Of course, these rules are in place to protect consumers, and she points out that sometimes the claims are legit. If the man- ufacturer is negligent and the consumer is harmed, the manufacturer certainly should be held accountable. But many of these lawsuits, Timmons notes, are simply "a shakedown method to make money." STANDARD BEARERS How can lawyers take issue with claims that aren't clearly defined in the first place? Well, there are standards in place– perhaps too many. Timmons notes that back in the 1990s, scientists John Warner and Paul Anastas outlined the 12 Principles of Green Chemistry, guidelines to mitigate the occupational risk and downstream effect of chemicals, thus creating a safer, more sustainable chemistry. Then came the organic standard for food in the U.S. and European Union, which Timmons believes also could serve as a model for organic cosmetics. But currently, there are many different standards–for example, she mentions Ecocert, the Soil Association Health and "Voluntary standards are not popular in the States; it is therefore easy for brands to make natural and organic claims without adopting any standards." —Amarjit Sahota, founder, Ecovia Intelligence — FOR MANUFACTURERS — PROTECT YOUR BRAND Sharon Blinkoff, counsel to the international law firm Lock Lord LLP and outside general counsel for the Independent Cosmetic Manufacturers and Distributors (ICMAD) association, offers the following tips to safeguard your brand. 1 Watch Product Claims: "Plaintiffs' counsel now assumes that if your brand is in a national chain or followed or noted, that your company and its sales are larger than what they may in fact be—thus making your company a more attractive target," she says. "The demands are usually based upon product claims; package claims get just as much attention in this arena as advertising claims. So the old strateg y of reducing risk based on claim positioning does not work in the area of class action demands." 2 Make Clear Natural and Organic Claims: "Certain claims, such as natural or organic, or claims which the FDA has cited in a warning letter, are all high-risk and likely to attract their attention. There are ways to protect your company," Blinkoff says. "If you make natural or organic claims, make sure these claims are clear and not susceptible to multiple interpretations. A lso, make sure you can support the claims you make." 3 Investigate & Be Prepared: "If you get a demand letter, you should always ask where the named consumer made their purchase," she says. "If the purchase was made online on your website, you may be able to verify whether the consumer did in fact make the purchase their lawyer claims. If you are selling online on your own website, you can adopt terms and conditions that can shield you from class actions. The advice we give our clients is to be prepared for a challenge and make sure the risk is financially worth taking."

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