Cosmetic compliance and safety and the Australian Consumer Law

Speakers: 
Ms Delia Rickard, Deputy Chair
Conference: 
Accord Conference 2014
22 October 2014

Addressing the Accord Cosmetic and Personal Care Conference in Sydney, ACCC Deputy Chair Delia Rickard outlines activities aimed at ensuring safe products and accurate marketing claims in the cosmetic industry.

Transcript: 

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Introduction

Thank you, today I will cover cosmetic labelling and safety issues under the Australian Consumer Law, but first I would like to say a few words about the Look Good, Feel Better cosmetic cancer program because I want to congratulate Accord on what is clearly a much appreciated, excellent program.

I remember Bronwyn telling me about the program when I first started in this job a few years ago and thought that’s nice but didn’t overly focus on it.

Last year one of my closest friends had cancer and it was very touch and go for a while. When things started to improve for her we were chatting one day and she observed that a few good things had come out of the ordeal.

The second good thing she mentioned was participating in the Look Good, Feel Better program – and it was apparent from her comments that it is a program that is in no risk of a misleading and deceptive action over its name.

I called her yesterday and asked her to remind me what she valued so much about it. Two of things she said I wanted to repeat to you all today. In her words:

The best thing was seeing all of these women of my generation arrive looking pale, tired and stressed and watching them be transformed over a couple of hours into laughing, glamorous women.

She also said that it was great to get practical tips on how to look good and how that really does make you feel more positive and confident. You can feel pretty powerless when you’re ill but this workshop showed how we could at least take control of how we look.

Oh – and she also really enjoyed the showbag.

As a regulator, I usually find myself talking about the things people and companies do wrong, but I did want to note that we also see the great work that is done by bodies like Accord. And, don’t worry, what’s to come isn’t too negative in any event.

Product safety priorities - cosmetics

It is no surprise that cosmetics are big business in this country. We use any number of a vast range of products every day.

They are a big part of our daily routines – whether we are men, women or children.

Few other consumer products are directly applied to our bodies in the way cosmetics are.

This means the people who make and supply cosmetic products need to be fully aware of their responsibilities.

The first port of call is compliance with the mandatory standard for cosmetic ingredient labelling.

I trust that you are all aware of the standard and know where to find it.

If not, go to the Product Safety Australia website (www.productsafety.gov.au).

Here you will find information and a link to the government’s ComLaw website, where you can download a free copy.

The standard works to maintain consumer confidence and prevent injuries.

It helps consumers identify the presence of cosmetic ingredients that they may be allergic or sensitive to, or otherwise concerned about, and it allows comparison of different products at the point of sale.

An inaccurate list of ingredients, or a product without an ingredient list could see consumers with allergies exposed to harm.

The cosmetics labelling standard was developed so everyone buying and using your products knows what is in them.

Compliance with the cosmetic standard is important for the ACCC as a product safety regulator and consumer watchdog.

For good reason. Cosmetics were the source of approximately 30 per cent of total injury reports received by the ACCC in the past year.

We receive these reports via the mandatory reporting regime.

In other words, when a supplier becomes aware that a product has or may have caused death, serious injury or illness, there is a two-day window to report the incident.

We appreciate the nature of cosmetic products and the frequency in which they are used. And, it could also be said that the cosmetic industry is better at self reporting than other sectors.

We also appreciate that we need to work with you as we monitor reports of rashes, burns and other injuries.Working with industry and supporting compliance is an important part of what we do, and so is enforcing the law.

Cosmetic suppliers are legally responsible for ensuring products meet the requirements of the cosmetics labelling standard, which is enforced under the Australian Consumer Law (ACL).

Failure to comply with labelling standards has resulted in legal action, heavy penalties and/or recalls.  (Cotton On Kids - $1 m)

Under the ACL, suppliers are also strictly liable for loss or injuries arising from defective consumer goods.

In some cases, a labelling deficiency could be regarded as a safety defect.

Priority

At the start of each year, the ACCC releases its Compliance and Enforcement Policy.

The policy sets out the principles adopted by the ACCC to achieve compliance with the law.

It also outlines our enforcement powers, functions, priorities and strategies on competition and consumer matters.

The assessment of product safety issues continues to be a priority for the ACCC.

This year our focus includes unsafe imports and the regulation of chemicals in consumer products, which includes cosmetics.

Product safety cosmetic compliance activities

As I mentioned, a significant proportion of mandatory injury reports received by the ACCC relate to this product category.

Our Product Safety Branch has conducted a number of compliance activities to understand why the injury reports are so high and to survey the market for compliance with the cosmetics labelling standard.

In the past few years, these activities have included:

  1. Reporting on the outcomes of a regulatory audit of cosmetic mandatory injury reports;

  2. Completing a number of cosmetic product surveys; and

  3. the start of a national surveillance program aimed at determining the extent of industry compliance with the cosmetics labelling standard.

I’ll provide a brief summary of these activities and where they fit into the picture.

Regulatory Audit

During 2012-13, the ACCC started a regulatory audit of cosmetic-related injury reports received during 2011.

The aim of the audit was to identify problem cosmetic categories or key trends; and to observe whether mandatory injury reporting was being implemented by all players across the cosmetic supply chain.

The audit was also an opportunity for us to assess compliance with the cosmetics labelling standard.

The main observations from the audit were that:

  • many of the mandatory reports involved injuries from face washes / creams, body wash products and creams, and deodorants
  • while compliance with the cosmetics labelling standard was generally good, some products had ingredient labelling that was inconsistent with their formulation lists, or displayed their ingredients list in a way that could not be considered to be prominent or legible (as required under the cosmetics labelling standard)
  • Surprisingly low mandatory injury reporting rates were recorded for pharmacies, retail stores, department stores, and

  • Australian based online sellers recorded no mandatory injury reports during that period, despite occupying an increasing proportion of sales in cosmetics in recent years.

These observations have been useful in informing our approach to cosmetic compliance activities during 2013-14.

Cosmetic product surveys

Regular compliance activities conducted by the ACCC’s Product Safety Branch involve surveys of chemical exposure risks in consumer goods.

These activities have increased as NICNAS’s accelerated chemical assessment program (IMAP) has progressed.

I am sure you are aware of the work being conducted by NICNAS.

As the government’s industrial chemicals regulator, NICNAS has started the assessment of close to 40,000 previously unassessed chemicals that were grandfathered onto the Australian Inventory of Chemical Substances (AICS) in 1990.

The ACCC relies on the advice provided by NICNAS to help inform its risk assessment of chemicals in consumer goods, particularly cosmetics.

We will continue to monitor IMAP recommendations associated with chemicals, including, of course, cosmetic ingredients.

In the 2013-14, the ACCC did two major cosmetic surveys.

Microbiological contamination

In mid-2013, the ACCC investigated whether microbiological contamination may be a possible explanation for some cosmetic injuries reported to the ACCC.

The regulatory audit I mentioned earlier had shown us that a majority of injury reports were associated with water-based cosmetic products.

A survey of products sold by online, cottage, and retail stores/outlets in Australia saw three out of 112 products tested return high microbial counts that vastly exceeded the European Union’s safe reference limits.

Further testing revealed the presence of opportunistic pathogens that caused potential safety risks to sensitised individuals.

This prompted us to quickly work with suppliers to voluntarily recall the unsafe products.

While the majority of surveyed products were microbiologically stable and not found to have high microbial counts, the detection of any unsafe cosmetics is a timely reminder about the importance of good manufacturing practice.

It is a timely reminder as the trend to produce all natural and all organic products may increase pressure on manufacturers to produce cosmetics with less preservatives or less effective natural preservatives.

This survey also highlighted an increasing trend in premium and absolute claims like ‘free from chemicals’ or ‘free from x chemical’.

Companies need to be very careful about making claims when marketing products.

Those claims need to be true. I will have more to say about this later.

As part of this survey, we reviewed each product’s ingredient list and found that more than 20 per cent of products were not compliant with the requirements of the cosmetics labelling standard.

The ACCC was pleased with the level of cooperation from suppliers who all agreed to improve compliance with the cosmetics labelling standard.

Deodorants

In mid-2014, a second, more targeted survey on popular personal deodorants was conducted.

The survey was in response to a complaint from a consumer with an allergy to one particular deodorant ingredient.

The consumer was unable to identify the ingredients from labelling when they went to purchase a deodorant.

The regulatory audit had also identified deodorants as a product associated with a high number of mandatory injury reports.

Our analysis found that the ingredient lists on some deodorants were not prominent or legible as required by the cosmetics labelling standard.

Again, we contacted suppliers and the response from industry has been very positive so far with many suppliers undertaking to improve their deodorant ingredient lists.

I believe the positive compliance outcomes resulting from these activities show that communication and cooperation between the ACCC and the cosmetics industry is good.

National cosmetics surveillance program

Now to our most recent activities.

Between July and September this year, the ACCC conducted an initial surveillance activity on 202 retailers who sold cosmetic products.

The ACCC observed fairly high levels of compliance.

Sixteen retailers were found selling non-compliant products; and this was mainly discount variety stores serving a predominantly non-English speaking background customer base.

As Accord members would be aware, the ACCC recently started a broader national surveillance program on industry compliance with cosmetic ingredient labelling requirements.

This work forms part of the ACCC’s new escalating campaign approach.

This approach aims to increase compliance with product safety regulatory requirements and further enhance consumer confidence in the regulatory system for product safety.

Our approach involves several components including, first, awareness raising activities, the survey and enforcement action against those who repeatedly fail to comply.

The program will further survey major retailers, franchise stores including chemists and pharmacies, smaller retailers including online suppliers, and the discount variety sector.

In assessing compliance with the mandatory standard, we will be particularly focussed on cosmetic products which include no ingredient labelling and where ingredient labelling is in a language other than English.

So far, the response from industry has been good with 10 out of 13 suppliers contacted already undertaking to address the non-compliance concerns raised by the ACCC, and this is encouraging.

The surveillance activities conducted during August to September 2014 were conducted across multiple state/territory jurisdictions to identify non-compliant products sold by ‘bricks and mortar’ retailers and online suppliers.

If you are an online supplier, we have a resource for you. Earlier this year, the ACCC introduced a Consumer Product Safety Online Guide for Business.

The guide outlines best practice tips for online sellers and marketplaces.

The key message is that the ACL applies regardless of whether products are sold in a ‘bricks and mortar’ shop, in an online store or via an online marketplace.

As such, our surveillance program will be closely looking at compliance with the requirements of the cosmetics labelling standard, starting with the product having an ingredient list displayed at the time of receiving the goods.

Where possible, the ACCC considers it good business practice for online businesses to display an ingredient list at point of sale so that consumers can access the information at time of purchase.

During this ‘escalating campaign’ the ACCC is conducting several education and awareness activities before the final round of surveillance of the marketplace during November 2014.

This has included distributing cosmetics education materials/ flyers to individual suppliers and relevant industry associations with information on the requirements of the cosmetics labelling standard.

This is the awareness raising aspect of our escalating campaign approach.

Where we identify non-compliance with the cosmetics labelling standard in our next round of surveillance, we will speak with the suppliers of those products and in the absence of extenuating factors, enforcement action will be seriously contemplated by the Commission.

As I mentioned earlier, unsafe imports are an important product safety focus of this year’s ACCC Compliance and Enforcement Policy priorities.

Therefore, this campaign includes looking at parallel imports from a safety perspective.

There will not be a focus on trade mark and intellectual property matters, because they are not administered by the ACCC.

However, if parallel imported products identified during surveillance activities fail to comply with the cosmetics labelling standard, we will act to ensure compliance with Australian regulations.

We expect to announce the outcome of the surveillance program in December this year.

We will continue to keep you informed.

Supply chain integrity and consumer guarantees

In addition to ensuring products comply with mandatory standards, Australian suppliers should also be aware of their wider obligations under the ACL.

For example, the consumer guarantee provisions mean your products must be of acceptable quality, which includes that they are safe and fit for purpose.

Other guarantees include the goods/services:

  • have been accurately described and match any sample or model
  • match descriptions made by the salesperson, on packaging and labels, and promises / claims made in promotions or advertising
  • satisfy any express warranty; and
  • meet any extra promises made about performance, condition and quality, including life time guarantees and money back offers.

Consumers are entitled to expect that every manufacturer, importer and retailer in Australia adheres to appropriate levels of product stewardship and complies with relevant laws.

This applies equally to new products and longstanding products.

In cosmetics, recent trends to produce more natural products with fewer or natural preservatives must still be covered by effective quality assurance programs to prevent unsafe products from reaching the shelves.

The microbiological hazards in cosmetics survey demonstrates what can go wrong with tight production timeframes or possibly rushed product innovations.

Investing in good quality assurance processes means you can be confident that the products you sell are safe and fit for purpose.

Marketing and credence claims

I also want to talk about product marketing and credence claims.

Often consumers cannot judge the truthfulness of claims made about products as it is not something they can tell by looking.

They have to rely on suppliers to provide accurate and truthful information.

Companies should not claim products are of a particular quality or standard when they are not.

The ACL is quite clear that making false representations about products is not allowed.

It also includes a general requirement that information provided on or about a product should not mislead or deceive.

Credence claims are representations made about the attributes or origins of a product.

They may relate to the presence or absence of an ingredient (e.g. formaldehyde free), product safety (e.g. allergy tested) or the moral or social benefits of a product (e.g. cruelty free, not tested on animals).

Earlier I mentioned we have seen claims that cosmetics products are ‘chemical free’.

We struggle to understand how this claim can possibly be accurate as all products contain chemicals whether naturally occurring or not.

We can ask suppliers to substantiate claims made about goods and penalties may apply if a claim has been made that cannot be substantiated.

Our Advertising and Selling guidelines describes ‘puffery’ as wildly exaggerated, fanciful or vague claim that no one could possibly treat seriously or find misleading.

For instance, there are many fanciful advertisements where lovers are spellbound by the scent of a deodorant spray.

These obvious types of statements are not considered misleading or deceptive under the ACL.

When looking at misleading advertising, a lot comes downs to the overall impression created and the audience.

You need to remember that sometimes your audience may be vulnerable in that they have insecurities about things like acne or ageing or whatever.

Creativity in selling your products can only go so far.

You need to be careful with claims about the performance of products which are intended to be taken seriously.

For example, in June this year, the US Federal Trade Commission settled an action with L’Oréal USA, Inc. about the advertising of two of its skincare products (Lancôme Génifique and L’Oréal Paris Youth Code).

According to the FTC’s complaint, L’Oréal made false and unsubstantiated claims that products provided anti-aging benefits by targeting users’ genes.

Complying with the Australian Consumer Law

There are several things you can do to help ensure that the cosmetics supplied are safe and comply with the ACL and this includes:

  • implementing your own in-house compliance program making use of suitable expertise and facilities.
  • regularly revising your compliance program to ensure relevance.
  • only sourcing products from reputable manufacturers/suppliers that can demonstrate they have quality systems in place and that their products comply with relevant standards.
  • visually inspecting the cosmetics you intend to supply to ensure the ingredients list is prominently displayed in English and can be read without strain or difficulty.
  • asking for documentary evidence to demonstrate that the ingredients listed on the product are the same as those in the formulation.
  • conducting third party testing of batches prior to shipping the product to Australia and regularly visiting facilities.
  • not offering for sale any cosmetic product unless you are confident that it is safe and compliant with relevant laws.

These steps also work to help manage your legal liability and company’s reputation.

Additionally, whether you are supplying goods and services online, door-to-door, or in a traditional retail setting, you are obliged to honour consumer guarantees that by law come with most goods.

Depending on the nature of the problem, you have obligations to offer a repair, replacement or refund to the consumer when certain guarantees as to acceptable quality are not met.

Further detail on consumer guarantees can be found on the ACCC website, where we have information written with businesses in mind.

Closing remarks

In closing, I just wanted to note that by continuing to work together, we will continue to make markets work for consumers, and achieve the goal of protecting the interests and safety of consumers while supporting fair trading in markets.

Thank you for your interest today.

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